CELEX: 31996M0779
Language: en
Date: 1996-10-07 00:00:00
Title: Commission Decision of 07/10/1996 declaring a concentration to be compatible with the common market (Case No IV/M.779 - Bertelsmann / CLT) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31996M0779

Commission Decision of 07/10/1996 declaring a concentration to be compatible with the common market (Case No IV/M.779 - Bertelsmann / CLT) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 364 , 04/12/1996 P. 0003

  COMMISSION DECISION of 07/10/1996 declaring a concentration to be  compatible with the common market (Case No IV/M.779 - Bertelsmann / CLT)  according to Council Regulation (EEC) No 4064/89   (Only the English text is authentic)  The paper version of the decision is available through the sales offices  of the Office of Official Publications of the European Communities.  PUBLIC VERSION  MERGER PROCEDURE  ARTICLE 6(1)(b) DECISION  To the notifying parties  Dear Sirs,  Subject :<ind> Case No IV/M.779  Bertelsmann / CLT  <ind> <ind> Notification of 04.09.1996 pursuant to Article 4 of Council  Regulation No 4064/89  1.<ind> On 04.09.1996 the Commission received a notification of a proposed  concentration pursuant to Article 4 of the Council Regulation (EEC) No  4064/89 by which Bertelsmann Aktiengesellschaft (Bertelsmann) and  Audiofina S. A. (Audiofina) will concentrate their radio and television  business in a newly created jointventure called CLTUFA.  2.<ind> After examination of the notification, the Commission has  concluded that the notified operation falls within the scope of  application of Council Regulation No 4064/89 and does not raise serious  doubts as to its compatibility with the common market and with the  functioning of the EEA Agreement.  I.<ind> THE PARTIES  3.<ind> Bertelsmann is a major German media group active in particular in  the following fields: publishing of books and magazines, book club,  publishing and distribution of music and records, radio and  televisionrelated activities. These activities have been carried out, up  to the present date, through Bertelsmann's subsidiary UFA Filmund  FernsehGmbH (UFA).  4.<ind> Audiofina is a Luxembourg based holding company of which the major  asset is its participation in Compagnie Luxembourgeoise de Télédiffusion  (CLT), of which it controls directly and indirectly approximately 97%. CLT  is mainly present in the radio and televisionrelated sectors. Audiofina is  solely controlled by Groupe Bruxelles Lambert (GBL).  II.<ind> THE OPERATION  5.<ind> Following the transaction, CLTUFA will be [Deleted as business  secret] owned by Bertelsmann, [...] by Audiofina and [...] by Fratel A.  Fratel A will in turn be a 50/50 jointventure between Audiofina and  Bertelsmann.  6.<ind> The operation includes a Formation Agreement signed by the parties  to which are annexed several documents.  III.<ind> CONCENTRATION  <ind> Joint control  7.<ind> No decision can be taken at the level of CLTUFA's [...] and [...]  without the agreement of both Bertelsmann and Audiofina. Therefore, CLTUFA  will be jointly controlled by Bertelsmann and Audiofina.  <ind>   <ind> Fullfunction entity formed on a lasting basis  8.<ind> CLTUFA will continue the activities performed to date by CLT on  the one hand and UFA on the other. It will receive all the television and  radio licences currently held by CLT and UFA and will employ its own  staff. It will have its own technical and financial resources. The  Shareholders' Agreement will not terminate before [...] and Fratel A and  CLTUFA are of an unlimited duration. Therefore, CLTUFA will be a  fullfunction entity formed on a lasting basis.  <ind> Absence of coordination  9.<ind> All Bertelsmann and Audiofina's activities related to radio and  television (including freeaccess television, paytelevision, radio  broadcasting, television production activities and television rights and  licences) will be transferred to the jointventure. Consequently, the  parents of the jointventure will be active on these markets only through  the jointventure. Therefore, the creation of CLTUFA will not lead to the  coordination of thecompetitive behaviour of its parents.  10.<ind> The operation is therefore a concentration within the meaning of  Article 3(1) of the Regulation.  IV.<ind> COMMUNITY DIMENSION  11.<ind> The combined aggregate worldwide turnover of all the undertakings  concerned is more than ECU 5 billion (Bertelsmann: ECU 10.969 billion).  