Commission, April 30, 2020, No M.9604

Subject:  Case M.9604 – NENT/Telenor/JV

Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/20041 and Article 57 of the Agreement on the European Economic Area2

Dear Sir or Madam,

(1)    On 23 March 2020, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Nordic Entertainment Group AB (“NENT”, Sweden) and Telenor ASA (“Telenor”, Norway) acquire within the meaning of Articles 3(1)(b) and 3(4) of the Merger Regulation joint control of the joint venture (“JV”, Sweden) (the “Transaction”).3 NENT and Telenor are designated hereinafter as the “Notifying Parties” and each individually as “Notifying Party”. The Notifying Parties together with the JV are designated hereinafter as the “Parties”.

1.      THE PARTIES

(2)    NENT provides TV distribution services and TV channels in Norway, Sweden, Denmark and Finland. NENT also creates, produces and distributes TV shows, commercials, feature films and branded content. In Sweden, NENT also provides broadband internet services on open fibre networks. Outside the Nordic region,4 NENT operates production companies in other European countries and sells content to customers worldwide.

(3)    Telenor provides mobile and fixed telecommunications services and TV distribution services in Norway, Sweden, Denmark and Finland. Outside  the EEA, Telenor provides mobile telecommunications services in Asia. Telenor’s subsidiary Telenor Satellite AS ("Telenor Satellite") is active in the supply of satellite transponder capacity. Telenor’s largest shareholder is the  Norwegian state.

(4)    The JV will be active in the provision of TV distribution services in Norway, Sweden, Denmark and Finland. NENT and Telenor will contribute to the JV their respective retail AV businesses i.e. the satellite and IPTV pay-TV operator and broadband provider of NENT, and the satellite pay TV operator of Telenor.

2.         THE OPERATION

(5)    On 22 October 2019, Nordic Entertainment Group Sweden Holding AB and Telenor Broadcast Holding AS entered into a Merger Agreement. At closing, NENT will contribute its Viasat Consumer business (“Viasat”) to the JV, which will be carved out of NENT prior to closing into a separate corporate structure ("VCB Group") as part of an internal reorganisation of NENT. Telenor will contribute its wholly owned subsidiary, Canal Digital AS (“Canal Digital”), to the JV. Following the closing, the Notifying Parties will each hold 50% of the shares in the JV.

3.       THE CONCENTRATION

3.1.     Joint control

(6)    The Notifying Parties will each hold 50% of the shares in the JV and will each have the ability to exercise decisive influence over the JV. In particular, the Board of the JV will consist of six Board members ("Directors"), with each Notifying Party nominating three Directors. The Notifying Parties will share the right to nominate the Chairman of the Board, with the right alternating between the Notifying Parties on a yearly basis in conjunction with an annual shareholders meeting.5

(7)    Each Notifying Party can require the replacement of any Director nominated by the other Notifying Party with a new Director. The appointment of the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") must be approved by a minimum of two Directors from both of the Notifying Parties and either Notifying Party can request the removal of the CEO and CFO.

(8)    The annual budget and business plan (including any amendment, updating, supplementing or replacement of a business plan) requires approval from the Board of the JV, by a minimum of two Directors from both of the Notifying Parties.

(9)    Therefore, as a result of the Transaction, NENT and Telenor will jointly control the JV within the meaning of Article 3(1)(b) of the Merger Regulation.

3.2.      Full-functionality

(10)   The JV will be fully functional. First, the JV will employ its own management dedicated to its day-to-day operations. The JV will also have access to sufficient resources, including finance, staff and tangible and intangible assets that will enable it to operate independently on the market for the retail supply of AV services, performing the functions normally carried out by undertakings operating on the same market.

(11)   Second, the JV will operate a TV distribution platform as a fully independent company with its own personnel (sales and marketing, customer service, technical and content negotiation and purchasing teams). Its market-facing activities will include the retail supply of AV services via satellite in each of Norway, Sweden, Finland and Denmark, and via IPTV in Sweden and Norway. The JV will have its own access to, and presence on, the market, and its activities are not limited to the distribution or sale of its parent companies' products.6

(12)   Third, the JV will be active as an autonomous economic entity and all relationships with the Notifying Parties and their affiliates (including, but not limited to, agreements concerning NENT's content and channels and Telenor's satellite transponder capacity) will be at arm's length on the basis of normal commercial conditions. Moreover, the vast majority of the JV's turnover will be achieved through relationships with third parties.

