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The Competition Commission (CC) has, by a majority, formally cleared the anticipated acquisition by Telefonaktiebolaget LM Ericsson (Ericsson) of Creative Broadcast Services Holdings (2) Limited (Creative). 

This confirms the provisional findings which were published last month.

Ericsson and Creative-owned Red Bee Media are leading providers of linear playout services to broadcasters. Linear playout is the process through which television content is prepared and compiled into a continuous stream for transmission in line with the broadcaster’s programme schedule. Ericsson currently provides such services to ITV and NBC Universal, whilst Red Bee Media supplies the BBC, Channel 4, UKTV and BT Sport among others.

In its final report published today, the CC has stated that the complexity of broadcasters’ playout requirements varies considerably, with the BBC and ITV having the most complex requirements overall.

ITV and Ericsson have recently agreed a long-term extension to their current playout agreement (conditional on the completion of the merger). The CC has provisionally found that taking into account the significant uncertainty about the state of the market at the end of the extended contract—including the potential for significant changes in technology and for significant developments in the market during the lengthy intervening period—the likelihood of ITV’s position being significantly weakened by the merger was remote.

Although the BBC’s current contract expires sooner (in 2017), the CC found it likely that the merger would have little adverse effect on the BBC. This is because of the way that the BBC plans to conduct the tender process and the potential for other competitors to exert the same level of competitive constraint on the BBC’s incumbent provider, Red Bee Media, as Ericsson would have absent the merger.

The CC also found that broadcasters with less complex requirements were unlikely to be significantly affected as they will continue to have a sufficient choice of providers.

The Office of Fair Trading (OFT) referred the case on 30 September 2014 and the CC was required to publish its final report by 11 May 2014.

Notes for editors

1. The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries. In April, the CC will join with the competition and certain consumer functions of the Office of Fair Trading (OFT) to form the new Competition and Markets Authority, which will continue with this inquiry and other work inherited from the two organisations.

2. Ericsson (the acquirer) is a leading provider of telecommunications equipment and services to mobile and fixed network operators. In 2012, Ericsson acquired 100 per cent ownership of a number of subsidiaries providing a range of broadcast services in the UK—including linear playout services for television, known together as Technicolor. Red Bee Media (the target) is also a leading provider of broadcast services in the UK, in particular as a supplier of television playout services. Red Bee Media is 100 per cent owned by Creative, the company that Ericsson proposes to acquire.

3. The members of the Inquiry Group are: Martin Cave (Chairman of the group), Jill May, Malcolm Nicholson and Andrew Popham.

4. The Enterprise Act 2002 empowers the OFT to refer to the CC completed or proposed mergers for investigation and report which create or enhance a 25 per cent share of supply in the UK (or a substantial part thereof) or where the UK turnover associated with the enterprise being acquired is over £70 million.

5. The CC has a 24-week period in which it is required to publish its report, which may be extended by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period. On 19 February 2014, the CC extended the reference period by eight weeks to 11 May 2014 due to the complexity of the inquiry, the need to allow sufficient time to take full account of the evidence gathered, and the need to provide a fully reasoned decision within the statutory time frame.

4. Further information on this inquiry, including the terms of reference and other key documents, as well as on the CC and its procedures, including its policy on the provision of information and the disclosure of evidence, can be obtained from the CC website at:www.competition-commission.org.uk.

5. Enquiries should be directed to Rory Taylor or Siobhan Allen or by ringing 020 7271 0242.