Antitrust Alert: German Federal Cartel Office Prohibits Online Video Platform Joint Venture Proposed by RTL and Pro7Sat1
On March 17, 2011, the German Federal Cartel Office (Bundeskartellamt) rejected plans by German broadcasting groups RTL and Pro7Sat1 to launch a joint venture for the creation and operation of an online video platform. This decision illustrates how in Europe, particularly in Germany, antitrust authorities tend to look at media markets very narrowly and to be skeptical of traditional efficiency arguments.
RTL (owned by Bertelsmann) and Pro7Sat1 are the two largest free-to-air television broadcasters in Germany. In unrelated proceedings, the Federal Civil Court recently found that RTL and Pro7Sat1 have a combined share of approximately 80% of the television advertising market in Germany and that they form a dominant duopoly. RTL and Pro7Sat1 proposed to create an internet platform financed by advertisements and targeted at German and Austrian consumers for reruns of television content within a seven days ("catch up") period after the program has initially been broadcast in free TV. The internet platform was intended to be open to other content channels, against payment for use of the technical infrastructure.
The parties filed their project with the EU Commission in August 2010 for antitrust approval. Germany and Austria requested a referral, saying that the project would harm competition in their jurisdictions. The Commission referred the case to Germany and Austria in September 2010, noting that the project raised "significant competition concerns."
The Cartel Office found that the joint venture would strengthen the duopoly of RTL and Pro7Sat1 in Germany and would, in addition, very likely result in collaboration between the joint venture partners in their broadcasting business outside the joint venture's scope.
In its assessment, the Cartel Office took the potential procompetitive effects of a new video-on-demand platform into consideration, in particular, the improvement in terms of video-on-demand offers and also in relation to navigation through available content (the platform would have been the first one-stop shop platform for free content in Germany). However, RTL and Pro7Sat1 failed to convince the Office that these effects outweigh the restraints of competition the platform would entail. In particular, the Cartel Office remained unconvinced that RTL and Pro7Sat1 would operate the platform in an open manner, and that the platform would indeed be limited to providing purely technical services to content providers.
Therefore, the Cartel Office concluded that the joint venture "would further strengthen the existing dominant duopoly between the two broadcasting groups in the market for TV advertising."
RTL and Pro7Sat1 have one month to appeal to the Higher Regional Court of Düsseldorf.
For more information, please contact your principal Jones Day representative or either of the lawyers listed below.
Carsten T. Gromotke
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