Competition Policy in Media: Vertical Issues
Brussels, Belgium
22 June 2004
Hosted By: NERA Economic Consulting
At this NERA Seminar, NERA Director Dr. Mark Williams and Dr. Herbert Ungerer, Head of the Media Unit at the European Commission's Directorate General for Competition, spoke about competition issues facing the media sector. The seminar took place at the Stanhope Hotel in Brussels and was attended by a large gathering of senior European lawyers, regulators and competition policy practitioners.
Dr. Williams set out the economic framework for the assessment of vertical arrangements, contrasting the efficiency benefits from the elimination of double marginalization with potential foreclosure concerns -- the "dark side" of vertical integration. He noted that the elimination of "double marginalization" can lead to one of the few instances of a "free lunch" in economics, by creating efficiences that benefit consumers with lower prices while allowing the merging parties to increase their profits. However, vertical integration may also increase incentives and opportunities for media creators or distributors to "foreclose" rivals, by making either access to content or distribution of content more costly to competitors, and ultimately consumers. Using cases such as Premier League, BSkyB/Manchester United, and AOL/Time Warner to illustrate these issues, Dr. Williams concluded that cases can only be assessed on specific facts, to balance improvements in investment incentives against the detrimental investment implications of foreclosure.
The theme of balance was also expounded by Dr. Ungerer, who discussed the Commission's recent cases in the media sector, including Telenor/Canal+, Telepiu/Stream (Sky Italia), and UEFA Champions League. In these cases, joint selling or purchasing, exclusivity and the hold-back of new-media rights all raised concerns of foreclosure despite the efficiences each case presented. Dr. Ungerer discussed the Commission's approach in evaluating the possible effects of the transactions. He indicated that one of the Commission's concerns for the future was its determination to consider "the voice of the competitor that does not yet exist," by creating favorable conditions for market entry. He emphasized the role that new media, such as broadband Internet and "3G" or advanced mobile communications, has to play in competition cases and sector inquiries in media markets.
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