Completed acquisition by LN-Gaiety Holdings Limited of Isle of Wight Festival Limited Decision on relevant merger situation and substantial lessening of competition ME/6693/17 The CMA’s decision on reference under section 22(1) of the Enterprise Act 2002 given on 14 September 2017. Full text of the decision published on 3 October 2017. Please note that [] indicates figures or text which have been deleted or replaced in ranges at the request of the parties for reasons of commercial confidentiality. Contents Page SUMMARY ................................................................................................................. 1 ASSESSMENT ........................................................................................................... 3 Parties ................................................................................................................... 3 Transaction ........................................................................................................... 3 Procedure ............................................................................................................. 3 Jurisdiction ............................................................................................................ 3 Background ........................................................................................................... 4 Counterfactual....................................................................................................... 5 Frame of reference ............................................................................................... 6 Competitive assessment ..................................................................................... 13 Decision .............................................................................................................. 37 SUMMARY 1. On 15 March 2017, LN-Gaiety Holdings Limited (Live Nation) acquired 75% of the issued share capital of Isle of Wight Festival Limited (the IoW festival) (the Merger). Live Nation and IoW festival are together referred to as the Parties. 1 2. The Competition and Markets Authority (CMA) believes that it is or may be the case that the Parties’ enterprises have ceased to be distinct and that the share of supply test is met. The four-month period for a decision, as extended, has not yet expired. The CMA therefore believes that it is or may be the case that a relevant merger situation has been created. 3. The Parties overlap in the supply of music festivals, specifically large camping music festivals. The CMA has therefore assessed the impact of the Merger in the supply of large camping music festivals, excluding free events, non-music festivals, and smaller/non-camping festivals from the frame of reference. However, the CMA has taken account of the constraint from these events where the evidence supports this. 4. The CMA assessed the impact of the Merger on the supply of large camping music festivals in the UK. However, the CMA has considered the relevance of the location of different festivals within the UK in assessing the competitive constraints that festivals impose on each other. 5. The CMA found that while the Parties’ combined position in the supply of festivals, and in particular large camping festivals, in the UK is significant, the Merger does not bring about a significant change in market structure and the Parties are not particularly close competitors. The CMA found that other music festivals (such as Bestival, Victorious and, to some extent, Glastonbury) will continue to constrain the merged entity. The CMA believes that these constraints, in conjunction with out-of-market constraints from other activities, are sufficient to ensure that the Merger does not give rise to a realistic prospect of a substantial lessening of competition (SLC) as a result of horizontal unilateral effects. 6. In considering whether the transaction could give rise to non-horizontal effects (in particular, dynamic foreclosure concerns), the CMA has also considered the effect of the transaction on UK concert promotion. The evidence available to the CMA does not indicate that the Merger will materially increase the Parties’ ability to reduce the access of other festivals and concert promoters to a sufficient range and quality of artists such that competitors are foreclosed. The CMA therefore found that the Merger does not give rise to a realistic prospect of an SLC as a result of non-horizontal effects. 7. The Merger will therefore not be referred under section 22(1) of the Enterprise Act 2002 (the Act). 2 ASSESSMENT Parties 8. Live Nation owns and operates live music venues and festivals in the UK. Live Nation is a joint venture between Live Nation (Music) UK Limited and Gaiety Investments Limited. Live Nation’s turnover in the calendar year 2015 was approximately £165 million. Live Nation (Music) UK Limited is a subsidiary of Live Nation Entertainment Inc., an entertainment company which provides concert promotion, venue operations, ticketing, and artist management services. Live Nation Entertainment Inc. is publicly listed on NYSE, and its turnover was US$8.335 billion for the 12 months to September 2016. Gaiety Investments Limited is an Irish entertainment company, which provides promotion services and operates festivals and entertainment venues. 9. The IoW festival is an annual music festival held on the Isle of Wight. The turnover of the IoW festival in the 2016 calendar year was £[]. Transaction 10. Pursuant to a Business Sale Agreement dated 15 March 2017, Live Nation agreed to acquire 75% of the shares in the IoW festival. The purchase price for the 75% stake was []. The remaining 25% of the IoW festival’s shares are owned by Solo Promoters Limited (Solo), which is owned by John Giddings. Procedure 11. The CMA’s mergers intelligence function identified this transaction as warranting an investigation.1 12. The Merger was considered at a Case Review Meeting.2 Jurisdiction 13. As a result of the Merger, the enterprises of Live Nation and the IoW festival have ceased to be distinct. 14. The Parties overlap in the supply of large camping music festivals in the UK. The Parties’ combined share of supply exceeds 25% on a number of bases. 1 See Mergers: Guidance on the CMA’s jurisdiction and procedure (CMA2), January 2014, paragraphs 6.9-6.19 and 6.59-60. 2 See Mergers: Guidance on the CMA’s jurisdiction and procedure (CMA2), January 2014, from paragraph 7.34. 3 For example, on the basis of large camping festivals with over 30,000 capacity, the Parties’ combined share of supply is [40-50]% (with a [0-5]% increment) (see Table 1 below). The CMA therefore believes that the share of supply test in section 23 of the Act is met. 15. The CMA therefore believes that it is or may be the case that a relevant merger situation has been created. 16. The Merger completed on 15 March 2017 and was first made public on 17 March 2017. The four-month deadline for a decision under section 24 of the Act is 16 September 2017, following extensions under section 25(2) of the Act. 17. The initial period for consideration of the Merger under section 34ZA(3) of the Act started on 5 July 2017, but was extended pursuant to section 34ZB(1) of the Act and the statutory 40 working day deadline for a decision is 14 September 2017. Background 18. Festivals are temporary outdoor venues, with a wide range of capacities, taking place over one or more days, often with live music events as their primary content.3 19. The majority of festivals (including the IoW festival) are independently owned, with a small number of larger festival operators running multiple festivals in the UK. Such operators include Live Nation, which owns 20 festivals in the UK, and Global Festivals Limited (Global), which owns 13 festivals in the UK. In addition, AEG Presents Limited (AEG), a subsidiary of Anschutz Entertainment Group Inc, owns the British Summer Time festival in the UK. 20. Some festival operators may also provide: (a) artist management services – management and promotion to the artists’ professional activities, search for the right opportunities for the artist, and liaising with booking agents; (b) booking agent services – artist marketing services to event organisers, receiving requests for performances, and taking responsibility for making a booking; and/or 3 CC decision: Completed acquisition by AEG Facilities (UK) Limited of the contract to manage Wembley Arena (AEG / Wembley Arena), 2 September 2013. 4 (c) non-festival/concert promotion services – organisation (ie making practical arrangements for the event and undertaking marketing) services to non- festival/concert events, including using ticketing agencies to sell tickets to public. Counterfactual 21. The CMA assesses a merger’s impact relative to the situation that would prevail absent the merger (ie the counterfactual). For completed mergers, the CMA generally adopts the pre-merger conditions of competition as the counterfactual against which to assess the impact of the merger. However, the CMA will assess the merger against an alternative counterfactual where, based on the available evidence, it believes that, in the absence of the merger, the prospect of these conditions continuing is not realistic, or there is a realistic prospect of a counterfactual that is more competitive than these conditions.4 22. [].5 23. []:6 (a) []; (b) []; and (c) []. 24. [].7 25. []. 26. [].8 []. 27. []. 28. []. 29. []: 4 Merger Assessment Guidelines (OFT1254/CC2), September 2010, from paragraph 4.3.5. The Merger Assessment