Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EC opens in-depth investigation into proposed acquisition of Ziggo by Liberty Global, (May 8, 2014)

The European Commission (EC) announced today that it has opened an in-depth investigation into the proposed acquisition of Dutch cable operator Ziggo by the telecommunications group Liberty Global, headquartered in London. Liberty Global, through its subsidiary UPC, and Ziggo both own a cable network in the Netherlands through which they provide various retail pay TV and telecommunications services. Both companies also operate a premium pay TV film channel in the Netherlands. The EC has concerns that the transaction may reduce competition in a number of pay TV and telecommunications markets in the Netherlands.

Liberty Global is active in the telecommunications sector, operating cable networks in 12 European countries. Ziggo is active in the telecommunications sector in the Netherlands and especially in the markets for the retail provision of TV, fixed internet access and fixed telephony services. The only other major provider of these retail services in the Netherlands, that also controls its own network infrastructure, is KPN.

The EC's initial market investigation indicated that the proposed acquisition would raise competition concerns in the Dutch markets for (1) the acquisition of individual Dutch language audio visual content, (2) the acquisition of TV channels, (3) the wholesale supply of premium pay TV film channels, and (4) the retail provision of fixed internet access, TV and fixed telephony services. The merger brings together two of the main players in these markets in the Netherlands and the only two suppliers as regards premium pay TV film channels.

At the wholesale level, the EC found that the proposed acquisition could significantly increase the merged entity's negotiation power towards content owners and TV channels suppliers. This could, in turn, negatively affect its competitors in retail pay TV and Dutch end consumers. Moreover, the proposed transaction could reduce the existing competition for the wholesale supply of premium pay TV film channels, by combining the only two linear film channels in the Netherlands, Film1 and HBO.

At the retail level, the investigation showed indications that Liberty Global and Ziggo exert some indirect competitive pressure on each other, despite the fact that their cable networks do not overlap geographically. The transaction could therefore reduce existing competition in the Dutch retail pay TV and telecommunications markets where the parties hold significant market shares. In addition, in light of the high level of concentration, existing market transparency and high barriers to entry, the removal of Ziggo as an autonomous player could increase the likelihood that the remaining competitors, in particular the merged entity and KPN, would coordinate their competitive behavior and increase prices or delay investments.

Finally, the EC's investigation provided indications that the merged entity might have the ability and incentive to shut out or otherwise hinder so-called 'over-the-top' TV service providers – i.e. TV services provided 'streaming' via the Internet – from effective access to its internet network, in order to strengthen its own competitive position in various TV-related markets. The merged entity could also have the ability and incentive to shut out its competitors in the Dutch retail TV market from access to its premium film channels. An in-depth investigation into the proposed transaction will begin in order to determine whether or not these initial concerns are confirmed. The EC has until September 18, 2014, to make a decision.

Companies: Ziggo; Liberty Global

News: Antitrust