The National Commission for the Defense of Competition (CNDC), which belongs to the Secretary of Domestic Trade of the Ministry of Productive Development of the Nation, ordered the divestment of The Walt Disney Company over the acquisition of exclusive control of Twenty-First Century Fox INC., and established conditions in the operation to restore effective competition in the commercialization market of sports channels of the basic cable TV service.
Due to the fact that the merger violates article 8 of the Law for the Defense of Competition (No. 27,442), through this decision, the CNDC subordinates the authorization of the operation to the fulfillment of a condition, since it diminishes, restricts or distorts competition in a way that harms the general economic interest.
Previously, the CNDC issued an “Objection Report” warning of the pernicious effects on competition of the operation in question
The conditioning consists mainly of making available for transfer to a new competitor all the transmission rights related to sports competitions of which Fox was the licensor at the time of notification of the merger operation. The purpose of this measure is to restore effective competition in the marketing market for basic sports signals, that is, ordinary cable sports channels -not premium signals or soccer packs-.
It is worth clarifying that the conditioning of the transfer of rights will be sufficient if, at a minimum, they will reach the so-called “Fundamental Contents” that make up the main content of each of the following sporting events:
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UEFA Champions League
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National Football League (NFL)
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Major League Baseball (MLB)
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Formula 1
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Ultimate Fighting Championship (UFC)
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World Wrestling Entertainment (WWE)
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Premier Boxing Champions
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ACB Basketball League
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World Rugby Sevens
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ATP World Tour 250 – ATP Córdoba
The conditioning is also complemented by a series of behavioral commitments whose immediate purpose is to reduce the effects of the merger until the divestment becomes effective and, on the other hand, they seek to moderate the effects derived from an increase in bargaining power.
According to the CNDC, the concentration operation under analysis would eliminate a competitor in signals that presents a very close substitution and would increase the bargaining power of the merged companies against the distributors of signals with possible effects on their prices and on the price of the fertilizers paid by final consumers. In addition, the position that the merged entity would acquire in the sports genre could have the consequence of increasing its negotiating power to include the rest of its signals from other themes in the operators’ basic packages.
The behavioral commitment also establishes requirements on the marketing and bundling conditions that minimize the portfolio effects that the operation could generate even after the divestment has been completed, and for a period of five years.
Specifically, it is established that Disney must broadcast openly and free of charge the relevant sporting events of each of the competitions defined as “fundamental content” until the stipulated divestment becomes effective (for which it has a term of one year and a possible extension of six months) and transmit under this same modality two matches of the local soccer league currently broadcast by the Fox Sports premium channel, one of which must be River or Boca, since these teams are the ones with the greatest call and audience.
In addition, you must maintain a maximum of four basic linear sports signals in the grid of channels offered in the Argentine Republic.
The CNDC ruling maintains that the strong bargaining power obtained by the company as a result of this merger, as a result of the accumulation of highly relevant signals for the end user, could result in: (i) an increase in the value of the set of signals , mobiles to pay television subscription; and/or (ii) exclusionary effects in the signal market, by transferring the portfolio of products over a finite space that makes up the grid or in pay TV distribution, reducing the profit margin of cable operators (enabling subscribers to receive a smaller offer, less varied and with lower quality products) in conjunction or not with its own signal distribution strategy (premium or OTT).
On the other hand, and while the parties do not specify the required structural divestment, the relationship existing prior to the merger between the price of sports signals and the price of the basic subscription must remain stable for each operator.
As it is a worldwide concentration operation, its effects were analyzed by the different competition authorities in the world where these companies operate, including Mexico, the United States, Europe, Chile and Brazil. Like the local CNDC, in these countries, the competition authorities identified specific effects and risks in their markets and also imposed certain conditions on both conduct and structure to avoid the identified problems.
In the opinion, the CNDC establishes that within 30 days after the date of the resolution, the parties must communicate by reliable means to all their clients the behavioral measures established herein.
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