On 25 April 2008, the Competition Council cleared the acquisition by Tecteo of eight Walloon cable operators and its subsequent merger with Brutélé. This decision follows a Phase II investigation which was initiated on 31 January 2008 after Phase I proceedings which were plagued by a procedural battle that went up to the Supreme Court (see Belgian competition law report of the second quarter of 2008).
In its decision to open the phase II investigation, the Council rejected the notifying parties’ claims that the procedure had become without object since the Brussels Court of Appeal had already declared the transaction admissible on 27 December 2007. The Council decided that a phase II investigation into the merger had to be initiated due mainly to the serious doubts it had as to the interpretation and effectiveness of the commitments offered by the parties in phase I in relation to the wholesale television market. This is the market where television channels and television distributors negotiate the conditions under which channels are distributed to households. The Council further considered that there were serious doubts as to whether the transaction would not result in the de facto control of the merging parties over BeTV, a pay-TV operator from which they acquire broadcasting rights.
On this last point the Council decided on 25 April 2008, on the basis of an analysis of the articles of association of BeTV, the rights and obligations of the notifying parties and other shareholders of BeTV and the possible economic dependency of BeTV on the notifying parties, that no such de facto control existed and therefore that the retail television markets were not affected by the concentration. It must be noted that, since then, Tecto has notified its intention to acquire control of BeTV. This separate transaction is currently being reviewed by the Competition Council.
In relation to the wholesale television market, the Council in its phase II decision reiterated that the transaction would increase the negotiating power of the merging parties vis-à-vis free-to-air channels as well as allow the merging parties to foreclose access of broadcasters, such as BeTV, to the distribution network (a risk which would exist in particular in case of backward integration of the merging parties).
As mentioned above, already in the first phase, on 31 October 2007, the parties had submitted commitments to alleviate any competition concerns the Auditor in charge of the case had identified in relation to the wholesale television market. These commitments were slightly modified on 6 November 2007. The first commitment proposed by the merging parties was that they would not impose or encourage any exclusivity in respect of free-to-air channels (i.e. not prohibit or discourage such channels from being distributed over other platforms) except for a limited duration in respect of specific events (e.g. the Olympic Games or the Football World Cup). Secondly, the parties committed not to refuse access to the cable to broadcasters (the parties used the term éditeurs de chaînes) in a discriminatory manner.
The Council reiterated that the market investigation during phase I had indicated that the commitments offered by the parties were prone to problems of interpretation but the parties, after the opening of the second phase, had informed the Council that they did not wish to propose any additional commitments. The Council therefore, when making the commitments binding on the parties until 2011, interpreted itself the terms it considered ambiguous. In relation to the commitment of the parties not to impose or encourage any exclusivity in respect of free-to-air channels, the Council stated that the notion “free-to air channel” (chaîne en clair) should be taken to mean “standard channel” (chaîne généraliste), i.e. channels which are or could be part of the basic television offering of the merging parties, as opposed to the offering of “premium” content. In respect of the second commitment, whereby the parties committed not to refuse access to the cable to broadcasters (the parties used the term éditeurs de chaînes) in a discriminatory manner, the Council stated that this obligation extended to all broadcasters bundling content, regardless of whether they broadcast free-to-air or in encrypted form. The Council further imposed certain reporting obligations on the parties in respect of these commitments and any changes in the control structure of BeTV.