Mergers: Commission authorises acquisition of Télé 2 France by SFR subject to conditions

The European Commission has approved under the EU Merger Regulation the purchase of the fixed telephony and Internet access businesses of Télé 2 France by the French mobile telephony operator SFR. When it was originally notified, the planned operation raised serious competition concerns in pay-TV markets in France and the Commission launched an in-depth investigation (see IP/07/347). These concerns have been addressed by commitments guaranteeing DSL operators equal treatment with the new entity as regards access to television content owned by the Vivendi group, of which SFR forms part. In the light of these commitments, the Commission has now concluded that the merger will not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Competition Commissioner Neelie Kroes said: "Television is a very important economic sector as far as consumers are concerned. It is essential, therefore, that the Commission should make sure that viewers enjoy a wide choice and the most competitive rates possible. The remedies to which approval of this operation is subject are designed to ensure this by safeguarding the interests of pay-TV consumers in France".

SFR is a French company active mainly in the mobile telephony sector. It is jointly controlled by Vivendi and Vodafone. Vivendi is a French conglomerate active mainly in the media and telecommunications sectors. Vodafone is a British telecommunications company.

Télé 2 France, a subsidiary of Télé 2 Europe, is active in France in the areas of fixed telephony, mobile telephony, Internet access provision and pay-TV distribution by DSL. Télé 2 France’s mobile telephony business is not affected by the operation.

The proposed merger would have an impact on the pay-TV sector in France.

Vivendi, through its subsidiary Groupe Canal+, occupies a very strong position throughout the pay-TV sector in France. In the light of the pay-TV distribution activities carried on by Télé 2 France, the Commission examined whether the operation was likely to give rise to competition concerns in that sector.

The market survey carried out by the Commission revealed that DSL operators are collectively the main players capable of bringing competitive pressure to bear on the Vivendi group in the relevant markets. Nevertheless, despite being on the increase, the competitive pressure exerted by DSL operators is still fairly limited given the restrictions on access by such operators to attractive television content (TV programmes and channels), which is largely controlled by Vivendi.

In view of the strong vertical integration of the Vivendi group, the planned operation, as originally notified, would have provided Vivendi with the perfect opportunity to grant its SFR/Télé 2 subsidiary preferential access to the television content it owns. Such preferential access would have given Télé 2 a substantial advantage over other DSL operators.

Such a strategy of discrimination on the part of Vivendi would therefore have had the effect of substantially weakening DSL operators competing with SFR/Télé 2 both in the downstream distribution market and in the upstream markets for the acquisition of television content.

In order to remove these competition concerns, Vivendi and SFR have proposed commitments aimed at ensuring that Vivendi does not discriminate against DSL operators in favour of SFR/Télé 2.

These commitments concern, firstly, access to the channels produced by Vivendi or for which Vivendi holds exclusive DSL distribution rights. Vivendi will have to allow DSL operators to distribute all the channels to which it gives SFR/Télé 2 access on normal market terms, which may not be less advantageous than those granted to SFR.

Secondly, they concern the channel packages distributed by Vivendi through DSL networks (such as CanalSat and Canal+ Le Bouquet) and the PPV services provided by Vivendi. Vivendi will not be able to grant SFR/Télé 2 subscribers more favourable terms than those granted to subscribers of other DSL operators.

Thirdly, they prohibit SFR/Télé 2 from acquiring exclusive DSL distribution rights to channels produced by third parties for which Vivendi does not hold such rights.

Lastly, they prohibit Vivendi and SFR from acquiring exclusive VoD rights to recent American and French films.
For further information on the case, see:

http://ec.europa.eu/comm/competition/mergers/cases/index/m90.html#m_4504