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Competition Council does not allow TV3 shareholder to take over Lithuania’s largest radio group

According to 2023 February 22 After receiving the notification of its intention to carry out the concentration, the company “All Media Lithuania”, which broadcasts TV programs TV3, TV6, TV8 and TV3 Plus, planned to acquire three companies that manage the radio stations M-1, “M-1 plus”, “Lietus”, “Laluna”, “Raduga” and the company “Reklamos ekspertai”, which sells advertising there. All Media Radijas, a company related to All Media Lithuania, broadcasts Power Hit Radio on radio frequencies, Power Gold radio programs on the Internet and sells advertising, while All Media Digital operates and other sites Web where also sells advertising.

The Competition Council states that it sought to determine whether the implementation of the above-mentioned transaction would have negative consequences for competition in the markets for the sale of radio and television advertising, given that “All Media Lithuania” currently holds a significant share of the television advertising market and, having joined the largest group of radio stations in Lithuania, would also increase its share in the radio advertising market.

The institution carried out a detailed economic analysis and received explanations not only from the merger participants and their competitors, but also from advertising agencies, as well as Lithuanian companies that purchase advertising in various advertising programs. television and radio. The Competition Council found that the M-1 and Power Hit Radio radio stations operated by the parties to the transaction are close competitors, that competition between them is significant, that it would be eliminated after the transaction and that the parties to the concentration would have the right The largest share of the radio advertising market in terms of revenue, control the timeshare radio stations with the largest audiences.

According to the Competition Council, the appearance of such a large player on the market would make it difficult for other radio stations to compete effectively and buyers of radio advertising would have fewer alternatives to choose from.

Another negative consequence of the transaction for competition identified by the authority is linked to the possibility for the company All Media Lithuania to apply the practice of bundling advertising, within the framework of which discounts would be offered to buyers of advertising who purchase television and radio advertising packages from the authority. media managed by him. Although it is not prohibited per se to link the sale of television and radio advertising, but in a highly concentrated market such a practice would be detrimental, as advertising buyers would be encouraged to purchase advertising from television channels and radio owned by All Media Lithuania. even more actively, thereby reducing the volume of advertising ordered from competitors.

“Competitors unable to offer similar bundled advertising packages would lose part of their revenue, their ability to invest in program content and retain audiences would be reduced, and their development and the entry of new entrants into the market would be reduced. difficult. In the absence of sufficient competitive pressure and a weakening of competitors, the participants in the merger could in the long term increase the prices of advertising services”, said Jolanta Ivanauskienė, President of the Competition Council.

The parties to the transaction, who were aware of the conclusions regarding a possible negative impact on competition, provided additional comments and arguments to the Competition Council, but the institution did not change its assessment.

“All Media Lithuania” offered to fulfill its obligations – to sell “All Media Radijas”, the management company of “Power Hit Radio”, and not to apply the practice of combining television and radio advertising. However, the Competition Council recognized that these obligations would not eliminate the negative consequences identified for competition, because they would not be effective and would require constant and extremely complex monitoring, impossible to ensure due to the specifics of the sale of advertisement.

After evaluating all the information and circumstances collected, the Competition Council decided not to authorize the company “All Media Lithuania” to carry out the merger by acquiring 100% of each. shares of the companies managing the radio stations M-1, “M-1 plus”, “Lietus”, “Laluna” and “Raduga” and the company “Reklamos ekspertai”, because the operation would create or strengthen a dominant position or would considerably limit competition in the radio and television advertising sales markets.

The non-confidential version of the Competition Council’s resolution will be published shortly on the institution’s website.

“All media Lithuania”: this is a negative signal for the media and businesses

“All Media Lithuania” claims that the ban by the Competition Council (CT) on the acquisition of the group of radio stations managed by “M-1” will lead to long-term damage to both Lithuanian media and the economy.

“The Competition Council has not only dealt a heavy blow to our business: the impact of the decision on the future of all media is much more worrying,” says Laura Blaževičiūtė, CEO of All Media Lithuania.

According to L. Blaževičiūtė, UAB All Media Lithuania, which belongs to the TV3 group, competes in Lithuania with players such as Google, Meta (Facebook, Instagram), Youtube, Spotify and others, which occupy a significant share of the market Lithuanian advertising executive. Therefore, according to her, local companies must look for ways to ensure the effectiveness of advertising and successful competition in conditions where new digital radio and television stations can easily be created, regardless of the availability of frequencies in the country.

“We can only stand up to global giants by investing in high-quality, audience-engaging content, employees and solutions that add value to advertising clients. This requires enormous resources, available only through expansion. The aspiration to acquire the “M-1” group meant opportunities for us to increase operational efficiency and fight for the audience by investing more in the quality of content. We cannot disappoint the public’s expectations about the quality of the content, otherwise it will be taken over by global players who offer freedom but are not able to ensure accountability,” says L. Blaževičiūtė.

Laura Blaževičiūtė

At that time, Marius Juonys, partner of the law firm “Ellex”, claimed that such extremely conservative attitude of KT towards the markets could have a negative effect on the investment climate in Lithuania. According to him, companies are transforming themselves by going beyond the boundaries of previous markets, and the changes in the field of advertising are particularly marked.

“Lithuanian media compete not only with each other, but also with global players for audience and advertising – this means that there is no longer a closed market for television, radio or other advertising markets. Consumers are contacted through multiple channels, so the assumption that media buyers do not consider alternatives is simply not true today. Therefore a very narrow approach market is misleading, both when assessing competition risks and when making decisions,” said Mr. Juonys.

“At the same time, a signal is sent to other companies: their applications will be evaluated in the context of very restricted market segments. This increases uncertainty over the approval of acquisitions and hampers investment and marketing decisions. expansion,” he added.

Furthermore, according to the lawyer, even if a competition risk is found, the agreement can be saved – the law allows the threat to be eliminated with additional obligations. According to him, this is a common practice in other EU countries.

All Media Lithuania also sought to take advantage of such an opportunity by proposing to assume obligations that would eliminate the threats specified by the TC. In addition, in order to ensure the effectiveness of such a commitment, the company declared itself ready to ensure the independence of the commercial activities of the radio stations whose acquisition is envisaged, their separate teams and sales, a control mechanism internally, as well as guaranteeing the training of all employees and informing customers.

However, CT rejected such a proposal. Mr. Juonys believes that such a choice shows that KT tends to view companies as dishonest.

“In international practice, the obligation not to tie sales is a classic way of eliminating risks identified by competition authorities. We have given examples showing that this practice is applied and entirely acceptable by competition authorities of France, Belgium, Germany and other countries, but the reality in our country is different. However, the decision to reject the proposal on the grounds that “everything can be agreed verbally” is even more troubling “We have the impression that the Lithuanian Competition Authority considers companies and their customers dishonest in advance,” commented Mr. Juonys.

“Clearly, the same statement can apply to any business – further limiting the chances of salvaging a deal by offering a classic ‘no-strings’ bond in similar situations.” Therefore, after this decision we see that what is applied in other EU countries does not work in Lithuania. In the meantime, CT has not published its own liability assessment guidelines. This becomes a major challenge for businesses as the valuation of liabilities becomes difficult to predict,” he explained.

100 percent Rūta Grušnienė, owner of shares in the mentioned companies, says she is disappointed with the decision of the Competition Council.

Source: The Delfi





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