The aggregate communitywide turnover of the two undertakings concerned is  more than ECU 250 million (Bertelsmann: ECU 7166 million; GBL: 2738  million). The two undertakings concerned did not achieve more than two  thirds of their communitywide turnover within one and the same Mumber  State. Therefore, the concentration has a Community dimension.<tab>   V.<ind> COMPATIBILITY WITH THE COMMON MARKET   A<ind> Relevant product markets  12.<ind> The activities of CLT and UFA are broadly related to the  following areas:  <ind> (i)<ind> free access tv  <ind> (ii)<ind> pay tv  <ind> (iii)<ind> tv productions  <ind> (iv)<ind> tv rights / licences  <ind> (v)<ind> free access radio  <ind> 1.<ind> Free access tv  13.<ind> <ind> Free access tv comprises free access broadcasting of  television programming, funded wholly or partially by advertising. There  is, therefore, a relevant product market for tv advertising where the  broadcasters compete for advertising revenues. In so far as pay tv  programs are also partially financed by advertising, these activities may  also be included in the market for tv advertising. However, the parties  operate, for the time being, a pay tv channel only in Germany where no  significant mixedfinanced pay tv exists to date.  14.<ind> <ind> The market for tv advertising must be distinguished from  advertising through other media, in particular through the print media.  The consumers targeted through the various types of advertising as well as  the technique employed and the prices in terms of targeted consumers  differ considerably. Although there may be fluctuations between the  several types of media, tv advertising and advertising in print media are,  therefore, distinct markets [Commission decision RTL / Veronica / Endemol  OJ nr. L 134/32, 5.6.96, para. 23 ].  15.<ind> <ind> It can be left open if there is, in the strict economic  sense of this notion, a market for viewers where the tv broadcasters  compete against each other for audience shares. In any event, the audience  shares in tv broadcasting are a determinent factor for the success of the  broadcasters in the tv advertising market and have, therefore, to be  assessed at least in the context of this market [Commission decision RTL /  Veronica / Endemol para 17, 20].  <ind> 2.<ind> Pay tv  16.<ind> <ind> While in the case of advertisingfinanced television, there  is a trade relationship only between the programme supplier and the  advertising industry, in the case of pay tv there is a trade relationship  between the programme supplier and the viewer as subscriber. Although the  distinction between freeaccess tv and pay tv may become blurred over time  with the emergence of digital bouquets combining freeaccess and pay tv  channels. Pay tv constitutes, therefore, for the time being a separate  relevant product market where the pay tv broadcasters compete for  subscribers [Commission decision MSC Media Service, OJ nr. L 364,  31.12.94, p. 1, para 32, 33]  <ind> 3.<ind> Tv productions  17.<ind> <ind> With respect to tv productions, a distinction has to be  made between inhouse productions produced by broadcasters and used for  captive use and productions commissioned by a broadcaster to a producer.  Only the latter are offered on a market and the relevant product market  has, therefore, be limited to tv productions which are not used for  captive use [Commission decision RTL / Veronica / Endemol, para. 24, 88,  89]  <ind> 4.<ind> Tv rights / licences  18.<ind> <ind> As regards the acquisition and licensing of tv rights, a  distinction can be made between film and other fiction rights on the one  hand and sport rights on the other. Sport programs covering widely popular  sports or major international events are often able to achieve high  audience ratings and are generallyconsidered to be particularly suited to  carrying advertisements, as reflected by the amount of sponsorship  involved. The tv rights for sport events must be acquired in advance of  the event, but their attractiveness may change considerably depending on  the actual participation and success of teams or participants appealing to  national or regional audiences. Sport rights have, therefore, specific  features as compared with film and other programme rights. For the  purposes of the present case, it can, however, be left open whether or not  there are separate relevant markets since even on the basis of a narrow  market definition the proposed concentration would not lead to the  creation of a dominant position. For the same reason, it can also be left  open whether or not there are separate relevant markets for free access tv  rights and pay tv rights.  <ind> 5.<ind> Free access radio  19.<ind> <ind> As regards free access radio, the situation is similar to  that of free access tv. There is a relevant market for radio advertising.  It is not necessary to decide whether there is a relevant market for radio  broadcasting since the audience share has to be taken into account, in any  event, in the assessment of the position of the broadcasters in the  advertising market.  B<ind> Relevant geographic markets  <ind> 1.<ind> Markets related to tv broadcasting  20.<ind> <ind> Although in certain niche markets there are already  programs broadcast throughout Europe, tv broadcasting still generally  takes place on national markets. This is true for both free access and pay  tv. As already outlined in several decisions of the Commission [e.g. MSG  Media Service para. 46, RTL / Veronica / Endemol para. 25, Kirch /  Richemont / Multi Choice / Telepiu (Case No. IV/M. 584) of 5.5.1995, para  17], the national character of tv broadcasting is mainly due to different  regulatory regimes, existing language barriers, cultural factors and other  different conditions of competition prevailing in the various markets  (e.g. the structure of the market for cable networks). Correspondingly,  the markets for tv advertising are also national markets since tv  advertising is directed to the area where the tv broadcasters have their  main audience.  21.<ind> <ind> The markets for tv productions may be sometimes broader and  comprise a particular language region, although there are situations where  even in a given language region the markets are, however, limited to each  of the countries in this region [RTL / Veronica / Endemol para. 25]. The  situation is similar with respect to the markets for tv rights. Although  the demand for a large part of these rights is EC wide or even worldwide,  in particular for international sport events, art movies, film and sport,  rights are normally granted for one specified country or language region.  In the present case, there is no need for an exact delineation of the  geographic markets for tv productions and tv rights. The assessment would  not change if Austria were to be included in the respective markets in  Germany and the Frenchspeaking region of Belgium were to be included in  the markets in France.  <ind> 2.<ind> Freeaccess radio  22.<ind> <ind> For similar reasons as for the tv markets, the market for  radio advertising is at least limited to a specific country. Moreover, it  could be considered that there are distinct regional markets within one  country since numerous radio stations are essentially directed to a  specific region. This question can, however, be left open. On the basis of  a regional market definition, there would be only an overlap between CLT  and UFA in one region in Germany where the concentration would, however,  not lead to the creation of a dominant position.  C<ind> Effects of the concentration  23.<ind> As regards the geographic markets where CLT and UFA are active,  the proposed concentration is to a great extent complementary. There is  only a significant overlap in Germany. However, the most important  activity of CLT and UFA in the German tv sector, the channel RTL, is  already a joint venture between the two parties.  <ind> 1.<ind> Germany  <ind> <ind> a)<ind> Freeaccess tv  24.<ind> <ind> <ind> In Germany, there is a relatively high number of  freeaccess tv channels. They can be mainly grouped into the channels of  the public broadcasters ARD and ZDF, the channels linked to CLT and UFA  and the channels linked to the Kirch group. CLT and UFA hold a share in  RTL of 47,9% and 39,1% respectively.Furthermore, CLT has a share of 24,9%  in RTL 2 and 50% in Super RTL. UFA has a share of 24,9% in VOX. The Kirch  group holds a share of 43% in SAT 1 and a share of 24,5% in the sports  channel DSF. A major participation in SAT 1 is held by the publishing  group Springer in which in turn Kirch has a significant shareholding. Mr.  Thomas Kirch, the son of the owner of the Kirch group, has a share of  24,5% in PRO SIEBEN AG which runs the channels PRO 7 and Kabel 1.  25.