CELEX: 31999J0031
Language: en
Date: 1999-12-15 00:00:00
Title: COMMISSION DECISION of 15/12/1999 declaring a concentration to be compatible with the common market (Case No IV/M.0031 - HMI INTERNATIONAL HOLDINGS/ARNOLDO MONDADORI EDITORE) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31999J0031

COMMISSION DECISION of 15/12/1999 declaring a concentration to be compatible with the common market (Case No IV/M.0031 - HMI INTERNATIONAL HOLDINGS/ARNOLDO MONDADORI EDITORE) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal 143 , 16/05/2001 P. 0006 - 0006

COMMISSION DECISION of 15/12/1999 declaring a concentration to be compatible with the common market (Case No IV/M.0031 - HMI INTERNATIONAL HOLDINGS/ARNOLDO MONDADORI EDITORE) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)Brussels, 15.12.1999To the notifying partiesDear Sirs,Subject: Case No COMP/JV31  Hearst/Mondadori/Hearst Mondadori Editoriale SRL1. On 12 November 1999 the Commission received a notification of a proposed concentration pursuant Article 4 of Council Regulation (EEC) N° 4064/89 by which the undertakings HMI International Holdings Inc and Arnoldo Mondadori Editore Spa create and acquire the joint control of Hearst Mondadori Editoriale SRL (HME) within the meaning of article 3 (1) b.2. After examination of the notification, the Commission has concluded that the notified operation falls within the scope of Council Regulation N° 4064/89 and does not raise serious doubts as to its compatibility with the common market.I. THE PARTIES3. HMI International Holdings, Inc (which along with its subsidiaries, affiliates and parent will hereinafter be referred to as "Hearst") is part of The Hearst Corporation, a large diversified communications company, whose major interests include newspaper, magazine and business publishing; television and radio stations; cable network programming; newspaper features syndication; television production and distribution together with internet activities.4. Arnoldo Mondadori Editore S.p.A (hereinafter "Mondadori") is an Italian publishing house.  Mondadori has more than 50 subsidiaries and affiliates, and its activities cover not only Italy but also other European countries.  It has six main areas of activity: books, magazines and advertising, printing, direct marketing, computer publishing and new media, and on-line services.  Mondadori is a company controlled by Fininvest S.p.A. The activities of Fininvest include the purchase, production and diffusion of TV programmes, advertising, publishing, financial and insurance brokerage services, large-scale retail, the production and distribution of products for the cinema, administration of theatres and cinemas, information directories, real estate and finance. II. THE OPERATION5. The basic structure of the transaction can be described as follows :6. The concentration is a full-function joint venture company, which has been created as an autonomous economic entity.  The joint venture company is called Hearst Mondadori Editoriale, SRL (hereinafter "HME").  Its object will be to set up and publish an Italian edition of "Cosmopolitan", a woman's magazine. Parties envisaged in the future to extend the scope of HME to the edition of an Italian version of "Harper's Bazaar", a women's fashion magazine.  It will also have an exclusive right of negotiation with regard to the publication or distribution of Italian editions of any current or future magazine whose edition rights are owned or controlled by the Magazines Division of Hearst. 7. Each of Hearst and Mondadori owns 50% of HME.III. CONCENTRATION8. Following the agreement between HME's shareholders, the decision-making structure involves a board of 6 Directors will be set up which shall delegate part of its responsibilities to a Managing Director designated as the Managing Director for the first three years by Mondadori.  Thereafter the Managing Director shall be selected by a procedure of approval by Hearst of Mondadori's candidate.  A Chairman of the Board of Directors shall be chosen by the Board for a one-year term.  The position of Chairman will rotate (in alternating years) between persons chosen by Hearst and persons chosen by Mondadori, with a Hearst candidate being the first Chairman.9. Fundamental decisions (which are defined in clause 7.4 of the Agreement and include, inter alia, a proposed material change in the HME's stated purpose, a proposal to adopt the budget, and entering into certain contracts), shall be approved by a two-thirds majority vote of two-thirds of all members of the Board of Directors and by a members' meeting.  The votes of the nominees representing the members in such a members' meeting must be unanimous.10. Consequently, the parents' companies have the joint control of HME.11. HME is a full-function joint venture; it fulfils all the functions of an independent undertaking. HME has sufficient financial resources [1]. HME will be granted from Hearst an exclusive licence on "Cosmopolitan's copyright, which will end in 2030.[1]  Each of the notifying parties commits itself to loan to HMI 1,3 million EUR.12. Therefore, the joint venture is of a concentrative character within the meaning of article 3 (1) of the merger regulation. IV. COMMUNITY DIMENSION13. The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 billion EUR [2] (Business Secrets). The Community-wide turnover of both companies is in excess of EUR 250 million EUR (Business Secrets), but they do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State (Hearst achieves more than two-thirds in the United Kingdom and Fininvest in Italy).  The notified operation therefore has a Community dimension.[2]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on the calculation of turnover (OJ C66, 2.3.1998, p25).  