DETERMINATION OF MERGER NOTIFICATION M/17/068 - IRISH TIMES/SAPPHO (EXAMINER) Dated 24 April 2018 M-17-068 Irish Times Sappho Phase 2 DET Public Version.docx 1. INTRODUCTION Introduction 1.1 On 14 December 2017, in accordance with section 18(1)(a) of the Competition Act 2002, as amended (“the Act”), the Competition and Consumer Protection Commission (the “Commission”) received notification of a proposed transaction whereby The Irish Times Designated Activity Company (“ITD”), through its wholly-owned subsidiary Palariva Limited (“Palariva”), would acquire sole control of Sappho Limited (“Sappho”) from Landmark Media Investments Limited (“LMI”) (the “Proposed Transaction”). 1.2 Given that both ITD and Sappho carry on a “media business” within the State (as defined in section 28A(1) of the Act), the Proposed Transaction constitutes a “media merger” for the purposes of Part 3A of the Act. 1.3 The Proposed Transaction is to be implemented pursuant to a Share Purchase Agreement (“SPA”) dated 5 December 2017 between LMI and Palariva. The Undertakings Involved The Acquirer - ITD 1.4 ITD is engaged in the following business activities in the State: • the publication of The Irish Times, a daily national newspaper, and its website irishtimes.com; • the operation of the following three websites: myhome.ie, irishracing.com and myantiques.ie; • the sale of newspaper advertising in its print edition of The Irish Times; • the sale of online advertising on irishtimes.com, myhome.ie, irishracing.com and myantiques.ie; • the hosting of a number of podcasts; • the provision of contract printing services to third party newspaper publishers;1 and • the provision of training courses. 1.5 For the financial year ending 31 December 2016, ITD’s worldwide turnover was approximately €82 million, the vast majority of which, according to the notification, was generated in the State. The Target - Sappho 1 ITD currently prints all of the newspapers published by Sappho in the State. 2 Merger Notification No. M/17/068 – Irish Times/Sappho (Examiner) 1.6 Sappho, a private limited company wholly-owned by LMI, is engaged in the following business activities in the State: • the publication of the Irish Examiner, a daily national newspaper, and its website irishexaminer.com; • the publication of the Evening Echo, a daily evening newspaper circulated primarily in Co. Cork, and its website eveningecho.ie; • the publication of the following six weekly regional newspapers: Laois Nationalist, Kildare Nationalist, Carlow Nationalist, Western People, Waterford News and Star and Roscommon Herald;2 • the operation of the following three websites: breakingnews.ie, recruitIreland.com and benchwarmers.ie;3 • the sale of newspaper advertising in each of the newspapers that it publishes; and • the sale of online advertising on each of the websites that it operates.4 1.7 Sappho is also active in the radio sector in the State, through its ownership of the following two radio stations: • Beat 102-103 which is licensed by the Broadcasting Authority of Ireland (“BAI”) to broadcast in the South East of Ireland (comprising counties Wexford, Waterford, Carlow, Kilkenny and south Tipperary); and • WLR FM which is licensed by the BAI to broadcast in Co. Waterford. 1.8 Sappho also owns a minority shareholding in Siteridge Limited, whose subsidiary, Red FM Limited, operates the radio station RedFM which is licensed by the BAI to broadcast in Co. Cork.5 1.9 For the 53 weeks ending 1 January 2017, Sappho’s worldwide turnover was €47.3 million, the vast majority of which, according to the notification, was generated in the State. Rationale for the Proposed Transaction 1.10 The parties state the following in the notification: “ITD intends to retain the core identity and independence of the respective newspaper publishing titles. Each will retain 2 Sappho also publishes the websites of each of these six weekly regional newspapers, namely: laois-nationalist.ie, kildare- nationalist.ie, carlow-nationalist.ie, westernpeople.ie, waterford-news.ie and roscommonherald.ie. 3 The acquisition by LMI of BenchWarmers Limited (which owned the domain name for benchwarmers.ie) was approved by the Commission on 2 May 2017 and the determination can be accessed at https://www.ccpc.ie/business/wp-content/uploads/sites/3/2017/04/M-17-017-Landmark-BenchWarmers-Public.pdf 4 Sappho also hosts the Paper Talk podcast. 5 As part of the Proposed Transaction, ITD will acquire the minority stake currently held by Sappho in Siteridge Limited. 3 Merger Notification No. M/17/068 – Irish Times/Sappho (Examiner) their editorial integrity. The overall increase in audience allows the group to build a digital platform with a strong reach, countrywide and internationally. The planned consolidation also presents the opportunity to strengthen and grow existing print advertising revenues while helping to secure contract print revenues for ITD.” “From Sappho's perspective, the Proposed Transaction represents an opportunity to secure the long-term future of its newspaper titles and other businesses.” Preliminary Investigation (“Phase 1”) Contacts with the Undertakings Involved 1.11 On 25 January 2018, the Commission served a Requirement for Further Information (“RFI”) on ITD, Palariva, LMI and Sappho, pursuant to section 20(2) of the Act. This adjusted the deadline within which the Commission was required to conclude its assessment of the Proposed Transaction in Phase 1. 