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The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Central European Media Enterprises (NYSE: CETV), based in Bermuda, by Time Warner (NYSE: TWX) of the United States. The Commission's investigation confirmed that the proposed transaction will not have negative effects on competition, since the activities of the parties are mainly complementary and not in direct competition with each other.

The Commission examined the effects of the proposed transaction on competition in the markets for the licensing of audio-visual TV content, the wholesale supply of TV channels, the sale of TV advertising, the licensing and distribution of films for theatrical release, and the licensing and distribution of home entertainment content in Bulgaria, Czech Republic, Hungary Romania, Slovak Republic and Slovenia (the "CME countries").

The Commission's investigation found that the parties' activities do not overlap in the licensing of TV content. Furthermore, the Commission found that the proposed transaction will not increase the merged entity's buyer power vis-à-vis right holders, as Time Warner and CME typically acquire different types of broadcasting rights.

As regards the wholesale supply of TV channels, the Commission found that the proposed transaction will not give rise to competition concerns, particularly in light of the fact that the parties' TV channels are not close substitutes. Indeed, CME operates mainly generalist free-to-air channels, while Time Warner's channels are either basic Pay TV channels or premium film channels, with a rather limited presence in the CME countries.

As regards the sale of TV advertising, the very limited increment in market share arising from the proposed transaction and the fact that CME and Time Warner are not close competitors in this market, led the Commission to conclude that the proposed transaction will not raise any competition concerns.

In the distribution of films for theatrical release and the home entertainment sector, the Commission found that the proposed transaction will not give rise to competition concerns given the limited (if any) overlap between the parties' activities in these sectors and the fact that the merged entity will continue to face competition from a large number of other market players at the licensing and at the distribution level.

The Commission equally dismissed any vertical concerns in each of the sectors affected by the proposed transaction, particularly in light of the fact that the merged entity will not have the necessary degree of market power and/or the economic incentive to shut out suppliers or customers from the markets.

The Commission therefore concluded that the proposed transaction will not raise competition concerns. The transaction was notified to the Commission on 8 May 2013.

Posted-In: News M&A

 

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