The Prohibition of the Proposed Springer-ProSiebenSat.1-Merger: How much Economics in German Merger Control?



Springer-ProSiebenSat.1-Merger

2.1 The Parties, the Relevant Markets, and Market Shares

The acquisition of the German TV-network ProSiebenSat.1 by Axel Springer, one of
the largest German publishing companies, was announced and notified to the
Bundeskartellamt in August 2005. Five months later, after several hearings and pro-
ceedings, the German competition authority eventually decided to block the merger.
The commitments offered by the merging parties did not suffice to have the merger
cleared. According to the Bundeskartellamt, the merger would have led to a strength-
ening of already existing dominant positions, in particular because of cross-market
effects between TV and newspaper markets. More specifically, the Bundeskartellamt
held (i) a strengthening of collective dominance on the TV advertising market, (ii) a
strengthening of single-firm dominance on the national advertising market for news-
papers and (iii) a strengthening of single-firm dominance on the national reader mar-
ket for over-the-counter newspapers.

> Axel Springer AG (AS) is a listed German media company, particularly en-
gaged in the business of newspapers, magazines and new media. Furthermore,
AS is involved in various other areas of the media business, e.g. regional radio
stations, printing and distribution of own and foreign print products, content
production for private and public TV stations. In particular AS already holds a
substantial share in one of the TV stations belonging to the ProSiebenSat.1-
Group.

> ProSiebenSat.1 Media AG (P7S1) acts as holding for one of two leading pri-
vate TV-Groups in Germany. P7S1 operates five Free-TV-stations and is en-
gaged in the marketing and commercialisation of its stations as well as in au-
dio-visual productions (news, magazines, talk shows, etc.), predominantly for
its own stations.

Media companies generally participate in two separate good markets: in the first one,
some kind of content is marketed to consumers, whereas the second market involves
the selling of advertising. Here, advertisers demand access to the audience using the
media content. Basically, this dual product market structure characterizes every media
product (partly) financed by advertising. So-called Free-TV-stations that are com-
pletely financed by advertising revenues (and/or public fees), so that consumers do
not have to pay directly for the program or a specific broadcast (in contrast to Pay-TV
and pay-per-view systems), also participate in these two markets. However, a direct
monetary relationship only exists in the advertising market. Therefore, the
Bundeskartellamt (2006: 23-29) denies a relevant audience market for Free-TV-
programs. In consequence, the one relevant TV market is the TV advertising market.
Nevertheless, the audience share is indirectly regarded as being an important factor
(success measure) due to its influence on a station’s advertising revenues and position
on the advertising market.

Figure 1 shows the market shares of both the TV audience market and the TV adver-
tising market. While the audience market is characterised by four similar strong play-



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