2004/311/EC: Commission Decision of 2 April 2003 declaring a concentration to be compatible with the common market and the EEA Agreement (Case COMP/M.2876 — Newscorp/Telepiù) (notified under document number C(2003) 1082) (Text with EEA relevance)

Article 3
This decision is addressed to:
The News Corporation Limited 1211 Avenue des Americas New York, NY 10036 United States of America.
Done at Brussels, 2 April 2003.
For the Commission
Mario Monti
Member of the Commission
(1) OJ L 395, 30.12.1989, p. 1 (corrected version in OJ L 257, 21.9.1990, p. 13).
(2) OJ L 180, 9.7.1997, p. 1.
(3) OJ C 92, 16.4.2004.
(4) OJ C 92, 16.4.2004.
(5) Case COMP/M.1978 - Telecom Italia/News Television/Stream of 29/06/2000, published on the Commission's website: http://europa.eu.int/comm/ competition/mergers/cases/.
(6) Decision of the Italian Antitrust Authority (IAA) of 13 May 2002 (case C/5109).
(7) Parts of this text have been edited to ensure that confidential information is not disclosed; those parts are enclosed in square brackets and marked with an asterisk.
(8) Commission decisions of 10 September 1991, case No. IV/M.110, ABC/Generale des Eaux/Canal+/W.H. Smith TV, recital 11; 20 September 1995, case No. M.553, RTL/Veronica/Endemol, recital 20. The mentioned decisions are published on the Commission's website: http://europa.eu.int/comm/ competition/mergers/cases/.
(9) See Commission notice on the definition of the relevant market for the purpose of Community competition law (OJ C 372, 9.12.1997, p. 5) point 20. The short term is to be intended as "such a period that does not entail a significant adjustment of existing tangible and intangible assets."
(10) In this respect, the "churn rate" is the measure of disaffection of customers vis-à-vis pay-TVs. The replies have indicated that a rise of 15 to 20 % is more likely to induce subscribers to "switch".
(11) In this respect, it can be pointed out that, in Spain, Quiero TV has been transmitted as a pay-TV DTT broadcaster until mid 2002 and, in the United Kingdom, ITV transmits via DTT.
(12) See for example, for the United Kingdom, the decision in the case NTL/CWC, http:// www.competition-commission.org.uk/ fulltext/437c2.pdf for Italy the decision of the IAA, mentioned in footnote 6, in the Group Canal+/Stream merger dated 13 May 2002 and, for Spain, the decision of the Spanish Government in the Sogecable/Canalsatélite Digital/Vía Digital case of 29 November 2002.
(13) Case COMP/JV. 37 - BskyB/Kirch Pay TV, case IV(M.993 Bertelsmann/Kirch/Première, case COMP/M. 2211 Universal Studio Networks/De Facto 829 (NTL) Studio Channel Ltd, case COMP/JV. 57 - TPS, Case COMP/M.2845 Sogecable/Canalsatélite Digital/Vía Digital. In some of these decisions it was indicated that another feature of pay-TV is the need for viewers to have a decryption module (decoder). In this context, it has to be pointed out that, presently, the use of set top boxes is also needed for Digital Terrestrial and Satellite-free TV. All these decisions are published on the Commission's website: http://europa.eu.int/comm/ competition/mergers/cases/.
(14) Case COMP/M.2211 - Universal Studio Networks/De Facto 829 (NTL) Studio Channel Ltd. Decision of the Commission dated 20 December 2000, published on the Commission's website: http://europa.eu.int/comm/ competition/mergers/cases/.
(15) Case COMP/JV.37. - BskyB/Kirch Pay TV, Decision of the Commission dated 2 March 2000, published on the Commission's website http://europa.eu.int/comm/ competition/mergers/cases/.
(16) Pay per view is another service where, in addition to paying a TV subscription, the client has to pay on a product-by-product basis to see the content (for example, a film or a sport event). Video on demand and near-video-on-demand are different modalities for customers of a pay-TV to have access to video contents on a personalised basis.
(17) For instance, this appears to be the case in the United Kingdom as regards Channel 4.
