CELEX: 31995M0584
Language: en
Date: 1995-05-05 00:00:00
Title: COMMISSION DECISION of 05/05/1995 declaring a concentration to be compatible with the common market (Case No IV/M.584 - Kirch / Richemont / Multichoice / Telepiu) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0584

COMMISSION DECISION of 05/05/1995 declaring a concentration to be compatible with the common market (Case No IV/M.584 - Kirch / Richemont / Multichoice / Telepiu) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 129 , 25/05/1995 P. 0006

 COMMISSION DECISION of 05/05/1995 declaring a concentration to be compatible with the  common market (Case No IV/M.584 - Kirch / Richemont / Multichoice / Telepiu) 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.584 - Kirch/Richemont/Multichoice/Telepiù <ind> <ind> Notification of 28.03.1995 pursuant to Article 4 of Council Regulation No 4064/89 1.<ind> On 28.03.1995 Compagnie Financière Richemont AG (Richemont), MultiChoice Limited  and Ptb Pay-TV Beteiligungs-GmbH (Ptb), belonging to the Kirch group, notified an operation by  which they will acquire joint control of Telepiù S.r.l. 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 OPERATION AND THE PARTIES 3.<ind> On 27th June 1994 Compagnie Financière Richemont AG (Richemont), through its  subsidiary Ichor, acquired the whole share capital of CIT, whose unique asset was 25% of the shares  of Telepiú. On the same day a shareholders agreement was signed between Kirch, through its  subsidiary Ptb Pay TV Beteiligungs GmbH, which held 34,72% (currently 40,73%) of Telepiù's  share capital and Richemont, whereby they jointly control Telepiù. The other principal shareholders  in Telepiú were the Italian property group Fin. Tel. S.r.l. (part of Della Valle Group), which holds  23,39% of the share capital, and Reti Televisive Italiane SpA (10%), a subsidiary of the Italian  Group Fininvest. The case was notified to and cleared by the Commission (case No. IV/M.410 -  Kirch/Richemont/Telepiù)  4.<ind> Under the present arrangements Richemont and MultiChoice will merge their respective  pay-TV business worldwide in PayCo, a company jointly controlled by them. As part of this  transaction, Richemont will contribute its interest in Telepiù to PayCo. As a result PayCo will  replace Ichor in the shareholders agreement in relation to Telepiù. PayCo will be jointly controlled  by Richemont and Multichoice and, therefore, Telepiù will be jointly controlled by Richemont, the  Kirch group and MultiChoice. 5.<ind> Richemont is a Swiss-based holding company which exercises financial and operational  control over companies operating throughout the world primarily in the fields of tobacco and luxury  goods. Within the television broadcasting industry, Richemont has a 50% interest in Network  Holdings (Nethold) which holds 100% of the voting rights in FilmNet SA. FilmNet is a Luxembourg  holding company active in the pay-TV business in Belgium, the Netherlands, Denmark, Norway,  Sweden and, through an agent, in Finland. The remaining 50% of the capital of Nethold is held by  MultiChoice. 6.<ind> MultiChoice is a South African based company. Multichoice was set up in October 1993 as  a result of the sale by Electronic Media Network Limited (M-Net) to Multichoice of its subscriber  management services (SMS) and Communications Technologies (Comtech) divisions, as well as its  African investments outside South Africa. MultiChoice's interests in the television broadcasting  industry in the EEA territory are held through a 50% interest in NetHold which, in turn, owns  FilmNet. 7.<ind> The Kirch Group is active in film and television production and broadcasting in Germany.  As a distributor, it holds a very important library of German language films. In the field of  broadcasting, it has interests in two commercial and one pay-TV channel in Germany: the  commercial channels SAT-1 (43%) and DSF (24,5%) and the pay-TV channel Première (25%). The  Kirch Group also owns a 25% shareholding in the Spanish commercial channel Gestavision Tele  Cinco S.A. and a 40,73% shareholding in Telepiù. 8.<ind> Telepiù is the holding company of the undertakings which operate the three television  channels: Prima TV Spa (Telepiú 1), Europa TV Spa (Telepiú 2) and Omega TV Spa (Telepiú 3).  Telepiú has the control of Atena Servizi Spa, which operates the business of subscriber management  and service, Telepiú Pubblicitá Srl, sales company and Gamma Televisiva Srl, which owns the  group's television production studio. 9.<ind> Under the same arrangements Richemont and Multichoice will contribute all their  respective television interests to a newly formed jointly controlled company, PayCo. NetHold will  contribute to PayCo its 100% interest in the following operating companies: FilmNet SA,  Multichoice Kaleidoscope (Europe), Multichoice Development, Irdeto, Pronet. These transfers from  NetHold to its wholly-owned subsidiary PayCo will constitute intra-group transactions with no  effects on the control of the companies concerned and therefore no impact on competition in the  markets concerned. Multichoice will contribute to PayCo some African companies and some African  investments, whose activities and turnover is achieved exclusively in the African continent. The  transfer to PayCo of the above African activities will therefore not affect competition within the EEA  territory  II.<ind> CONCENTRATION 10.