Competition Bureau statement regarding the acquisition by TVA of Vision Globale

Position statement

OTTAWA, December 30, 2014 — This statement summarizes the approachFootnote 1 taken by the Competition Bureau in its review of the proposed acquisition by Groupe TVA Inc., in partnership with a newly-formed subsidiary (together, TVA), of Vision Globale A.R. Ltée (Vision Globale) pursuant to an Asset Purchase Agreement announced November 13, 2014.

On December 29, 2014, the Bureau issued a No Action Letter (NAL) to TVA and Vision Globale indicating that the Commissioner of Competition does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the proposed acquisition.

In the course of its review, the Bureau conducted interviews with numerous market participants, including film and television content producers and various production and post-production service providers.

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Background

On November 13, 2014, TVA, a subsidiary of Québecor Media Inc., announced that it had reached an agreement to acquire Vision Globale’s assets for a purchase price of approximately $118 million.

TVA is a major French-language television broadcaster in Quebec, operating six conventional television stations and eight specialty television services.

Vision Globale is a Quebec-based provider of production and post-production services, including studio rentals, equipment rentals, and technical services, to producers of film, television, and other audio-visual content. Vision Globale operates film and television studios located in the Greater Montreal Area, including the largest studios available for rent in the province of Quebec, as well as offering rentals of specialised equipment and post-production services such as visual effects production and sound editing.

The television production and broadcasting industry comprises a production chain, with production services being upstream, independent producers in the middle and broadcasters downstream.

Since TVA is not a significant downstream broadcaster or distributor of films, the Bureau’s analysis focused primarily on television content productions.

Analysis

Broadcasters in Canada generally compete for the right to commission and air television content conceived by independent producers, by offering up-front financial commitments in the early stages of development. Once a given show has been commissioned by a broadcaster, producers, using various sources of public and private funding, create the content, and make use of numerous production services to do so. Upstream, third-party suppliers such as Vision Globale compete to provide these production services, including studio and equipment rentals, or technical post-production services, directly to independent producers for a given project.

Through one of its affiliates, TVA supplies limited post-production services to third-party producers of television content. TVA also owns production assets, which have predominantly been used for the production of content intended for broadcast on its own television networks. Given this, it appears that TVA and Vision Globale do not compete significantly against each other.

As a result, the Bureau evaluated the potential effect of the transaction on the television industry using the approach to non-horizontal mergers outlined in the Bureau’s Merger Enforcement Guidelines. Specifically, the Bureau’s investigation centered on two potential theories of harm:

  1. Input foreclosureFootnote 2 in the provision of various production and post-production services to television producers; and
  2. The leveraging of TVA’s strong position in television broadcasting and in the purchase of television content, to force independent producers to use Vision Globale’s services.

Foreclosure of access to television production services

Vertical mergers can harm competition if the merged firm gains the ability to limit a downstream rival’s access to inputs, or raise a downstream rival’s costs by raising prices charged for an input. The Bureau therefore examined whether TVA would have the ability, following the transaction, to harm its rival broadcasters by partially or fully foreclosing access by producers, who develop content for those rivals, to the production and post-production services of Vision Globale.

The Bureau found that numerous suppliers of post-production services remain in the Greater Montreal Area that can provide sufficient and effective alternatives for independent producers such that those producers would not likely be vulnerable to a foreclosure strategy by the merged firm. While there are fewer options for studio and equipment rentals, the Bureau concluded that no significant barriers to entry and expansion are present that could impede entry or expansion if access to Vision Globale were to be foreclosed to independent producers.

Therefore, the Bureau concluded that, post-transaction, TVA would not likely have the ability to partially or totally foreclose independent television producers developing content for rival broadcasters.

Tying purchases of television content to the supply of production services

Following complaints from stakeholders, the Bureau examined a second theory of harm, relating to the merged firm leveraging its strong position in television broadcasting to impact competition in the market for the supply of production services to producers. Specifically, the Bureau assessed whether the proposed transaction would provide TVA with the ability to force television producers in Quebec to use its newly-acquired production services for the television content they develop, including that sold to competing broadcasters. The Bureau assessed whether, post-merger, TVA could charge higher prices, or offer inferior quality service, for the production of content intended for its broadcasting rivals. The Bureau considered whether the transaction, under this scenario, could result in a decrease in the quantity or quality of television content offered to consumers.

The Bureau’s investigation revealed that, while TVA is an important purchaser of many genres of French-language television content, the size of its purchases of content relative to the purchases of alternative broadcasters is not sufficiently large to allow it to force independent producers to use Vision Globale for the production of content intended to be aired by rival broadcasters. The Bureau was able to identify numerous Quebec-based independent television producers who are not currently reliant on TVA to broadcast their content. It was therefore concluded that, post-merger, independent producers of French-language television content in Quebec will continue to be able to select the suppliers of production and post-production services of their choice at competitive terms.

Therefore, the Bureau further concluded that, post-transaction, TVA is unlikely to have the ability to force independent television producers to use Vision Globale’s services for the production of content destined for broadcast on rival networks.

Conclusion

In light of the above, the Bureau concluded that the transaction is unlikely to result in a substantial lessening or prevention of competition with respect to the production, distribution, or broadcasting of film and television content in the province of Quebec. The Bureau has therefore issued a No Action Letter (NAL) to TVA and Vision Globale, indicating that the Commissioner of Competition does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the proposed acquisition.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.

However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.


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