To the extent that figures include turnover for the period before 1.1.1999, they are calculated on the basis of average ECU exchange rates and translated into EUR on a one-for-one basis.V. RELEVANT PRODUCT AND GEOGRAPHICAL MARKETS.14. HME is set up to produce and distribute an Italian version of the women's magazine "Cosmopolitan". The Commission considered in the decision COMP/M665            CEP/Groupe de la Cité (29November 1995) that a separate market for magazines exists and that it can be divided into further sub-markets according to the topics and the category of readers it aims at [3]. The Commission identified a separate relevant market for women's magazines.[3]  See point 9 of the CEP/Presse de la Cité decision15. In the same decision, the Commission established that it was necessary for each sub-market to distinguish between the market for readers and the market for advertising space.16. The relevant product markets in the present case must follow the principles adopted in this previous decision.17. Due to language and cultural differences, the relevant geographical market is limited to Italy [4].[4]  See the CEP/Groupe de la Cité case, cited above, point 1118. To the extent that Hearst has no activities in Italy the question of the effects of the present operation on neighbouring, upstream or downstream markets has no relevance.VI. COMPETITIVE ASSESSMENT19. Hearst is not active in the women's magazine market or other upstream and downstream markets in Italy. Mondadori owns several titles and its market share of the women's magazine market in Italy is (Business Secrets). According to the HME's business plan, the parties have the aim to sale around 200.000 Cosmopolitan's issues per month in 2004.  By comparison with the 1998 total sales in Italy, this figure represents a market share of  0,7%.20. Concerning the market for advertising, even if the narrowest definition of the market is adopted, the advertising in women's magazines, there is no indication that Mandadori acquires a dominant position.  21. Therefore there is neither addition of market shares nor vertical relations as a result of this operation and no competition concerns arise.VII.  ANCILLARY RESTRAINTS.22. Parties identify four ancillary restraints :- The Clause 2.2 of the Agreement gives HME right of first negotiation with respect to the publication and distribution of Italian editions of any current (other than Cosmopolitan) or future magazine where the Italian edition rights are owned or controlled by the Magazines Division of Hearst.- The second ancillary restriction is a non-compete covenant in Clause 6 of the Agreement which provides that neither of the parties to the Agreement shall, for the duration of the Agreement, publish in Italy, help others to publish in Italy or have a direct or indirect interest in any business which publishes or distributes in Italy any Italian magazine which is a general interest glossy up-scale magazine aimed at women aged 18 to 34 which, as a result of its content, style and presentation, is directed at the same target readership as Cosmopolitan.  Clause 6 of the Agreement applies a similar covenant, for a duration of only three years, to monthly, glossy, up-scale women's fashion magazines similar to Harper's Bazaar. - The third ancillary restriction is the exclusive Licence Agreement entered into by Hearst with HME under Clause 1.6 of the Agreement.  The Licence Agreement is for a period, which shall commence on the date of the execution of the Agreement, and shall terminate on 31 December 2030.  - Under Clause 1.6 of the Agreement, HME shall enter into Service Agreements with Mondadori.  Under these agreements, Mondadori and/or its affiliates shall provide certain facilities and services, including advertising, to HME at a charge no higher than Mondadori or its affiliates would charge or allocate to their own publications.  These service agreements will expire on 31st December 2000, and any extension shall be on terms mutually agreeable.  23. The first clause does not fulfil the requirements to be qualified ancillary; this commitment is not indispensable to the creation and functioning of the joint venture. 24. The third and the fourth clauses are ancillary because HME needs a licence agreement to exploit the title "Cosmopolitan in Italy. It needs also, during the launching period, some back office support.25. The non-compete clause raises the question of its duration;  The parties follow the principles established in the Commission notice regarding restrictions ancillary to concentrations [5]; it stipulates that non-compete commitments can last as long as the duration of the joint venture in order to ensure the lasting withdrawal of the parent companies from the joint venture's market. In addition to that, it must be noted that Hearst made a first attempt to edit an Italian version of "Cosmopolitan" through a licence agreement with Dellaschiava S.p.a, but this relationship was terminated in July 1997. The parent companies want to avoid a second failure and the non compete clause is a tool to ensure the success of this new attempt[5]  O.J. C 203 14 August 1990 p.5Finally, the scope of the clause is designed very narrowly.Consequently, this provision can be considered as ancillary.26. The other commitment concerning "Harper's Bazaar" has a different nature; it is very similar to the right of first negotiation. Hearst has not yet decided if it will distribute an Italian version of this fashion magazine. The limited-term non-compete commitment will give time to focus on this option. If Hearst in the meantime decides to implement this option, the non-compete clause will cease and HMI will have only a first negotiation right limited to a 60-day period.This clause cannot be considered as ancillary, because it is not indispensable for the creation of HMI.CONCLUSION27. 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 EEA Agreement. This decision is adopted in application of Article 6(1)(b) of Council Regulation (EEC) No 4064/89.   For the Commission,