The European Commission has unconditionally approved the proposed acquisition of Sky by Twenty-First Century Fox under the EU Merger Regulation. The EC concluded the transaction would raise no competition concerns in Europe. The deal still faces tough scrutiny from UK regulators Ofcom and the Competitions and Markets Authority on grounds of commitment to broadcasting standards and media plurality. The proposed transaction would combine Sky plc( Sky), the leading pay-TV operator in Austria, Germany, Ireland, Italy and the UK and Twenty-First Century Fox Inc, one of the six major Hollywood film studios( 20th Century Fox), as well as TV channel operator( Fox, National Geographic).
According to the EC, Fox and Sky are mainly active in different markets in Austria, Germany, Ireland, Italy and the UK. They compete with each other only to a limited extent, mainly in the acquisition of TV content and in the wholesale supply of basic pay-TV channels.
The Commission found that the proposed transaction would lead to only a limited increase in Sky’ s existing share of the markets for the acquisition of TV content as well as in the market for the wholesale supply of TV channels in the relevant Member States.
Given that the merging companies are mainly active at different levels of the market, the Commission’ s assessment focused on whether, as a result of the proposed transaction:
• Fox would be able to prevent or significantly limit access by Sky’ s competitors to its films and other TV content, as well as to its TV channels. The Commission concluded that these possible concerns were not founded. This is because the parties’ audience shares remain limited and pay-TV distributors would continue to have access to content
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from Fox’ s competitors and alternative channels with comparable programming and audiences in the relevant Member States.
• Sky would have the incentive to cease purchasing content from Fox’ s competitors. The Commission found that this was unlikely as it would reduce the quality of Sky’ s product offering.
• Sky could prevent competing channels from accessing its platform. The investigation found that the merged companies’ ability to shut out Fox’ s rivals was significantly mitigated by existing regulations in the UK, Germany and Austria. In addition, competitors that could have been targeted for exclusion are either contractually protected for a sufficient period of time or are not dependent on Sky’ s retail platform in the relevant Member States. Based on the results of its market investigation, the Commission concluded that the proposed transaction would raise no competition concerns.
The Commission has exclusive jurisdiction to assess the impact of the proposed transaction on competition in the various markets affected within the European Economic Area. However, Article 21 of the EU Merger Regulation recognises that Member States may take appropriate measures, including prohibiting proposed transactions,
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to protect other legitimate interests, such as media plurality.
The purpose of, and legal frameworks for, competition assessments and media plurality assessments are very different. The competition rules focus broadly on whether consumers would be faced with higher prices or reduced innovation as a result of a transaction. A media plurality assessment typically looks at wider concerns about whether the number, range and variety of persons with control of media enterprises is sufficiently diverse.
Karen Bradley, the UK secretary of state for Culture, Media and Sport issued a European intervention notice on March 16 th 2017. This notice requires the relevant UK authorities to investigate and report by May 16 th 2017 on whether the proposed transaction is, or may be, against the public interest.
As the Commission’ s findings concern solely the competition aspects of the proposed transaction, its clearance decision is without prejudice to the UK’ s ongoing media plurality review of the proposed transaction.
At the time of Bradley’ s referral, Fox said it was confident that a thorough review of its track record over 30 years would underscore its commitment to upholding high broadcast standards, and would demonstrate that the transaction will not result in there being insufficient plurality in the UK, pointing out that the media market had changed dramatically in recent years, as has its business.“ We believe our proposed £ 11.7 billion [€ 13.5bn ] investment will benefit the UK’ s creative industries,” it concluded.
Fox welcomed the EC decision clearing its proposed transaction:“ We now look forward to continuing to work with UK authorities and are confident that the proposed transaction will be approved following a thorough review process,” it said.
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