<ind> <ind> <ind> The audience shares of the different tv broadcasters  were in 1995 as follows:  <ind> <ind> <ind> Public broadcasters:  <ind> <ind> <ind> ARD (First programme) <tab> 14,6%  <ind> <ind> <ind> ARD (Third programme) <tab> 9,7%  <ind> <ind> <ind> ZDF <tab> 14,7%  <ind> <ind> <ind> <tab> 39,0%  <ind> <ind> <ind> Channels linked to CLT / UFA:  <ind> <ind> <ind> RTL <tab> 17,6%  <ind> <ind> <ind> RTL2 <tab> 4,6%  <ind> <ind> <ind> Super RTL <tab> 1,1%  <ind> <ind> <ind> VOX <tab> 2,6%  <ind> <ind> <ind> <tab> 25,9%  <ind> <ind> <ind> Channels linked to the Kirch Group:  <ind> <ind> <ind> SAT1 <tab> 14,7%  <ind> <ind> <ind> DSF <tab> 1,3%  <ind> <ind> <ind> PRO 7 <tab> 9,9%  <ind> <ind> <ind> Kabel 1 <tab> 3,0%  <ind> <ind> <ind> <tab> 28,9%  <ind> <ind> <ind> Others <tab> 6,2%  <ind> <ind> <ind> The market shares in tv advertising were in 1995 as  follows:  <ind> <ind> <ind> Public broadcasters:  <ind> <ind> <ind> ARD (all programmes) <tab> 4,8%  <ind> <ind> <ind> ZDF <tab> 5,4%  <ind> <ind> <ind> <tab> 10,2%  <ind> <ind> <ind> Channels linked to CLT / UFA  <ind> <ind> <ind> RTL <tab> 30,9%  <ind> <ind> <ind> RTL2 <tab> 5,1%  <ind> <ind> <ind> Super RTL <tab> 0,3%  <ind> <ind> <ind> VOX <tab> 1,8%  <ind> <ind> <ind> <tab> 38,1%  <ind> <ind> <ind> Channels linked to the Kirch Group:  <ind> <ind> <ind> SAT 1 <tab> 25,6%  <ind> <ind> <ind> DSF <tab> 1,1%  <ind> <ind> <ind> PRO 7 <tab> 21,0%  <ind> <ind> <ind> Kabel 1 <tab> 2,4%  <ind> <ind> <ind> <tab> 50,1%  <ind> <ind> <ind> Others <tab> 1,6%  <ind> <ind> <ind> (based on advertising revenues excluding agency  commissions)  26.<ind> <ind> <ind> On the basis of these market shares, there is no  indication that CLT / UFA would enjoy a dominant position on the German tv  advertising market. Given that RTL is already a joint venture of CLT and  UFA, there is only a small increase in market shares for the channels  linked to CLT / UFA through VOX (1,8%). With a total market share in tv  advertising of around 38%, the CLT / UFA group will, however, be faced  with the strong position of the channels linked to the Kirch group which  have together a market share of around 50%. Even if SAT 1 / DSF and PRO 7  / Kabel 1 were to be seen as completely independent competitors, they  would each have a sufficently strong position to exclude the assumption of  a dominant position of CLT / UFA. In this context, it has also to be taken  into account that Kirch is the leading German supplier of feature films  and entertainment programmes for television. Even if CLT and UFA were to  strengthen their position in the acquisition of tv rights through the  proposed joint venture, CLT / UFA would, however, probably not achieve a  stock of movies and television programmes which could be comparable to  that of Kirch.There is also no indication that there could be in the  future a collective dominance of the channels linked to CLT / UFA and  those linked to the Kirch Group. Although both groups reach together a  market share in tv advertising of around 88%, the record of the market  shows that there is effective competition between the players on this  market. There is no indication that this would change as a result of the  creation of the proposed joint venture. This view was confirmed  by major  advertisers asked by the Commission.  <ind> <ind> b)<ind> Pay tv  27.<ind> <ind> <ind> UFA has a stake of 37,5% in the pay tv channel,  Premiere. The other shareholders are Canal + with a stake of 37,5% and  Kirch with a stake of 25%. Premiere which is jointlycontrolled by its  shareholders was until July 1996 the only pay tv supplier in Germany and  has around 1.2 million subscribers. In July 1996, Kirch launched the  digital pay tv channel, DF 1, which envisages to achieve 200.000  subscribers by the end of the year. In contrast, CLT and UFA have informed  the Commission that they abandoned at present their previous plans to  launch the digital pay tv channel, Club RTL.  28.