Argentine Antitrust Commission approves deal in pay TV market

The Antitrust Commission identified horizontal and vertical relationships in the following markets:

 a.   Internet access service. Clarín controls Prima SA and Clarín Global SA. Cablevisión offers this service through Fibertel SA. The Antitrust Commission considered that the different technologies for the provision of internet (dial-up, ADSL and cable-modem) are part of the same relevant market. Although post-acquisition, Clarín will obtain a 32.5% share of this market, the Antitrust Commission found no competition concerns in this market.

 b.   Pay TV market. Multicanal and Cablevisión are the main competitors in this market. The Antitrust Commission stated that this market consists of cable TV and satellite TV, as the price difference between both types of services has been substantially reduced in recent years (satellite TV used to be more expensive than cable TV). On a nationwide, Cablevisión and Multicanal have a total market share of 55%. However, the market share in certain cities where both companies have a presence may exceed 90%.

 c.   Broadcasting of TV signals. This market is vertically-related to the pay TV market. Clarín is active in this market through a group of subsidiaries that produce TV content. The Antitrust Commission considered that Clarín has strong market power, mainly, in the sports TV signal markets, which provide live soccer matches. After analysing the relationship between the sports TV signal markets and the pay TV market, the Antitrust Commission concluded that such relationship increased the incentives for the merged entity to restrict access by other pay TV operators to the sports TV signal.

Given these concerns, the Antitrust Commission decided to further analyse the markets. In analysing the barriers of entry to the pay TV market, it concluded that the barriers were high, taking into account:

i)     The investments needed to develop a wire network.

ii)    The rules in force in Argentina that prevent those companies engaged in the provision of public services from providing pay TV services.

However, the Antitrust Commission stated that such considerations did not imply a failure to take into account "Triple Play" technology, as its development may modify the future market structure.

The Antitrust Commission placed a great deal of importance on the changes evidenced in international experience in antitrust analysis. It expressly quoted a report issued by the Antitrust Modernisation Commission of the United States of America, which states that merger analysis has moved away from the presumption that anti-competitive conduct is the consequence of an increase in market concentration, towards a more complex analysis that incorporates predictions of competitive effects using tools of modern economic analysis, such as efficiency gains.

As a result, efficiency gains evidenced by the parties were very important for the Antitrust Commission in eliminating possible competition concerns. According to the Antitrust Commission, the transaction would allow significant savings in operative and commercial costs for the newly-merged entity. Furthermore, the Antitrust Commission stated that efficiency gains would allow the merged entity to:

i)             Take advantage of large-scale economies.

ii)            Develop projects and investments with a significant impact on the quality and efficiency of the service.

The Antitrust Commission made particular reference to Triple Play technology, as it considered that, from a technological point of view, this could be implemented in Argentina in the short term. The information provided by the parties, the information gathered during the proceedings and the testimony of the representatives of companies engaged in the provision of telephony service, clearly evidenced the intention of the telecommunications companies to provide Triple Play technology in the near future.

Considering the impact of the transaction on the relevant markets in which the Antitrust Commission had competition concerns, the parties to the transaction offered certain commitments with respect to the pay TV market and the sports TV signal market. The Antitrust Commission accepted the commitments and approved the transaction under section 13(a) of the Antitrust Law. It is worth mentioning that section 13(a) of the Argentine Antitrust Law grants a full approval without imposing any conditions.

The commitments proposed by the parties were aimed at eliminating concerns related to the possible vertical restrictions and the effective demonstration of the efficiency gains proposed:

i)             A guarantee of access in reasonable market conditions by all pay TV operators to the exclusive TV signal that the parties must provide.

ii)            A guarantee to all TV signals suppliers of a spot within the programme schedule of the parties.

iii)            A guarantee of pluralism, freedom of information and entertainment within the programme schedule of the parties.

iv)           The extension of pay TV and internet services in accordance with the investment plan proposed and offered by the parties.

v)            The provision of digital services to more customers on a progressive basis in compliance with the proposed investments plan.

vi)           The establishment of a fee for the pay TV service no higher than the fee charged in the City of Buenos Aires, in those areas in which there are no other pay TV providers as a consequence of the transaction.

vii)          The provision of an optional social service with a reduced fee with at least ten TV signals (other than regular TV channels).

viii)          The provision of a free pay TV service to municipal, provincial and national public agencies.

This is a very important precedent as the Antitrust Commission and the Secretary for Domestic Trade approved a transaction that creates a monopoly in the pay TV market in certain areas of Argentina.

The Antitrust Commission gave importance to the improvements that the development in technology will bring to these markets and the efficiency gains submitted by the parties. This is the first case in which the Antitrust Commission approved a transaction based exclusively on the efficiency gains evidenced by the parties.

The Antitrust Commission accepted the commitments offered by the parties. These commitments are only behavioural, aimed at eliminating possible competition concerns arising from the strong vertical relation between the provision of sports TV signals and the pay TV market, and are supported by the effective demonstration of the efficiency gains proposed.

The acceptance of these commitments demonstrates the tendency by the Antitrust Commission to accept behavioural commitments rather than structural.

Finally, as the transaction received full unconditional approval, non-compliance with the agreed commitments will not modify the terms of approval and will only lead to future investigations by the Antitrust Commission to assess whether such breach has caused damage to competition.