Non-compliance with merger commitments escapes fines

D&I Competition & Public Procurement Alert

Posted on

6 Nov


Dittmar & Indrenius > Insight > Non-compliance with merger commitments escapes fines

On 24 October 2018, the Finnish Competition and Consumer Authority (the “FCCA”) ended a 6-year long investigation concerning a breach of merger commitments relating to the acquisition of C More Group AB (“C More”) by TV4 AB (“TV4”) in 2008, without seeking any sanctions. The FCCA investigated whether the launch of the MTV Total pay-TV channel package in 2012 by MTV, a subsidiary of TV4, was contrary to the conditions to which TV4 had committed in order to obtain the FCCA’s approval for the acquisition. 

The FCCA’s decision closing the investigation reveals that the FCCA considered that the merger commitments had been breached with the launch of the MTV Total channel package. The FCCA’s reasoning for not taking any further action despite this is questionable, and the outcome is unfortunate for the credibility of the FCCA’s merger control enforcement.

The Law

Merger commitments, also known as merger remedies, are conditions and obligations the parties to a concentration may propose to competition authorities in order for an otherwise problematic concentration to be permitted. The object of the commitments is to eliminate the competition concerns identified by a competition authority during the review of a notified concentration. The commitments are attached to the decision clearing the concentration and their compliance is monitored.

Non-compliance with commitments may lead to an administrative fine of up to 10 per cent of the annual worldwide turnover of the group of companies in question. The fine is imposed by the Market Court on the FCCA’s proposal.

Background and Facts

In July 2008, TV4, a Swedish company, notified the acquisition of C More to the Finnish Competition Authority (currently the Finnish Competition and Consumer Authority). TV4 belongs to the Swedish Bonnier Group, which is active on the Finnish free-to-air and pay-TV market through MTV. The FCCA’s main competition concerns at the time of the merger decision related to the fact that TV4 and C More were the two largest providers of pay-TV services in Finland and they had the broadcasting rights for the main sports events.

Following an in-depth investigation – which included extending the Phase II review period twice with the permission of the Market Court – the FCCA finally decided to clear the acquisition in November 2008, subject to several commitments. One of the main purposes of the conditions imposed by the FCCA was that MTV and C More pay-TV services had to be kept separate.

In November 2012, MTV launched the MTV Total channel package which combined the MTV and C More pay-TV services. Interestingly, the channel package was launched despite the fact that the FCCA had rejected – in a decision in 2010 – MTV’s application to have certain merger commitments lifted. In 2014, two years after launching the MTV Total channel package, MTV applied, again, for the lifting of the commitments. This time the application was accepted in 2015.

In 2015, the FCCA also prepared a draft Statement of Objections with a view to asking the Market Court to impose fines for the non-compliance of the commitments.

The Outcome

The FCCA closed the case on 24 October 2018 without seeking any sanctions. The FCCA’s decision (in the form of a memorandum) closing the investigation makes it clear that the FCCA considered that the merger commitments had been breached with the launch of the MTV Total channel package. Despite this, the FCCA did not take the case to the Market Court as it did not consider it reasonable.

According to the decision, the reasons of the FCCA for not considering it reasonable to make a proposal to the Market Court for the imposition of fines were as follows:
(i) inaccuracy of the commitments,
(ii) contradictions between the wording and the objectives of the commitments,
(iii) ambiguity of the interpretation of the FCCA’s earlier advice,
(iv) the length of the FCCA’s investigation, and
(v) the fact that the conditions had eventually been lifted in 2015 due to significant changes in the market conditions as applied by MTV in its second application to this effect.

As can be seen, the reasons for not finding it reasonable to seek any sanctions depend largely on the FCCA itself.

Key Observations

Despite having merger control rules in place for 20 years, there has not yet been a decision in Finland imposing fines on non-compliance with merger commitments. For a long time, the case at hand seemed to become the first one. The FCCA’s withdrawal in this case – and the reasons leading to the withdrawal – are unfortunate for the credibility of the FCCA’s merger control enforcement, and also somewhat at odds with its call for tougher sanctions in competition law that has been witnessed in the media and public speeches lately. Also, customers, suppliers and competitors of the parties to a concentration should be able to rely on the fact that commitments cannot be and are not unilaterally lifted, even due to significant changes in market conditions, as in law the power to remove or mitigate the commitments lies solely with the FCCA.

Even though the case calls into question the binding nature of merger commitments, one should be careful to draw a hasty conclusion that commitments need no longer be complied with. On the contrary, due to the potentially very severe consequences of non-compliance, it is naturally still important to comply with the commitments. Even though in this particular case the consequences did not materialize, we trust that the case will contribute to improving the development of the practical application of commitments.

We represented a competitor of the notifying party in the case at hand.

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