(13)   Finally, the JV is intended to operate on a lasting basis. The Merger Agreement does not provide for finite duration of the JV and the Transaction therefore brings about a lasting change in the structure of the undertakings concerned.

(14)   Therefore, the Transaction will lead to the creation of a full-function joint venture within the meaning of Article 3(4) of the Merger Regulation.

4.             EU DIMENSION

(15)   The undertakings concerned have a combined aggregate world-wide turnover of more   than   EUR   5   000   million   (NENT:   EUR   1   420   million;   Telenor: EUR 11 437 million; combined: EUR 12 857 million).7 Each of them has an EU-wide turnover in excess of EUR 250 million (NENT: EUR […]; Telenor: EUR […]), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension.

5.          RELEVANT MARKETS

5.1.  Introduction

(16)   The Transaction relates to the two lower levels of the AV value chain, namely (i)   the wholesale supply of TV channels where NENT is active and will post- Transaction remain independently active; and (ii) the retail supply of AV services to end customers where the JV will be active but also Telenor will remain active through technologies other than satellite,8 and NENT will remain active with its OTT offer.

(17)   In addition, the Transaction relates to the market for the supply of satellite transponder capacity where Telenor Satellite is active as a supplier and Telenor’s Canal Digital and NENT’s Viasat are customers.

5.2.       Structure of the value chain

(18)   In previous cases, the Commission set out the different levels of the TV value chain as follows: (i) the (upstream) markets for the production and the licensing  of AV content, (ii) the (intermediate) market for the wholesale supply of TV channels, and (iii) the (downstream) market for the retail supply of TV services.9 The market investigation10 confirmed that this three-layer classification remains accurate with regard to AV content.11

5.3.    Wholesale supply of TV channels

(19)   TV broadcasters package the AV content and broadcasting rights for AV content that they have produced in-house or acquired into linear TV channels, which are supplied to retail suppliers of AV services, and then broadcast to end users either on a FTA basis or on a pay TV basis. Ancillary services have gradually been associated to TV channels in order to complement the TV offering and enhance the viewer experience of traditional linear TV channels.

(20)   The wholesale supply of TV channels is an intermediate layer between the upstream production and licensing of content, and the downstream retail  provision of AV services to end customers.

5.3.1.        Product market definition

5.3.1.1.     Previous Commission decisions

(21)   In its past decisional practice, the Commission identified a wholesale market for the supply of TV channels. Within that market, in certain decisions, the Commission further identified two separate product markets for (i) FTA TV channels, and (ii) pay TV channels.12 The Commission further stated that within the pay TV channels market, there could be different segments for (i) basic pay TV channels; and (ii) premium pay TV channels,13 for which end customers pay a premium in addition to their basic subscription fee. In other decisions, including its recent decision of 12 November 2019 in case M.9064 – Telia Company/Bonnier Broadcasting Holding, the Commission concluded that at the level of the wholesale supply of TV channels there were two separate product markets, one consisting of the wholesale supply of premium pay TV channels and one consisting of the wholesale supply of FTA and basic pay TV channels.14

(22)   In   addition,   in   previous    decisions    including    its    recent    decision    of 12 November 2019 in case M.9064 – Telia Company/Bonnier Broadcasting Holding, the Commission considered that there was no need to draw a distinction between linear TV channels and their ancillary services, which are licensed by  TV broadcasters to TV distributors along with, or in addition to those linear TV channels.15

(23)   Further, in previous decisions, the Commission examined a number of other potential additional segmentations, including genre or thematic content (such as sports, films, general entertainment, news, youth, and others), and ultimately left the market definition open in these regards.16

(24)   Last, in its recent decision of 12 November 2019 in case M.9064 – Telia Company/Bonnier Broadcasting Holding, the Commission considered that the market   for   wholesale   supply   of   TV   channels,   and   any   other     possible segmentation, should not be further segmented according to the type of infrastructure used for the delivery to the viewer (cable, satellite, terrestrial TV and IPTV).17

