In a joint statement released on September 16, 2022,[1] TF1 and M6, the two main free-to-air television operators in France, announced their decision to abandon their merger project (the “Transaction”). Despite offering several commitments during an in-depth investigation, TF1 and M6 came to the conclusion that the divestitures required by the French Competition Authority (the “FCA”) would too strongly affect the transaction’s rationale. The FCA released on the same day a press release to “take note of the decision to withdraw [the] planned acquisition”[2], in order to publicly clarify its position.
- Background
On May 17, 2021, the Bouygues Group (the “Notifying Party”), a French conglomerate and parent company of TF1, the main French free-to-air television player, announced its intention to acquire exclusive sole control of the Métropole Télévision group(“M6”), the second main French free-to-air television player in France (the “Parties”), owned by RTL group and ultimately controlled by Bertelsmann. The Transaction aimed at creating a French leader in the sector, gathering 10 television channels and over 40% of the television audience, that would be able to compete with tech giants such as Netflix or Amazon Prime.
Following several months of prenotification discussions, the Notifying Party notified the Transaction to the FCA on February 17,2022. In addition, TF1 and M6 agreed to divest their channels TFX (TF1) and 6ter (M6) to the Altice Group, in order to comply with the French audiovisual regulation.
The FCA opened an in-depth investigation on March 18, 2022,[3] and during which the FCA conducted several market tests and heard the main stakeholders.
- The relevant markets
The relevant markets in the TV sector were previously defined by the FCA in several decisions, in particular in Vivendi/Canal +/TPS[4], TF1/AB Group[5], and more recently the 2019 landmark decision clearing the creation of joint streaming platform Salto between TF1, M6 and France Télévisions.[6]
However, in anticipation of the possible competition concerns, the Parties proposed, during Phase I, to redefine the scope of the relevant markets in order to consider that (i) video on demand (“VOD”) providers (such as Netflix or Amazon) compete with the Parties and (ii) television advertising competes with online advertising.
The FCA acknowledged that the television markets have encountered several new evolutions, including the rise of VOD. Yet the FCA found that television “remains a very powerful medium for the French population as a whole” focusing on “simultaneous distribution of advertisements to all users” whereas VOD providers have a different business model, with paid models based on a “promise of individualized consumption”. Hence, VOD providers are not set to “challenge television’s power” and free to air broadcasters are not competitors on the online advertising markets as, according to the FCA, television advertising and online advertising remain largely complementary.
Following an in-depth investigation, the FCA found that the Transaction could raise competition concerns on the following markets: (i) television advertising, (ii) publishing and marketing of television channels; (iii) distribution of television services, and (iv) acquisition of broadcasting rights.
- The competition concerns raised by the Transaction
On the market for television advertising, the FCA found that the Parties, which are each other’s closest competitor, would have a combined market share of approx. 70 %. According to Benoit Coeuré,[7] the FCA’s President, such market power would give rise to a strong risk of increased prices for advertising spaces at the expense of both advertisers and consumers[8].
Moreover, due to the essential nature of the channels of the TF1 and M6 groups, the merged entity would have increased its bargaining power vis-à-vis its distributors (such as internet access and pay-TV providers), eventually leading to higher prices or market foreclosure in favor of its parent company, the Bouygues Group, one of the main internet access providers in France.
Finally, on the market for acquisition of broadcasting rights, according to the FCA’s President, the merged entity could have (i) used its buyer power to acquire the rights of French films at the expense of competitors, and (ii) internalized stream programs (“programme de flux”) to the detriment of independent producers of stream contents.[9]
- The proposed remedies
During the in-depth investigation, the Parties offered behavioral commitments addressing the competition concerns. Although the commitments were not made public, the FCA’s President reported to the French Senate that, given the merged entity’s market share on the television advertising market, only structural remedies would have been able to address the competition concerns raised by the Transaction. As a result, the Parties’ commitment to separate the advertising departments of the TF1 and M6 channels was considered insufficient. The FCA found that the incentives for the two advertising departments to compete with each other post-Transaction would have been limited given their common ownership. In other words, based on the information made public by the FCA, it seems that only a divestiture of the TF1 or M6 channels, or at least of one of the two advertising departments, would have been capable of solving the competition concerns raised by the Transaction in the television advertising market.
[1] Available on their website, here.
[2] The FCA’s press release is available on its website, here.
[3] FCA decision of March 12, 2022 regarding the acquisition of exclusive control of the Métropole Télévision group by the Bouygues Group.
[4] FCA decision of July 23, 2012, n°12-DCC-100.
[5] FCA decision of January 26, 2010, n°10-DCC-11.
[6] FCA decision of August 12, 2019, regarding the creation of a joint venture by France Télévisions, TF1 and Métropole Télévision companies (M6), n°19-DCC-157.
[7] The FCA President was auditioned by a Senate Committee on September 27, 2022, and gave several insights that led to this outcome. The hearing is available on the Senate’s website, here.
[8] According to the FCA’s President during his hearing before the Senate, the Transaction would, in the end, have been financed by French advertisers and therefore by television viewers (i.e., consumers) without any proof of efficiency gains for the latter.
[9] Stream programs are intended to be broadcast only once before losing their primary value.