CELEX: 31995M0673
Language: en
Date: 1995-12-22 00:00:00
Title: COMMISSION DECISION of 22/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.673 - Channel Five) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0673

COMMISSION DECISION of 22/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.673 - Channel Five) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 057 , 27/02/1996 P. 0003

 COMMISSION  DECISION of 22/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.673  - Channel  Five)  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)(a) DECISION To the notifying parties Dear Sirs, Subject :<ind> Case No. IV/M.673  Channel Five <ind>  <ind> Your notification of 21 November 1995  pursuant to Article 4 of Council Regulation No 4064/89 1.<ind>  On  21  November  1995 the  Commission  received  a notification of a proposed operation pursuant to  Article  4 of  a  Council Regulation (EC) No. 4064/89 by which MAI plc, Pearson  Television Ltd (Pearson), Compagnie Luxembourgeoise de  Télédiffusion  (CLT)  and  Warburg  Pincus  Ventures  LP (Warburg   Pincus)   form  a  new  company:   Channel   Five Broadcasting Ltd by way of purchase of shares. 2.<ind> Having examined the notification, the Commission has concluded that the notified operation does not constitute  a concentration within the meaning of Article 3 of the  Merger Regulation and consequently does not fall within  the  scope of  this Regulation. This decision is adopted in application of Article 6(1)(a) of Council Regulation No. 4064/89. <ind> I<ind> THE PARTIES 3.<ind> MAI is a company with activities in media, financial services  and market research.  In particular, MAI  controls two regional Channel 3 (ITV) franchises in the UK : Meridian and  Anglia  which  serve  the south  and  east  of  England respectively.   These two companies also  have  considerable programme  production activities which  provide  programming for  both themselves and for broadcastingon the national ITV network.   MAI also controls a television advertising  sales house  TSMS  which sells advertising time  on  behalf  of  a number of Channel 3 franchise holders. 4.<ind>   Pearson   is  involved  in  the   production   and distribution   of   television  programmes   through   three subsidiary companies Thames Television, Grundy and ACI.   It also has stakes in two satellite television channels UK Gold and  UK  Living which broadcast to the UK and  has  a  joint venture with the British Broadcasting Corporation to provide two  satellite  channels worldwide BBC World and  BBC  Prime (which are not available in the United Kingdom).   5.<ind>   CLT  is  active  in  the  television   and   radio broadcasting sectors, with holdings in TV and radio stations in  various European countries. Moreover CLT operates in the fields of the production  and licensing of TV programmes and has  activities in the press sector.  In the UK, CLT  has  a 15%  shareholding  in First Choice, a television  production company as well as activities in the radio sector. 6.<ind>  Warburg,  Pincus is a Delaware, USA  based  limited partnership which is a private equity investment  fund.   It has  no  other  media  interests  in  Europe,  though  other associated  investment entities have interests  in  magazine publishing, media buying and cable  television in Europe.  None of these interest constitutes  a controlling interest. <ind> II<ind> THE OPERATION 7.<ind>  The operation concerns the formation of  a  company Channel   Five  Broadcasting  Ltd  (C5B)   to  operate   the franchise  for the fifth terrestrial free access  television channel in the United Kingdom.  The franchise was awarded on 27  October  1995 and the Independent Television  Commission (ITC),  which  awarded  the  franchise  and  regulates   the independent television sector in the UK, has required C5B to take up the licence before the end of 1995.  The company  is expected to begin broadcasting on 1 January 1997.  <ind> III<ind> ABSENCE OF JOINT CONTROL <ind> Absence of de jure joint control 8.<ind>  Immediately after the granting of the Channel  Five licence, the shareholdings of the parent companies in C5B is expected to be as follows: <ind> <ind> MAI <ind> 20% <ind> <ind> Pearson <ind> 20% <ind> <ind> CLT <ind> 32% <ind> <ind> Warburg Pincus <ind> 28% <ind> <ind> (rounded to nearest whole number) <ind>  Certain matters are subject to shareholder protection rights  where each of the shareholders are obliged to ensure that  all  the shareholders with 15% or more of  the  shares agree.   These  matters  include the acquisition  of  assets costing  more than £1 million (approx 1.3 million  ECU)  and the appointment of the Chairman of the Company and its first chief executive. <ind> Subsequent appointments of the chief executive and the approval  of  the  budget are subject  to  different  voting arrangements where 66% of the voting shares must be voted in favour  in  order for such matters to be approved.   