On 29 October 2008, the Council ruled on the request by Kinepolis Group NV (Kinepolis) of 29 July 2008 for approval of the acquisition by Kinepolis of a 50% share in NV Imagimons (Imagimons) through the exercise of a call option. Imagimons exploits a cinema complex in Mons that was so far solely owned by Multiscope Palace NV (Multiscope). The request was made further to one of the conditions, which was imposed by the Council in 1997 when it granted approval for the concentration of Group Bert and Group Claeys that created the Kinepolis Group (see the above article). This condition requires that Kinepolis should not create or acquire new cinema complexes, nor expand, renovate or replace an existing complex (where more than 20% new seats or cinemas would be created), without prior approval of the Council. Multiscope challenged the validity of the exercise of the call option and opposed Kinepolis’ participation as it feared that Kinepolis would acquire sole control over Multiscope.
The Council first distinguished a relevant upstream market for the distribution of films for screening in cinemas and a relevant downstream market for the screening of films in cinemas. Furthermore, the Council held that, on the basis of a so-called “catchment area of 20 minutes around the complex”, the downstream market should be considered as being local in scope. The upstream market, on the other hand, should be considered as being national because distributors of films are active at a national level and distribution rights and release dates are granted nationally.
In the meantime, the Council’s decision of 1 October 2008 (see the above article) further clarified that an acquisition as foreseen in this condition should be understood as the acquisition of control in the sense of the merger control rules. Although this clarification came into force after Kinepolis had submitted its request and could strictly speaking not yet be applied, the Council ruled that, based on a future-oriented approach, the substantial assessment of its 1 October 2008 decision could be taken into account. Therefore, the Council concluded that Kinepolis’ participation in the exploitation of an existing complex by the exercise of a call option could be considered as an acquisition, given that the transaction would lead to a change in Imagimons’ control structure.
The Council stated that each assessment of planned transactions by Kinepolis during the period that it remains subject to the conditions should be based on the characteristics of the transaction as well as of the relevant market and should be aimed at maximising consumers’ welfare. It first explained that Kinepolis was not yet active in the relevant local market and that Multiscope as such would not disappear further to Kinepolis’ participation in Imagimons. According to the Council, the question at stake was whether Kinepolis’ participation would cause Multiscope to align its market conduct with that of Kinepolis, or on the contrary could maintain its market position on the local and national market. This depended on the governance relationships between the parties, and in particular on whether Kinepolis would acquire sole or joint control of Imagimons.
Based on its review of the agreement between Kinepolis and Multiscope and on a number of declarations made by Kinepolis during the hearing, the Council concluded (albeit on a conditional basis taking into account that Multiscope was challenging the validity of the exercise of the call option by Kinepolis) that approval could be granted for the transaction provided that the transaction would not lead to the acquisition of sole control by Kinepolis nor lead in practice to Kinepolis having sole control of daily management or having a decisive influence on the strategic decisions concerning Imagimons without Multiscope as a co-shareholder having the same decisive influence.