Pay-TV merger cleared Minister Economy France

13 November 2006

Romain Ferla

On August 30, 2006, the Minister of Economy authorised the merger of the two satellite pay-TV platforms active in France: CanalSat and TPS. This authorisation was granted after a Phase II investigation (i.e. after an opinion of the Competition Council) and the submission by the parties of 59 commitments which are meant to remedy the competition issues that the merger raises on many markets.

The Minister considered that this merger had to be assessed in the light of a fast evolving competitive landscape. It took into account, notably, that in the other Member States of the European Union, pay-TV satellite platforms have already merged and that, in addition, several telecom operators recently entered the pay-TV market.

According to the Minister, the undertakings submitted by Vivendi and Canal Plus guarantee that effective competition will be preserved after the merger on the pay-TV market, and that consumers will benefit from it.

On the markets for the acquisition of movies and sports rights (so-called ‘upstream’ markets), the parties offered a certain number of remedies in order to maintain a sufficient degree of competition on the markets. These commitments consist mainly of limiting the duration of the acquisition contracts and ceasing to make tied offers for various categories of broadcasting rights. The Minister considered these undertakings were sufficient given that, as the Conseil de la Concurrence also observed, the increased purchasing power of the new entity will be partly compensated by the strong position of some rights owners like the American studios or the French football league.

Among the interesting issues the Minister had to deal with on these upstream markets was the creation of a ‘monopsony’ on the market for the acquisition of the broadcasting rights of the French football league. Both the Minister and the Competition Council acknowledged that, given the current structure of the league’s auction procedure, it is very unlikely that credible bidders other than the new entity will be able, in the next auction (in 2007), to submit competitive offers for the acquisition of these rights. The French competition authorities nevertheless minimised the risk of competitive harm, showing confidence in the league’s capacity to restructure its auction procedure and thus to adapt to the new competitive environment. One may think that the French authorities’ optimism contrasts with the more realistic approach recently advocated by Prof. Klemperer in his report on bidding markets recently published by the UK Competition Commission. Indeed, Prof. Klemperer explains that “It is true that with enough care and determination it is usually possible to design an auction that can overcome all these problems, but it is often unrealistic to expect this to be achieved in practice. Competition policy must sometimes take the decision-making structure of other organisations as given — just as it must sometimes accept the current industrial structure. In short, we should not be overly sanguine about what bid-taker power can achieve" (Competition Commission, "Bidding Markets", Paul Klemperer, June 2005)

On the markets for the supply of pay-TV channels, the parties undertook to make 7 important channels, including two premium channels, available to third party distributors. Guarantees were also submitted to preserve the attractiveness of these channels in the long term. Thus, according to the Minister, third party distributors should be able to create new attractive multi-channel pay-TV packages. In addition, the parties to the concentration undertook to at least maintain at its current level the proportion of independent channels present on the merged satellite platform. The Minister believes this should maintain a sufficient degree of competition on the downstream markets.

Source: Letter of the Minister of Economy of August 30, 2006
Opinion of the Competition Council of July 13, 2006