(18) Case COMP/JV.37 BskyB/Kirch Pay TV, case IV/M. 993 Bertelsmann/Kirch/Première, Commission Decision of 27 May 1998, Official Journal L 53, 27.2.1999, p. 1. Case COMP/M. 2845 Sogecable/Canalsatélite Digital/Vía Digital, decision of the Commission dated 14 August 2002 published on the Commission's website: http://europa.eu.int/comm/ competition/mergers/cases.
(19) Fox (a company which is part of the Newscorp Group) is mainly active in the development, production and worldwide distribution of feature films and television channels. It supplies some of those products in Italy, in particular filmed entertainment.
(20) See in particular COMP/M.553 - RTL/Veronica/Endemol, COMP/M.2050 - Vivendi/CANAL+/Seagram, case 37.576 - UEFA's Broadcasting Regulations, COMP/M.2211 - Universal Studio Networks/De facto (NTL) Studio Channel Ltd, COMP JV.57 - TPS, COMP/M.2845 - Sogecable/Canalsatélite Digital/Vía Digital. See Commission's website: http://europa.eu.int/comm/ competition/mergers/cases.
(21) The general issue has been introduced without being settled by the abovementioned Decision TPS of 3 March 1999 recital 34), then decided in the abovementioned merger decision of 13 October 2000 in case COMP/M.2050 - Vivendi/CANAL+/Seagram. See also, as for the existence of a separate market for the acquisition of TV rights concerning football events played regularly throughout the year, the statement of objections in case COMP/C.2/37.398 Joint selling of the TV rights to the UEFA Champions League on an exclusive basis (press release IP/01/1043 dated 20 Juli 2001), "The Commission opens proceedings against UEFA's selling of TV rights to UEFA Champions League" and background note (MEMO/01/271 dated 20/07/01) and case COMP/M.2845 - Sogecable/Canalsatélite Digital/Vía Digital.
(22) See abovementioned decision of 13 October 2000, case COMP/M.2050 Vivendi/CANAL+/Seagram.
(23) Case COMP/M.2845 Sogecable/Canalsatélite Digital/Vía Digital.
(24) Generally speaking, films for pay-TV are exhibited under different timing and windows. After a time period of theatrical exhibition (six to eight months) and of video rentals and/or sales (four to six months) films reach pay-TV consumers through a pay per view period (usually a three months period). Films can be thereafter be released on first window (usually six month period) and the on second window (usually six month period). Finally they become part of the major's library and available for the free-TV market.
(25) Case COMP/M.2050 Vivendi/Canal+/Seagram, decision dated 13 October 2000, case COMP/M.2845 Sogecable/Canalsatélite Digital/Vía Digital, decision dated 14 August 2002, published on the Commission's website: http://europa.eu.int/comm/ competition/mergers/cases.
(26) See case COMP/M.2050 Vivendi/Canal+/Seagram, recital 19.
(27) Pay-TV exhibition rights (especially those supplied by larger producers) are often acquired through so called output deals. Output deals agreements are typically agreements pursuant to which a film producer sells all or most of the production of its studio to a given operator. As regards output deals for pay-TV, pay-TV operators buy the window for TV broadcasting subsequent to home video and, where available, pay-per-view and video-on-demand. In these cases, the same film may also be subject to other exhibition windows. The pricing of these contracts takes into account the box office results of the movies in theatrical distribution. Typically, free-TV broadcasters purchase subsequent exhibition windows which are commonly referred to as free-TV windows.
(28) Case COMP/M.2050 - Vivendi/Canal+/Seagram, case COMP/M.2845 - Sogecable/Canalsatélite Digital/Vía Digital.
(29) Case 37.576 - UEFA's broadcasting regulations, case COMP/M.2483 Canal+/RTL/GJCD/JV, case COMP/M.2845 Sogecable/Canalsatélite Digital/Vía Digital.
(30) Case IV/36.237 - TPS (OJ L 90, 2.4.1999, p. 6).
(31) Case COMP/M.2845 - Sogecable/Canalsatélite Digital/Vía Digital.
(32) Universal mobile telecommunications system.
(33) Decision of the Italian Antitrust Authority (IAA) of 13 May 2002, paragraph 33 (case C/5109).