<ind> <ind> <ind> Even if, despite the new digital activities of Kirch  and the expected significant change in the conditions of competition  following the emergence of digital tv, a dominant position of Premiere  were to be assumed, this position would not be strengthened by the  proposed concentration. Since CLT has no pay tv activities in Germany,  there will be no increase in market shares. Furthermore, CLT can not be  seen on its own as a potential competitor. The previous plans of CLT to  enter the German pay tv market through its participation in MMBG, a  proposed joint venture for services related to digital tv, and through the  development of Club RTL, were all related to digital pay tv. Furthermore,  these plans were not directed to launching a digital programme on a stand  alone basis, but only in cooperation with the other parties, in particular  UFA. Given the high investment which is necessary for launching digital  pay tv and the risks to be taken, it is hardly conceivable that CLT could  be a potential competitor on its own. This is also evidenced by the fact  that the planned digital activities of CLT in France will be carried out  in a cooperation together with TF1, France 2, France 3, France Télécom and  La Lyonnaise des Eaux.  <ind> <ind> c)<ind> TV productions  29.<ind> <ind> <ind> The German market for tv productions, excluding  inhouse production for captive use, is estimated to amount to a value of  around DM 2.5 billion in1995. The turnover in tv productions achieved by  UFA amounted to DM [below 300 million]. The production activities of RTL  in Germany amounted to a value of around DM [below 100 million.]. It has  to be assumed that the greater part of these productions were for captive  use. In any event, the combined share of CLT / UFA would be less than  [between 10% and 20%]. The market leader in German tv production is the  Kirch group. The proposed concentration will, therefore, not lead to the  creation of a dominant position.  <ind>   <ind> <ind> d)<ind> Tv rights / licences  30.<ind> <ind> <ind> Television rights are partially acquired by traders  or agencies from the owners of the rights (e.g. movie companies, sports  associations) and then licenced to the broadcasters. Partially, these  rights are directly acquired by broadcasters from the owners.  31.<ind> <ind> <ind> UFA achieved in 1995 with the trade of tv rights for  sport events a turnover of DM [below 300 million] and in fiction  programming a turnover of DM [below 50 million]. A part of the turnover  achieved by sport rights was related to sales outside Germany. CLT did not  achieve any turnover in the trade of sports rights. The turnover of the  licencing of film rights to broadcasters outside the CLT group amounted to  DM 30 million in the whole of Europe.  32.<ind> <ind> <ind> It is estimated that the total value of sports rights  in Germany amounted in 1995 to DM 700  800 million. Taking into account  that the sales by UFA were partially related to broadcasters outside  Germany, the market share of UFA lies in the order of [between 20% and  30%]. The leading agency for sport rights in Germany is ISPR which is a  joint venture of Kirch and Springer. It cannot be assumed that UFA would  have a dominant position on the basis of separate market for the licensing  of sport rights.  33.<ind> <ind> <ind> With respect to the licensing of film rights, by far  the leading trader of film rights in Germany is the Kirch group which had  already in the past a portfolio of 15.000 feature films and 50.000 hours  of tv programming. Kirch's position has been recently even more   strengthened as a result of major outputdeals with the U.S. movie  companies Columbia, MCA and VIACOM. As far as direct licence agreements  between broadcasters and movie companies are concerned, RTL entered into  major outputdeals with Warner Brosand Orion. However, these deals have to  be seen as creating a certain counterbalance to the strong position of  Kirch.  <ind> <ind> e)<ind> Freeaccess radio  34.<ind> <ind> <ind> On a nationwide basis, the German radio stations in  which CLT and UFA hold significant participations have a combined market  share of [between 13% and 17%]. On a regional basis, there is only an  overlap in the region of Berlin / Brandenburg where CLT operates the radio  station 104,6 and UFA has a minority participation in Berliner Rundfunk.  The combined market share in tv advertising in this region is around  [below 40%]. There are, however, other strong competitors in this regional  market which have market shares between 12% and 24%. Furthermore, the  market shares of the main players were not stable over the last years. It  cannot be assumed that the proposed concentration would lead to a dominant  position even on the basis of the definition of a regional market  comprising Berlin and Brandenburg.  <ind> 2.<ind> Other European markets  35.