Case M.8861 - COMCAST / SKY
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EUROPEAN COMMISSION DG Competition Case M.8861 - COMCAST / SKY Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 6(1)(b) NON-OPPOSITION Date: 15/06/2018 In electronic form on the EUR-Lex website under document number 32018M8861 EUROPEAN COMMISSION Brussels, 15.6.2018 C(2018) 3923 final In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and PUBLIC VERSION other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. To the notifying party Subject: Case M.8861 - Comcast/Sky Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/20041 and Article 57 of the Agreement on the European Economic Area2 Dear Sir or Madam, (1) On 7 May 2018, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Comcast Corporation ("Comcast" or the "Notifying Party", United States) proposes to acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the whole of Sky plc ("Sky", United Kingdom and the "Proposed Transaction"). Comcast and Sky are collectively referred to as the "Parties".3 1. THE OPERATION (2) Comcast is a US listed global media, technology and entertainment company, with two primary businesses: Comcast Cable and NBCUniversal ("NBCU"). Comcast is present in Europe almost entirely through NBCU, which is active in Europe in: (i) production, sales and distribution of film and television content; (ii) wholesale supply of TV channels and on-demand services; (iii) CNBC, a business news service, as well as NBC News; (iv) the provision of television content to end users through NBCU’s video on demand service; (v) the licensing of its 1 OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the European Union ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology of the TFEU will be used throughout this decision. 2 OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement'). 3 Publication in the Official Journal of the European Union No C 170, 17.05.2018, p. 9. Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË Tel: +32 229-91111. Fax: +32 229-64301. E-mail: [email protected]. intellectual property to manufacturers and distributors of consumer products; (vi) minor golf-related digital businesses; and (vii) minor direct to consumer DVD, Blu-ray and music disk sales.4 (3) Sky is a UK public company whose shares are listed on the London Stock Exchange. Sky is the holding company of a number of subsidiaries carrying on business in a variety of sectors predominantly in the UK, Ireland, Germany, Austria and Italy, including: (i) licensing/acquisition of audiovisual programming; (ii) TV channel wholesale supply in the UK and Ireland; (iii) retailing of audiovisual programming to subscribers; (iv) provision of technical platform services to broadcasters on Sky’s DTH platforms in the UK, Ireland, Germany and Austria; (v) sale of TV advertising; (vi) in the UK and Ireland, the provision of fixed-line retail telephony and broadband services; (vii) in the UK, the provision of mobile communications services; and (viii) in the UK, provision of access to public Wi-Fi hotspots. Sky also recently launched its over-the-top ("OTT") subscription service ("Now TV") in Spain. 2. THE CONCENTRATION (4) On 25 April 2018, Comcast published its announcement for a pre-conditional cash offer for the entire issued and to be issued share capital of Sky, under Rule 2.7 of the UK City Code on Takeovers and Mergers. This constitutes the announcement of the intention to launch a public bid in terms of Article 4(1) of the EUMR. (5) Comcast intends to implement its offer to acquire the entire issued and to be issued share capital of Sky by way of a takeover offer pursuant to the relevant provisions of Part 28 of the UK Companies Act 2006. Whilst Comcast’s objective is to achieve 100% ownership in Sky, under these circumstances, the offer will be conditional upon the receipt of valid acceptances in respect of Sky shares which, together with Sky shares that Comcast has acquired or may agree to acquire (pursuant to the offer or otherwise), carry in aggregate more than 50% of the voting rights normally exercisable at a general meeting of Sky. The offer will thus be conditional on a minimum acceptance condition of 50 per cent, plus one share. The Proposed Transaction therefore constitutes a concentration pursuant to Article 3(1)(b) of the Merger Regulation. (6) The Commission notes that, by decision of 7 April 2017 in case M.8354 – Fox/Sky, it unconditionally approved the proposed acquisition by Twenty-First Century Fox, Inc. of the remaining shares that it does not currently own in Sky. 4 In the US, Comcast is also active as a broadband and cable TV provider. In the course of the market investigation, the Commission received third party submissions alleging that the as a result of the Proposed Transaction, Comcast would engage in anticompetitive foreclosure of third party content over Sky's broadband network. First, the Commission notes that there is no overlap between the Parties for the provision of broadband anywhere in the EEA and as a result, the Parties' market power will not change as a result of the Transaction. Second, Sky's market share for the provision of broadband services in the UK and Ireland is significantly below 30% and a number of other providers will continue to be active post-transaction. As a result, the Commission has not considered these submissions further. 2 That transaction has not been completed yet. The current transaction in case M.8861 - Comcast/ Sky constitutes a competing bid for Sky. 3. EU DIMENSION (7) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million5 (Comcast: EUR 74 437 million; Sky: EUR 15 186 million). Each of them has an EU-wide turnover in excess of EUR 250 million (Comcast: EUR [turnover]; Sky: EUR [turnover]), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension pursuant to Article 1(2) of the Merger Regulation. 4. RELEVANT MARKETS (8) The Proposed Transaction relates to all the levels of the TV value chain. Section 4.1 first provides an overview of the TV value chain and the Parties activities at each level of the chain. Section 4.2 onward then discusses the product and geographic market definition for each level of the TV value chain. 4.1. Introduction: the TV value chain and the Parties’ activities (9) Audiovisual ("AV") content for television (TV content) comprises all products (films, sports, series, shows, live events, documentaries, etc.) that are broadcast via TV.6 In previous decisions, the Commission has identified different activities in the TV value chain, namely: (i) the production and supply of TV content (including the supply of pre-produced TV content and commissioned TV content); (ii) the wholesale supply of TV channels; and (iii) the retail provision of TV services to end customers.7 As a part of its analysis of the Parties' activities, the Commission also considers the Parties’ activities in the area of advertising (section 4.1.4). (10) Sections 4.1.1 to 4.1.3 further describe these levels of the TV value chain as well as provide an overview of the Parties' activities at each level in the UK, Ireland, Germany, Austria, Italy and Spain. 4.1.1. Production, supply and acquisition of TV content (11) This upstream level of the value chain concerns the production of new TV content. TV production companies produce TV content for either: (i) internal use on their own TV channels or retail TV services if they are vertically integrated in the wholesale supply of TV channels and/or in the retail provision of TV services (that is to say, captive TV production); or (ii) supply to third-party customers (that is to say, non-captive TV production). 5 Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1). 6 Commission decision of 25 June 2008 in case M.5121 News Corp/Premiere, recital 28. 7 Commission decision of 25 June 2008 in case M.5121 News Corp/Premiere, recital 28; Commission decision of 7 April 2017 in case M.8354 – Fox/Sky, recital 29. 3 (12) Third-party customers are typically: (i) TV channel suppliers (TV broadcasters), which then incorporate the TV content into linear TV channels, or (ii) content platform operators, which then retail the TV content to end users on a non-linear basis (that is to say, Pay-Per-View ("PPV") or video on demand ("VOD")), including non-traditional platforms, that is to say internet or so-called Over-The- Top ("OTT") platforms. (13) TV broadcasters and TV distributors who source TV content for their TV channels or retail TV services generally have a choice between a number of sourcing models, which can be broadly categorised as follows: a. Obtaining TV content produced on an ‘ad hoc’ basis (that is to say tailor- made), by: i.