<ind> As a result of this transaction, PayCo will replace NetHold as the holding company for the  television interest of Richemont and MultiChoice. PayCo will have ten directors. Richemont and  MultiChoice will each nominate three of the six non-executive directors. The executive directors will  be appointed and removed by unanimous decisions of the directors of PayCo. All material decisions,  including in particular the approval of the business plan of the PayCo group, the appointment and  removal of the chief executive officer, the chief financial officer and the chief operating officer of  PayCo (who are executive directors of PayCo) and of the fourth executive director of PayCo require  the unanimous consent of all the directors present at a meeting of the board of directors of PayCo or,  were appropriate, the unanimous consent of the general meeting of PayCo. Under clause 25 of the  Agreement if the directors of PayCo should fail to reach unanimity on the above mentioned material  decisions, the matter may be referred to the directors of NetHold for a decision. The board of  directors of NetHold is composed of four members, of whom two will be Richemont directors and  two will be Multichoice directors. According to the Agreement decisions of the board of directors of  NetHold must be unanimous. Thus PayCo will be jointly controlled by Richemont and MultiChoice. 11.<ind> The shareholders' Agreement of 27th June 1994 between Ichor and Ptb will remain  unaffected by the proposed concentration except that under the present operation PayCo will replace  Ichor as a party to the Shareholders' Agreement. Telepiù is an existing company which provides  television broadcasting services in Italy. It will therefore continue to perform on a lasting basis all  the functions of an autonomous economic entity.  12.<ind> Commission decision (case No. IV/M.410 - Kirch / Richemont / Telepiù) established joint  control of Telepiù by Richemont and the Kirch group. As a result of the new arrangements between  Richemont and Multichoice, Telepiù will be jointly controlled by Richemont, the Kirch group and  Multichoice. The acquisition of joint control of Telepiù will not give rise to coordination of the  competitive behaviour between the parties, since the television activities of Richemont and  MultiChoice, the Kirch Group and Telepiù are carried out in separate geographic markets as will be  seen below. 13.<ind> Thus the acquisition by Richemont, MultiChoice and Kirch of joint control of Telepiú  constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation. III.<ind> COMMUNITY DIMENSION 14.<ind> The undertakings have a combined aggregate worldwide turnover in excess of 5,000  million ECU. Richemont and the Kirch Group have a Community wide turnover of more than 250  million ECU. They do not achieve more than two thirds of their aggregate Community-wide  turnover in one and the same Member State. The operation has therefore a Community dimension. IV. COMPATIBILITY WITH THE COMMON MARKET <ind> The relevant product market 15.<ind> The present operation concerns the market for television broadcasting, and more  specifically, the segment of pay-TV. <ind> In order to determine whether pay-TV should be regarded as distinct from free-access  channels, a certain number of elements should be taken into account. First, pay-TV is primarily  financed by subscription fees, whereas free-access television is financed by public authorities and/or  by advertising revenue, depending on whether the channel in question is State-owned or a private  commercial one. Although a pay-TV channel may take advertising, it is of lesser importance. <ind> Secondly, pay-TV offers a more specialised programme-mix in order to meet the requirements  of a target audience. This can consist of live coverage of sport events, first television screenings of  recent films or well-reputed works, etc. In most countries pay-TV channels acquire the right to  broadcast major new films only after they have been on general release on cinemas (the so-called  theatrical window) for a period of 6 to 12 months, and after they have been made available on video  (video window) for around 6 to 10 months once the theatrical window has expired. The pay-TV  channel will broadcast those films (pay-TV window) within a period of 6 to 12 months, after which  they will become available for free- access channels. 16.<ind> The above factors seem to lead to the conclusion that pay-TV represents a separate market.  However, some substitutability exists between pay-TV and free access television, since the value of  the former depends directly on the alternative viewing possibilities. In any event, the present case  does not raise competition concerns even in the narrowest possible market. Consequently, the precise  definition can be left open. <ind> Geographic reference market 17.<ind> The television broadcasting market is undergoing a strong process of development and  geographical expansion. This trend is in particular due to the growing importance of satellite  television, which enables viewers (through a cable network or a dish) to have access to a greater  range of television channels than when only terrestrial broadcast is available. Notwithstanding these  technical advances, conditions of competition in this sector seem to vary considerably from one  Member State to another for the following reasons: <tab> a)<ind> Programme rights to broadcast are purchased by television channels on a national or  language basis. This applies to films, sports and other general interest events, such as live concerts. <tab> b)<ind> The rights to broadcast major new films are subject to the rules in each country on  the time periods for release in cinemas, video, pay-TV and free-access television (windows). These  rules are set forth by law or by industry and the duration of the windows varies from country to  country. In addition, film producers often release films to be broadcast in different Member States at  different times. <tab> c)<ind> The programme- mix of the main television channels in the Community is designed  on the basis of the cultural interests of a national or regional audience. Although pan- European  channels are starting to develop, their success in terms of viewers is so far very limited. As regards  pay-TV channels, they usually target a specific audience on a national basis. For example, Telepiù  substantially increased its number of subscribers after it purchased the rights to show certain football  league matches live. Even FilmNet, which has a wide international coverage, has adapted its second  channel, FilmNet Plus, to national needs, so that the programmes broadcast in Belgium are not the  same as those broadcast in the Netherlands.  <tab> d) <ind> Language differences throughout the Community still hinder a wide expansion of  television channels outside their home country. For the same reason foreign programmes broadcast  by the main television channels in their home country are often shown in the language of that  country after having dubbed them. This is the case in countries such as Italy, France or Spain. In  other countries (the Netherlands, Scandinavia) foreign programmes are usually broadcast in the  original language including subtitles.  <tab> e)<ind> In the case of pay-TV, the setting-up of a subscriber management system requires an  extensive customer service organisation in the country where subscribers are located. <ind> In the light of the above, it can be concluded that although technical advances have  significantly contributed to a gradual process of internationalisation, television broadcasting markets  remain mainly national or regional (language-based).  <ind> Assessment 18.<ind> The present transaction concerns the television broadcasting market in Italy, the only  country where Telepiù operates and has subscribers. <ind> There are six principal television channels in Italy,of which three are State-controlled (Rai 1,  Rai 2 and Rai 3) and three are commercial channels controlled by the Fininvest group (Canale 5,  Italia 1 and Retequattro). These channels account together for 90% of total viewing time. The  remaining 10% includes minor private national networks and a number of local television  channels. <ind> The Telepiù group operates three channels in Italy: two pay-TV channels (Telepiù 1 and 2,  focusing on films and sports respectively) and a free-access channel (Telepiù 3), whose future is  uncertain due to recent changes in the legislation in Italy. The group derives [Deleted business  secrets - more than 75%.] of its revenue from subscriptions, the rest being advertising. It currently  has 680000 subscribers.  19.<ind> Under the legislation adopted in Italy in August 1993, Telepiù's three channels may only  continue to use terrestrial frequencies to broadcast for four more years and must begin to use  alternative transmission means after two years. Currently, cable networks are limited in Italy and the  number of satellite dishes is estimated at around 200000. Under these circumstances, the need to  adapt to a cable or satellite transmission system constitutes a technical and economic difficulty for  the development of Telepiù. 20.<ind> None of Telepiù's parents are present in the Italian television market. Richemont and  MultiChoice, through its shareholding in FilmNet, have television broadcasting activities only in  Belgium, the Netherlands, Denmark, Norway, Sweden and Finland. The Kirch group's main  interests in the television sector are in Germany. Consequently, the present operation will not lead to  any addition of market share. Furthermore, the national character of the television market seems to  show that Kirch and FilmNet are not in a particularly advantageous position in order to enter the  Italian market on their own with the setting-up of a new pay-TV channel as compared to other  television operators in the EC. Therefore, the present transaction does not amount to an appreciable  elimination of potential competition in the television market in Italy. 21.<ind> Although the Kirch Group holds a very significant portfolio of feature films in German  language, its rights to distribute them to pay-TV and free-access channels are limited to German- speaking territories. Consequently, no significant vertical effects can be expected as a result of this  transaction. 22.<ind> MultiChoice and Richemont are already partners in the pay-TV business throughout  Europe. The proposed transaction is principally an internal restructuring and will have little impact  in the present market position of Telepiù as operator of pay-TV in Italy.  V.<ind> ANCILLARY RESTRAINT 23.<ind> Clause 12.4 of the Principal PayCo Agreement provides that neither Multichoice nor  Richemont will become interested in electronic media services without first having offered PayCo  the opportunity to exploit it. This clause is to be considered as a restriction directly related and  necessary to the implementation of the concentration and is covered by the present decision. VI.<ind>  CONCLUSION 24.<ind> Given that the present transaction will not lead to any addition of market shares between  the parties, as well as the relatively small operations of Telepiù in the Italian market, the proposed  concentration will not create or strengthen a dominant position as a result of which effective  competition will be significantly impeded in the common market or EEA or in a substantial part  thereof. For the above reasons, the Commission decided not to oppose the notified concentration 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