Extensive investigation needed into merger between RTL and Talpa
The planned merger between media companies RTL and Talpa requires an extensive investigation. The preliminary investigation of the Netherlands Authority for Consumers and Markets (ACM) has revealed that the merger between these two major media companies may have negative effects on price, quality, and innovation. The follow-up investigation will look into, among other aspects, the planned merger’s effects on advertisers, on producers of shows, on television-channel distributors, and, ultimately, on consumers.
The procurement and production of shows, the selection and distribution of television channels, and the sales of ads on those channels are closely intertwined. RTL and Talpa compete with each other in all of these markets. Together, RTL and Talpa have a large number of commercial television channels and various production companies that produce and sell television shows. In addition, RTL and Talpa combined are, by far, the largest provider of airtime for television ads.
Why is an extensive investigation needed?
One of the questions is whether a combined RTL/Talpa will have the ability to raise prices of television ads as a result of the strong position they will acquire. Advertisers have concerns about such a potential development, and say that advertising on television is a unique way for reaching consumers. They do not expect this to change over the next couple of years, despite the rise of online ads. Furthermore, distributors of television channels such as telecom companies VodafoneZiggo and KPN will, in the future, have to deal with a single major provider in negotiations, instead of two. The investigation will need to reveal whether RTL/Talpa will be able to demand higher prices as a result of that new situation. This may result in consumers paying more for television.
RTL and Talpa buy shows from other producers, and also produce shows themselves. Those markets also require an extensive investigation. One question is whether, after the acquisition, RTL/Talpa would produce more themselves, as a result of which other producers would have fewer opportunities. That may result in fewer investments by those producers, and in a reduction of the range of television shows at the expense of consumers. Furthermore, after the merger, RTL/Talpa’s market position will become stronger when buying shows from other producers. As a result, RTL/Talpa may be able to compel lower prices. That, too, may lead to fewer investments in new productions, and result in a reduction of the quality and variety of the range of television shows.
What are the next steps?
RTL and Talpa will now apply for a merger license. When they do, ACM will continue its investigation. As part of that follow-up investigation, ACM will, among other activities, conduct an extensive data analysis of the merger’s price effects on the advertising market. ACM will also assess the merger’s effects on the quality of the range of shows and on the carriage of television channels. In that context, ACM will also have more in-depth conversations with producers of tv shows, advertising firms, and distributors that offer these channels to consumers.
ACM’s concentration control: mergers, acquisitions, and joint ventures
With any merger, acquisition, or joint venture, there is a question of whether sufficient competition will remain on that market, right after the concentration as well as in the subsequent years. Competition ensures that products are of high quality, and that they are offered on the market at competitive prices. Competition also promotes innovation. That is why ACM decides in advance whether or not companies are allowed to join forces. ACM assesses whether the markets involved will continue to work well for people and businesses after that transaction.