(34) For example, see The News Corporation Goldman Sachs Media Conference October 1, 2000 http://www.newscorp.com/ investor/presentations.html.
(35) Decreti legislativi approvati dal Consiglio dei Ministri del 30 aprile 1999, per l'attuazione della direttiva comunitaria 95/47/CE concernente dei segnali televisi. Decreto legislativo 17 maggio 1999. Attuazione della direttiva 95/47/CE in materia di emissione di signali televisi ref: GURI n° 145, 23/06/1999. Legge 78 29.3.1999, Delibera AGCOM 216/00.
(36) Digital Switchover in Broadcasting - Final Report 12 April 2002 by BIPE, Consulting Study for the European Commission. Published by DG Information Society.
(37) However, this seems only to be the case for earlier deployments of DTT technology which have been based on unrealistic coverage assumptions.
(38) See cases IV/M.993 - Bertelsmann /Kirch/ Premiere, and IV/36.539 - British Interactive Broadcasting/Open (OJ L 312, 6.12.1999, p. 1) recital 30.
(39) See case IV/36.539 - British Interactive Broadcasting/Open.
(40) The encrypted data transmitted comprise television signals and other data like information on the programmes or packages of programmes subscribed to, as well as on the entitlement of the pay-TV subscribers to receive the programmes.
(41) A smart card is a miniature computer with a microprocessor, memory and internal operating system, which is used to operate as a security barrier, granting or denying access to a given service.
(42) The two biggest providers of CAS at a EEA level are NDS (belonging to the Newscorp group) and Canal+ Technologies (which belonged to the Vivendi group and which has been sold to the Thomson Multimedia Group in September 2002).
(43) As mentioned, in previous cases the Commission has looked at CAS within the context of a wider market for technical services for pay-TV. In case IV/136.539 - British Interactive Broadcasting/Open (OJ L 312, 6.12.1999, p. 1), recital 32, the Commission has already held that narrower product markets may exist, given the different skills and technologies underlying each of the individual technical services for pay-TV.
(44) Directive 95/47/EC of the European Parliament and of the Council of 24 October 1995 on the use of standards for the transmission of television signals (OJ L 281, 23.11.1995, p. 51).
(45) Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002 on access to, and interconnection of, electronic communications networks and associated facilities (Access Directive) (OJ L 108, 24.4.2002, p. 7).
(46) AGCOM (Italian authority for communications) Decision N. 216/00/CONS.
(47) The effective implementation of simulcrypt between Telepiù and Stream took two years and the two operators were twice fined by the Italian authority for communications (AGCOM) for not complying with their obligations.
(48) Paragraph 5.1.3 of Newscorp's defence.
(49) Paragraph 5.1.5 of Newscorp's defence.
(50) Case COMP/M.2803 - Telia/Sonera recital 91. Decision dated 10 July 2002, see Commission's website http://europa.eu.int/comm/ competition/mergers/cases/.
(51) See paragraph 5.1.15 of Newscorp's defence.
(52) For example Digitaly's position in Stream's EPG has changed four times over the last few years.
(53) Paragraph 5.1.11 of Newscorp's defence.
(54) Case T-5/02.
(55) See paragraph 142 of Tetra Laval judgment.
(56) Of total amount of money paid in Italy for rights on premium films.
(57) This reduction in the market share as regards the volume is due to the fact that Telepiù has most of the films produced by American majors which are the most expensive ones and the more viewed in the theatres.
(58) [...]*
(59) In 2001, with the exception of four Italian films for which first window rights were acquired by La 7 almost 19 % of box office stemmed from films for which no exclusive rights were purchased or marketed.
(60) Paragraph 6.1.3 of Newscorp's defence.
(61) http://europa.eu.int/comm/ competition/mergers/ review/final_draft_en.pdf.
(62) Paragraph 6.1.4 of Newscorp's defence.
(63) Council Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities (OJ L 298, 17.10.1989, p. 23) as amended by Directive 97/36/EC of the European Parliament and of the Council (OJ L 202, 30.7.1997, p. 60).
