Competition DG Information, communication and multimedia Media
Vertical and horizontal integration in the media sector and EU competition law Miguel Mendes Pereira*
“The ICT and Media Sectors within the EU Policy Framework” U.L.B.-SMIT (Studies on Media, Information and Telecommunications) CEAS-Norwegian School of Management, Oslo Telenor Broadcast
Brussels, 7 April 2003
Introduction I. Convergence and integration 1. Technical convergence 2. Economic convergence 3. Efficiencies II. Competition issues 1. The competitive arena 2. Foreclosure 3. The dominance test III. Vertical integration 1. 2. 3. 4. The gate-keeper issue Foreclosure of input markets Leveraging Network effects
IV. Horizontal integration 1. General assessment 2. The Newscorp/Telepiù case 3. The EMI/Time Warner case V. Remedies 1. The balance between efficiencies and foreclosure 2. Remedies in the Newscorp/Telepiù case 3. Remedies in the cases Vivendi/Seagram/Canal Plus, Vizzavi and AOL/Time Warner Conclusion
* Administrator, European Commission/DG Competition/Media Unit. Lecturer at the Law School of the University of Lisbon. The opinions expressed are purely personal and only engage the author.
“Vertical and horizontal integration in the media sector and EU competition law” - M. Mendes Pereira
Ladies and Gentlemen, I wish first of all to thank the SMIT Center and Telenor for inviting me to speak here today. I intend to give you a brief overview of the competition issues raised by vertical and horizontal integration of companies in the media sector. I will start by referring to the convergence trend in the media and telecommunications sectors and its link to the concentration wave we have witnessed during these past three years. I will then highlight the main competition issues which this type of operations raise from a theoretical point of view. I will subsequently address the issues linked specifically to vertical as well as to horizontal integration, and conclude by illustrating how the European Commission has dealt with these problems by means of remedies accepted as a condition for the approval of this type of concentrations. In so doing, I will refer to a number of cases recently assessed by the Commission such as AOL/Time Warner, EMI/Time Warner, Vizzavi, Vivendi/Seagram/Canal Plus and, decided just last week, Newscorp/Telepiù. I. CONVERGENCE & INTEGRATION Convergence has become all too familiar to most of us as one of the main driving forces behind the recent changes occurred in the media and telecom industries. However, as it so frequently happens with notions that turn into “buzzwords”, the many meanings attributed to the term “convergence” are often ambiguous and, as such, unhelpful in order to describe the evolution of the media and telecom industries. Let me therefore turn, first of all, to the two meanings of the term “convergence” that I consider to be most relevant from a competition law point of view.
1. Technical convergence Technical convergence mainly concerns the possibilities offered by digital technology. Those possibilities are reflected, for example, in the infra-structures required to deliver contents like movies or music. With the current digital technology, huge amounts of data may be transmitted to a high number of users through different networks (mobile networks, Internet, satellite). This allows for the dematerialization of media products traditionally sold as physical products (newspapers, films, CD’s) by transforming them into packages of bytes. At the same time, digital technology allows for the convergence of traditionally separate media into a single product, putting together text, sound, video and voice in what has become known as multimedia. Access to TV broadcasting, or rather webcastig, on the Internet is already nowadays a reality and listening to an MP3 music file on a cellular phone is nothing new. 2. Economic convergence Audio-visual products were never cheap...