Thomson/Reuters (European Commission, phase II)
Advisory Services
The Situation
In May 2007, Thomson announced its takeover of Reuters in a deal that valued the company at around £8.7bn at the time. The transaction would give Thomson sole control over Reuters within a dual-listed company structure. The two companies were both leading global providers of financial information and desktop products to financial professionals such as traders, investment managers and investment bankers, among others.
On 3 September 2007, Thomson notified the European Commission of its proposed acquisition of Reuters, and on 8 October 2007 the Commission initiated an in-depth investigation.
NERA's Role
NERA worked alongside law firm Allen & Overy to provide advice to Thomson on the economic aspects of its merger control proceedings before the European Commission, starting in pre-notification.
Given the many different bundles in which financial information is combined and packaged to address the various users' specific needs, the case involved a particularly detailed market definition exercise, which eventually identified a number of markets for individual content sets, such as news, research provided by brokers, estimates and economic time series data. The parties sold these content sets on a standalone basis, as part of a wider desktop solution, or through third-party distributors.
In substantive terms, the Commission was concerned that the transaction would have adverse horizontal effects on competition in a number of financial information content markets, due to the elimination of the parties' competitive constraint on each other. In addition, the Commission was concerned about possible adverse vertical foreclosure and bundling effects, whereby the merged entity might leverage market power to foreclose rival desktop products, which the Commission analysed on the basis of its non-horizontal merger guidelines.
The Result
On 19 February 2008, the European Commission cleared the transaction without issuing a Statement of Objections, subject to a number of remedies. The Commission’s competition concerns were resolved by selling copies of the databases for each of the four content areas where competition concerns had been identified (aftermarket research, estimates, fundamentals, and economic time series data). The sales included copies of the actual databases, source data, training materials, as well as certain contracts and employees connected to the databases. The merged entity was not required to divest the relevant databases, and retained ownership and the right to continue using the information in its own products.
The Commission's investigations, and negotiations of remedies, were undertaken in close co-operation with the US Department of Justice.