<ind> <ind> In the tv and radio markets outside Germany, there is no  overlap between CLT and UFA since the activities of UFA are limited to  Germany. Furthermore, given the position of CLT in the other European  markets where it has participations in tv broadcasters, it cannot be  assumed that there is on any of these markets a dominant position which  could be strengthened by the combination of the resources of Bertelsmann  and CLT.  36.<ind> <ind> In France, assuming that M6 is jointly controlled by CLT,  the mqrket share of CLT with the channels M6 and RTL9 amounts to around  17%. These channels are i.a. faced with the competition by TF1 which  belongs to the Bouyges group and is, therefore, backed by large financial  resources.  37.<ind> <ind> On the assumption that there is a regional market for tv  advertising in Belgium which is limited to the Belgian French speaking tv  channels, CLT would have in this market a share of 69,7% through its  channels RTL TVI and Club RTL. However, there is a certain competitive  pressure from the French channels TF1, France 2 and France 3 which achieve  in prime time together an audience share of more than 30% in the French  speaking region of Belgium, as compared with around 25% for the CLT  channels. Advertisers aiming to reach the French and the French speaking  Belgian audience can´, therefore, also use to a significant extent the  French tv channels. Furthermore, the advertising marker of the Belgian  French speaking channel was until 1 October 1996 regulated by the  Communauté française de Belgique in the way that the advertising time of  the channels had to be sold through the same agent and the proceeds of the  sales were allocated between the channels according to an arrêté of the  Gouvernement de la Communauté française. In any event, on the assumption  that CLT has a dominant position on the regional tv advertising market in  the French speaking region in Belgium it cannot be assumed that this  position would be appreciably strengthened by the combination of the  resources of Bertelsmann and CLT.  38.<ind> <ind> In Luxemburg, RTL Télé Letzebuerg has a share in tv  advertising of 5%.  39.<ind> <ind> In the Netherlands, HMG is the clear market leader in tv  advertising. However, as outlined in the Commission's decision of  17.07.1996 in the RTL/Veronica/Endemol case, the dominant position  resulting from the creation of HMG has been removed as a result of the  modification of the HMG joint venture.  <ind> 3.<ind> Overall evaluation of the concentration on a Community  level  40.<ind> <ind> Some competitors have argued that the proposed  concentration, resulting in the creation of the leading European tv  broadcaster in terms of tv channels, would lead over time to a strong or  even dominant position of CLT / UFA throughout Europe. The argument was  put forward that, even in the absence of a significant overlap and an  addition in market shares, the possible synergies resulting from the  concentration and in particular the increase in buying power for tv rights  resulting from the combination of the resources of Bertelsmann and CLT  would confer major competitive advantages on CLT / UFA. The Commission  considers, however, that given the position of CLT / UFA on the different  markets as outlined above and the fact that normally tv rights are not,  for the time being, acquired on a Europeanwide basis, but essentially for  national markets, the mere combination of resources and possible synergies  is not sufficient to establish a dominant position in theforseeable  future.  41.<ind> <ind> The evaluation of the concentration on a European level  could be different if CLT / UFA by entering the digital tv market were to  be, as one competitor suggested, in the centre of a network of strategic  alliances of all the major European players. However, apart from the fact  that the parties abandoned at present their plans of entering the digital  tv market, the various alliances which are currently envisaged have to be  assessed on their merits when they are subject to a competition  examination. In the framework of such an examination, possible links to  CLT / UFA and its overall position would have to be taken into account.  V<ind> CONCLUSION  <ind> For the above reasons, the Commission has decided not to oppose the  notified operation and to declare it compatible with the common market and  with the functioning of the EEA Agreement. This decision is adopted in  application of Article 6(1)(b) of Council Regulation No 4064/89.  For the Commission