Playout merger cleared
27 Mar 2014 02:54 PM
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.