(64) Regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, (OJ C 277, 30.9.1999, p. 3). http://europa.eu.int/eur-lex/de/ consleg/pdf/1989/ de_1989L0552_do_001.pdf.
(65) Roma, Lazio, Parma.
(66) As explained above, football clubs especially the medium and small ones are reluctant to sell their rights to free-to-air TVs given that pay-TV platforms have the possibility to broadcast several matches at the same time and in order to preserve attendance to stadiums. Free-to-air TVs only compete for the acquisition of rights for the UEFA cup and the UEFA Champions League and Coppa Italia.
(67) Live rights only.
(68) Exclusive rights for Roland Garros are not applicable in relation to Eurosport provided that Eurosport transmits matches from quarter finals onwards in languages other than Italian.
(69) Exclusive rights for the US Open are not applicable in relation to Eurosport provided that Eurosport transmits matches from quarters final onwards in languages other than Italian.
(70) Live rights only.
(71) Throughout this document the word "Studios" identifies both the Hollywood majors and the Italian film producers.
(72) Second window rights are exploited in France by TPS, which has established itself as a significant competitor to Canal+ and, in Belgium, by Cinenova.
(73) Directive 95/47/EC of the European Parliament and of the Council of 24 October 1995 on the use of standards for the transmission of television signals (OJ L 281, 23.11.1995, p. 51).
(74) Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002 on access to, and interconnection of, electronic communications networks (OJ L 108, 24.4.2004, p. 7).
(75) Commission Decision of 14 December 1993 relating to a proceeding pursuant to Council Regulation (EEC) No 4064/89, Case No IV/M.308 - Kali-Salz/MdK/Treuhand) (OJ L 186, 21.7.1994, p. 38).
(76) Case COMP/M.2314, BASF/Eurodiol/Pantochim decision of 11 July 2001 (OJ L 132, 17.2.2002, p. 45) and also published on the Commission's website: http://europa.eu.int/comm/ competition/mergers/cases/.
(77) Joined cases C-68/94 and C-30/95, France v Commission.
(78) Points 115 and following of the judgment in Joined Cases C-68/94 and C-30/95.
(79) Commission Decision of 3 February 1999 relating to proceedings under Council Regulation (EEC) No 4064/89 (Case No IV/M.1221 - Rewe/Meinl) OJ L 274, 23.10.1999, p. 1).
(80) Document attached to Newscorp's defence. Expert report on the financial viability of Stream SpA. This document, allegedly shows that Stream is not financially viable as a stand-alone business in the foreseeable future and that, absent continued funding by its two shareholders, it would be forced into bankruptcy within the first half of 2003.
(81) According to Telecom Italia's submission in the oral hearing held on 5 and 6 March 2003, in 2001 Telecom Italia gave a mandate to a financial institution to sell its stake in Stream.
(82) See Article II, paragraph 2.2 (Funding) and Article IV, paragraph 4.1 (Funding of the combined platform) of the Framework Agreement.
(83) See point 4 of the written observations of Telecom Italia in reply to the non-confidential version of the European Commission's statement of objections, pursuant to Council Regulation (EC) No 447/98 on the notifications, time limits and hearings provided in the Merger Regulation.
(84) Paragraph 7.1.1 of Newscorp's defence.
(85) Paragraph 7.3.5 of Newscorp's defence.
(86) Case IV/M.1383, recitals 225 to 229.
(87) Joined Cases C-68/94 and C-30/95 France and Others v Commission [1998] ECR I-1375. At paragraph 171, the Court stated: "A concentration which creates or strengthens a dominant position on the part of the parties concerned with an entity not involved in the concentration is liable to prove incompatible with the system of undistorted competition which the Treaty seeks to secure. Consequently, if it were accepted that only concentrations creating or strengthening a dominant position on the part of the parties to the concentration were covered by the Regulations, its purpose (...) would be partially frustrated. The Regulation would thus be deprived of a not insignificant aspect of its effectiveness without being necessary from the perspective of the general structure of the Community system of control of concentrations."
(88) Case T-102/96 Gencor v Commission [1999] ECR II-753.
(89) Case COMP/M.2434.
(90) Case COMP/M.2684, recitals 33 and 37.
