Cegetel/Canal+/AOL/Bertelsmann - Telecommunications

United Kingdom

The Commission has only just published this 1998 decision, taken under the then “new” Article 2(4) of the Merger Control Regulation.

Background

Acquisition by Cegetel, Canal+, American On-line and Berthelsmann of joint control over AOL/CIS. Cegetel provides a broad range of telecom services and Internet services in France. Canal+ is a French company that provides pay-television broadcasting and distributes television services by cable and satellite. American On-line (AOL) is a corporation engaged in the provision of interactive services to individual subscribers towards the world. It operates in France via two joint ventures with Bertelsmann: BAOL-SNC and CompuServe Interactive Services France (CIS SNC). Bertelsmann is a media group which publishes books, magazines and newspapers, publishes and distributes music and records and programs aimed for private television. It is also engaged in multimedia. According to the Commission, the relevant product markets are dial-up Internet access, Internet advertising and paid for content provision. The relevant geographic scope of the market, according to the Commission, could either be national or extended to all French-speaking regions.

Assessment

Owing to the market shares of the parties and the fact that the size of the market for paid-for content is extremely small, and the vast number of information providers that develop content and make it available, the Commission concluded that the joint venture would not create or strengthen a dominant position.

The Commission assessed the operation pursuant to Article 2(4) of the Merger Regulation and assessed the co-ordination of competitive behaviour in the market for dial-up Internet access, content provision on the Internet and network distribution services. On all of these markets, given the market shares of the parties, any possible coordination could not lead to an appreciable restriction of competition due to the small market share.

The parties notified possible restrictions as ancillary restraints. AOL, CIS and Cegetel undertook to license to the joint venture certain technology, content and trademarks and to provide certain related services. Also, Cegetel agreed to provide either free of charge or on the basis of most-favoured customer terms, certain marketing and promotional benefit to the joint venture over a period of 5 years. A non-competition obligation was agreed, provided that for a period of 5 years AOL, Bertelsmann, Cegetel and Canal+ will not offer or provide, other then through the joint venture, within France, PC access services falling within the scope of activities of the joint venture. The above-mentioned clauses were all considered as directly related and necessary to the implementation of the concentration.

The parties also notified as an ancillary provision the creation of an interim committee which will review the operations of the joint venture and oversee compliance of the parties with their duties and obligations between the signing date and the date the agreements become fully effective. The Commission stated that these arrangements concerned the stage before the establishment of control within the meaning of the Merger Regulation and that they are therefore not directly related to the implementation of the concentration. (Case No COMP/JV5, Decision of 4 August 1998)