Chillin'Competition

The Spanish Competition Authority decided last week to close the file related to the acquisition of joint control of Digital+ (the main satellite pay-tv platform in Spain) by Prisa (one of the largest media groups in Spain which prior to the merger enjoyed sole control of Digital+), Telefónica (you know this one) and Telecinco (a TV channel whose largest shareholder is Berlusconi´s Mediaset).

The CNC´s decision has made big news in the press in the past few days, and many have accused the Competition Authority of having been too sensitive to the government´s wish (yes, that was an euphemism) to avoid the bankruptcy of Prisa, which allegedly could have been declared had the merger not been authorized.

To make a long story short: The merger was initially notified to the European Commission, which, following the parties´request, decided to refer the case to the CNC. In its referral decision the European Commission expressed its fears that the merger could strenghten Telefonica´s position in broadband related markets.  The CNC  issued a Statement of Objections alleging that the merger could significantly impede effective competition. However, the Council of the CNC confirmed a change of views after the parties committed to modify the shareholders´agreements and other covenants in order to remove the veto rights that gave them the ability to exercise a decisive influence over Digital+.  Technically, the operation would therefore cease to be a merger within the meaning of the competition rules (Prisa will retain sole control), so nothing to object…in principle.

The problem after the withdrawal of the notification in scenarios such as this one  is that there could theoretically exist the risk that the parties who formally intented to exercise control could now do so informally.  Query: How should a competition authority address these sort of situations?

From an ex ante perspective,  the resort to the notion of de facto joint control may seem like too much of a long shot given its exceptional nature.  And ex post control does not look like an easy path neither. In this case, the CNC  has committed to remain vigilant with regards to any future agreements between these companies, but other operators (namely Mediapro) have argued that there is a most serious risk of coordination that will turn the audiovisual market in Spain into the least competitive in Europe. Mediapro has announced its intention to fight this decision on every possible ground and has asked for the European Commission´s immediate intervention. It will certainly be interesting to see how this evolves.

My take: a reliable indicator could be whether Digital+ will supply its channels to other competitors (which was, by the way, a commitment that apparently Telefonica was reluctant to accept).

Any opinions?

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