(91) See recital 33 of case COMP/M. 2684. The transaction was finally approved after EDF and the French grid operator, EDF/RTE, submitted undertakings to take all necessary steps to increase capacity on the interconnector connecting France and Spain to about 4000 MW from an existing 1100 MW.
(92) See paragraph 5 and in particular paragraphs 9 to 13 of the mentioned written observations.
(93) Paragraph 14 of the written observations.
(94) Paragraph 16 of written observations.
(95) M.COMP/2845 Sogecable/Canalsatélite Digital/Vía Digital, Decision of the Commission dated 14 August 2002. See Commission website: http://europa.eu.int/comm/ competition/mergers/cases/.
(96) COMP/M.2845. The case concerns the acquisition of by Promotora de Informaciones SA (Prisa) and Group Canal+ of joint control over the combined Spanish satellite platform (stemming from the integration of Sogecable with Vía Digital). In this venture, Telefónica would have had a position of significant minority shareholder, but would not have had any joint control over the merged entity.
(97) See recitals 96, 100 and 102 of the mentioned merger decision Sogecable, regarding the Internet access market in Spain, and 106 to 109 regarding the fixed telephony market in Spain.
(98) Pay per view is a service where, in addition to paying a TV subscription, the client has to pay on a product-by-product basis to see the content (e.g. a film or a sport event). Video-on-demand and near video on demand are different modalities for customers of a pay-TV to have access to video contents on a personalised basis.
(99) Paragraphs 7.1.1 to 7.2.12 of Newscorp's defence.
(100) Case T-5/02 Tetra Laval SA v. Commission, judgment of 25 October 2002, paragraphs 153 and 251.
(101) Paragraph 7.2.12 of Newscorp's defence.
(102) As regards the applicable burden and standard of proof, see Joined Cases C-68/94 and C-30/95, France and Others v Commission [1998] ECR I-1375, in particular paragraphs 110, 120, 128 and 246.
(103) In the context of Internet access, the term "bandwidth" refers to the speed at which information can be transferred. The higher the bandwidth, the higher the speed of the line, and the more information a telecommunications system can transfer. Modern applications within the Internet, and in particular video on demand require the transmission of large amounts of information, and hence require high speed broadband interconnections if they are to be usable by the final subscriber. A kind of high speed band is represented by the "xDSL" (digital subscriber line) technology. There are a number of variants of DSL technology such as ADSL (assymmetric digital subscriber line), HDSL (high data rate digital subscriber line) and VDSL (very high rate data digital subscriber line). They are collectively referred to as "xDSL" technologies. Broadband services can be offered over the existing copper line if it is hooked up to so-called "enabling" technologies such as one of the "xDSL" (digital subscriber line) technologies. The xDSL technologies are capable of effectively converting a copper pair into a high speed digital line, and so overcome the technical limitations of the traditional copper local loop. In this respect also cable network infrastructure for broadband Internet access offers similar performances vis-à-vis the end-consumers and could be considered substitutable to xDSL technologies from the demand standpoint.
(104) Virtually Telecom Italia could re-activate its cable network project, which was interrupted in 1998. This possibility concerns the completion of its existing cable network in Italy, (so-called project Socrates) initially aimed at connecting [...] million households to a Hyber Fiber Coaxial (HFC) network.
(105) For instance, in order to increase the width of the present network functionalities, both long-term and at local level.
(106) Paragraph 7.2.12 of Newscorp's defence.
(107) The competitors of Telecom Italia in respect of broadband Internet access services are: Fastweb (e.Biscom), Wind, Tiscali, Albacom, Gruppo I.net, MCI Worldcom (especially for business clients). Some of these companies are also competitors of the telecom incumbent as regards fixed telephony services (Wind-Infostrada, Albacom, Fastweb, Tiscali).
(108) Paragraph 1.2.7 of Newscorp's defence.
(109) Paragraph 24 of Telecom Italia's observations.
2004/311/EC: Commission Decision of 2 April 2003 declaring a concentration to be compatible with the common market and the EEA Agreement (Case COMP/M.2876 — Newscorp/Telepiù) (notified under document number C(2003) 1082) (Text with EEA relevance)

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