In  the light of the shareholdings listed above, no shareholder will have veto rights over such decisions. 9.<ind>  On the basis of the above information, the  parties will not have de jure joint control over C5B. <ind> Absence of de facto joint control 10.<ind> In their notification, the parties argue that there will  be  a  strong  common interest in  the  sense  of  the Commission's   notice  on  the  notion  of  a  concentration [Commission  Notice on the notion of a concentration   OJ  C 385/02  of  31.12.94  page  5].   This  notice  states,   in paragraph  32,  that "very exceptionally, collective  action can  occur on a de facto basis where strong common interests exist  between the minority shareholders....".   The  notice sets  out  certain criteria which indicate the existence  or otherwise  of such a strong common interest.  These  factors include  the  prior existence of links between the  minority shareholders and the establishment of a new rather  than  an existing joint venture.  There is a higher probability  that the  parents are carrying out a deliberate common policy  in particular  where  each  of  the parents  provides  a  vital contribution to the joint venture.  By contrast, the greater the number of parent companies, the lesser the chance of  de facto joint control being in existence. 11.<ind>  In  their notification, the parties only  indicate one  priorlink between any of the shareholders  before  this operation.  This is between MAI and Pearson, who both have a onethird  shareholding  in  Three  on  Four  Limited   which produces live broadcasts of horse racing.  However, in other areas  MAI  and  Pearson  are actually  competitors  on  the programme  production  market and  both  have  interests  in television   broadcasting,  though   on   different   market segments.  The parties have indicated no area where there is a prior link between all four shareholders. 12.<ind>  The parties point out that C5B is a newly  created company with a single purpose.  In addition, they point  out that  all the shareholders will contribute expertise to C5B, in   particular  in  relation  to  broadcasting,  television production and venture capital.  They cite, for example, the activities  of MAI in UK broadcasting and the experience  of Pearson  in  television  production  as  meaning  that   the agreement  of each shareholder will be required  to  operate the company.   <ind>   However,  Warburg  Pincus  only  bring  a  financial contribution   to  the  joint  venture,  which   cannot   be considered to be a vital contribution.  MAI bring  expertise in the broadcasting sector through its ITV channels Meridian and Anglia.  However, MAI does not contribute those channels to C5B, they are kept separate and will compete with C5B for viewers of and advertisers on free access television in  the UK.    <ind>  Each  of  MAI,  Pearson  and  CLT  have  at  least  a theoretical possibility of supplying programmes to C5B.  CLT is  unlikely to do so given that most of its programmes will not be in English and it may not have the rights to offer to C5B  in  the  UK.   MAI and Pearson have the  capability  to supply programmes to C5B.  However, according to the parties only  a  modest  proportion  of  C5B's  programmes  will  be purchased  from  MAI  and  Pearson.   No  long  term  supply agreements  have been entered into between the  parents  and C5B   as   part   of  the  operation.   Under  its   licence application, C5B is committed to commission programmes  from a  large  number  of independent production companies.   The presence  of  programme production companies as shareholders of C5B is not, therefore, vital to its operation. 13.<ind>  In  the  light  of  the  above  information,  MAI, Pearson, CLT and Warburg Pincus do not have a strong  common interest  which would create a situation of de  facto  joint control  amongst all four of them. 14.<ind>   Taking  all  the  above  factors  into   account, including  both the legal and factual elements,  the  parent companies will not have joint control over C5B.   <ind> CONCLUSION <ind>  For  the  above reasons the Commission has  concluded that   the   notified  operation  does  not   constitute   a concentration within the meaning of Article 3 of the  Merger Regulation and consequently does not fall within  the  scope of  this Regulation. This decision is adopted in application of Article 6(1)(a) of Council Regulation No. 4064/89. <ind> The Commission will treat the notification pursuant to Article  5  of  Commission  Regulation  No.  2367/90  as  an application   within  the  meaning  of  Article   2   or   a notification  within  the meaning of Article  4  of  Council Regulation  17/62  as  requested by  the  parties  in  their notification. For the Commission