Budzinski/Wacker: Springer-ProSiebenSat.1-Merger
segmentation and creation resulting from tying and bundling. Additionally, socially
desirable improvements of the protection of intellectual property might occur (gener-
ally and comprehensively: Bishop et al. 2005: 73-104; Tirole 2005: 14-17). Kolasky
(2005: 164) summarizes: “U.S. law has long considered that antitrust agencies should
very rarely interfere with conglomerate mergers. On the contrary, it is recognized that
such mergers have the potential to generate significant efficiencies: the injection of
capital; the improvement of management efficiency; the transfer of know-how and best
practices across traditional industry boundaries; and the increased ability to get by dur-
ing economic downturns through diversification. In addition, conglomerate mergers
provide a market for owner-managers to sell the businesses that they create, thereby
encouraging enterprise and risk-taking. The European Community’s concern with theo-
ries that have been long abandoned in the United States is probably misplaced. Greater
faith should be placed in the competitive process rather than worrying about competi-
tors who may be less efficient than the merged entity.”
With imperfect capital markets, a conglomerate merger may create scope for financial
leverage and predation (Church 2004: 260-280). If the conglomerate enjoys incon-
testable market power in market A, it can finance a predatory pricing strategy on mar-
ket B through cross-subsidization in order to leverage its market power to the pre-
merger competitive market B. Furthermore, credible threats (referring to its ‘deep
pocket’) might deter potential competitors from entering market B. However, a num-
ber of additional elements are required in order to make a financial predation strategy
sufficiently probable (Bolton/Brodley/Riordan 2000): the prey company depends on
external financing, based on its performance, and predation sufficiently reduces its
performance, thus threatening its continuing financing and thus its viability; a facili-
tating market structure (high concentration and entry barriers in market B); probable
recoupment; absence of a credible efficiency justification.
A different line of thought claims that conglomerate mergers may favour coordinated
effects by creating additional punishment instruments, in particular multimarket con-
tact (Church 2004: 254-259). Post-merger coordination becomes facilitated if the
merger makes the multimarket competitors more symmetric. If company I pre-merger
competed on market A with company III and company II pre-merger competed on
market B with company III, a merger I+II creates two symmetric companies, both
competing on markets A and B with each other. However, several more conditions
must be fulfilled (e.g. homogeneous products on each market A and B, sufficient mar-
ket transparency, few competitors in both markets, considerable entry barriers, stable
economic environment, past experience with coordination) in order to establish likely
coordinated effects.
2.3 Economic Competition on Media Markets
Media markets are characterized by a number of specific features that distinguishes
them from ‘ordinary’ markets. First, we briefly review some economic specifics, and
then we briefly address the interrelation of economic competition and journalistic
diversity that frustrates an economics-only analysis of media markets. Nevertheless,