1.12 Upon receipt of all of the responses to the RFI, the “appropriate date” (within the meaning of section 19(6)(b)(i) of the Act) became 9 February 2018.6 1.13 During the Phase 1 investigation, the Commission requested and received, on an on- going basis, further information and clarifications from the notifying parties. Third Party Submissions 1.14 During the Phase 1 investigation, the Commission received one third party submission concerning employment issues in one of the newspapers published by Sappho in the State. The Commission considers that this third party submission raises no competition issues in relation to the Proposed Transaction. Market Enquiries 1.15 During the Phase 1 investigation, the Commission circulated questionnaires to various third parties, including: • Institute of Advertising Practitioners in Ireland (“IAPI”), the representative organisation for the marketing and communications sector in the State; • 35 advertising customers of ITD and LMI;7 • 5 competitors of ITD and LMI currently active in the publication and sale of daily national newspapers and the sale of daily national newspaper advertising in the State; and 6 The “appropriate date” is the date from which the time limits for making both Phase 1 and Phase 2 determinations begin to run. 7 This comprises 22 direct advertisers and 13 advertising agencies. 4 Merger Notification No. M/17/068 – Irish Times/Sappho (Examiner) • BAI. 1.16 The Commission received a full response from most of the third parties to whom it sent a questionnaire and, in each case, the Commission also contacted those third parties by telephone and/or e-mail to seek further detail regarding those responses. Phase 1 Determination 1.17 Having considered all the available information in its possession at the time, the Commission was unable to form the view at the conclusion of the Phase 1 investigation that the result of the Proposed Transaction would not be to substantially lessen competition in any market for goods or services in the State. 1.18 On 22 March 2018, the Commission determined, in accordance with section 21(2)(b) of the Act, to carry out a full investigation under section 22 of the Act. Full Investigation (“Phase 2”) Third Party Submissions 1.19 No third party submission was received by the Commission during the Phase 2 investigation. Market Enquiries 1.20 During the Phase 2 investigation, the Commission continued the process, initiated during Phase 1, of seeking the views of third parties, including advertising customers and competitors of ITD and LMI. 1.21 The Commission also circulated a questionnaire to third parties who might have expressed an interest in acquiring Sappho. Contacts with the Undertakings Involved 1.22 During the Phase 2 investigation, the Commission requested and received, on an on- going basis, further information and clarifications from the notifying parties. 5 Merger Notification No. M/17/068 – Irish Times/Sappho (Examiner) 2. INDUSTRY BACKGROUND – NEWSPAPER PUBLISHING AND ADVERTISING 2.1 The newspaper publishing and advertising industry has been subject to significant changes in recent years. This section describes some of the recent trends in newspaper publishing and advertising in the State. 2.2 Since newspapers satisfy the needs of both readers and advertisers, an assessment of the nature of competition in the newspaper industry requires a consideration of the interaction between advertisers and readers. This type of assessment is typically carried out in the context of a two-sided market analysis where two groups interact through a particular medium (e.g., a newspaper) that enables each group to achieve their inter-related objectives. In this instance, newspapers wish to attract advertisers on one side and readers on the other side to form an audience for advertisers. An advertiser’s demand for advertising space in a particular newspaper depends on, amongst other things, the size and demographic of the newspaper’s readership and its level of circulation. Decline in Newspaper Circulation 2.3 Newspaper circulation has declined significantly in the State in the past decade. This decline appears to be primarily as a result of the increasing consumption of news online, including through social media websites such as Facebook, Twitter, Instagram, and Snapchat. 2.4 The average daily circulation of The Irish Times in the State declined by 29% between 2013 and 2017. Similarly, the average daily circulation of the Irish Examiner in the State declined by 27% between 2013 and 2017. Increase in Digital Subscriptions to News Content online 2.5 While newspaper circulation has been in decline in the State in recent years, there has been a significant increase in the number of people paying for news content online.