5.3.1.2.     The Notifying Parties’ view

(25)   The Notifying Parties submit that the Transaction should be assessed on the basis of an overall market for wholesale supply of TV channels in all four geographies, and that any segmentation according to (i) pay and FTA TV channels, (ii)   genre, (iii) distribution platform, or (iv) premium and basic pay TV channels would be inappropriate.18

5.3.1.3.     The Commission’s assessment

(26)   A majority of respondents to the market investigation across the four geographies indicated that it remains appropriate to segment the wholesale supply of TV channels (i) between FTA and pay TV channels, and (ii) within pay TV channels between basic and premium TV channels continues to be appropriate.19 However, a number of well-substantiated responses to the market investigation suggested that these segmentations are not clear-cut for the following reasons.

(27)   First, some respondents active across the Nordics indicated that, in the countries  at stake, it might be relevant to consider FTA, basic pay and premium pay TV channels together. In that respect, some indicated that these types of channels are substitutable from the supply side, given that (i) all TV broadcasters would be able to provide all types of TV channels (Telia),20 and (ii) they effectively  compete with each other for the same content as well as viewers' time, attention and spending (HBO Nordic),21 while others consider that they are interchangeable from the demand side, as many households switch from one to another when making content choices (The Walt Disney Company).22

(28)   Second, some respondents considered that it would be more accurate to distinguish between the wholesale supply of (i) FTA and basic pay TV channels on the one hand and (ii) premium pay TV channels on the other hand. In that respect, the Swedish retail provider of AV services Tele2 submitted that for FTA and basic pay TV channels, which have advertising as their main source of income, audience reach is the key variable, while for premium TV channels, which are usually advertising free, the key variable would rather be willingness to pay.23   Discovery  also  considered  that  in  Norway,  Sweden  and  Finland,    the division between FTA and basic pay TV (on one hand) and premium pay TV (on the other) is accurate.24 Indeed, for instance, in Norway, end users essentially  need to subscribe to a basic TV package to receive FTA channels.25

(29)   Third, some respondents to the market investigation considered the distinction between basic pay TV channels, which are part of the basic cable or IPTV subscription, and premium pay TV channels, for which end customers pay a premium in addition to their basic subscription fee, to be blurred.26 In that respect, TV2 Norge submitted that several TV distributors are introducing point based optional packages, where subscribers may use points to select between a range of TV channels and services that include both traditional basic channels, and channels and services which have traditionally been regarded as "premium content".27 Notwithstanding this trend, ITV stressed that premium  sports  and "first run" films should continue to be seen as complements rather than substitutes for pay TV, as they tend to be packaged within narrow genre-specific bundles, premium sports and films TV channels tend to be purchased "through" a basic subscription package, and their content is not included in the subscription offerings of the OTT operators.28

(30)   Fourth, some market participants stressed the specificities of the Finnish and Danish markets. Indeed, in Finland there would be a limited offer of basic pay TV channels,29 in view of the national legislative framework, which prevents housing companies from collecting basic TV fees from households.30 In Denmark, there would be a minor offer of premium pay TV channels.31

(31)   In addition, the results of the market investigation indicated that the wholesale supply of pay TV  channels  could  be  further  divided  according  to  genre  (e.g., films, sports, youth, general entertainment, news). Indeed, most respondents stressed that (i) distributors would seek to offer a variety of genres to end- customers, and (ii) end customers would consider thematic channels of a given genre as a complement to thematic channels of a different genre. Channels of different genres would thus be complementary.32

(32)   With regard to a possible segmentation of TV channels depending on the infrastructure used for their transmission, the results of the market investigation did not provide reasons to conclude that different means of infrastructure used for the delivery to the viewer (cable, satellite, terrestrial TV and IPTV) could constitute different product markets. Indeed, nothing in the Commission's file indicated that the competitive conditions in the market for the wholesale supply of TV channels, and any possible segmentation, would be different according to the distribution technology and type of infrastructure used for the distribution of the TV channels.

(33)   With regard to a possible distinction between linear TV channels and their ancillary services, the results of the market investigation did not provide reasons to depart from the Commission's previous approach.

(34)   In light of the above, the Commission considers that, for the purpose of this Decision, the relevant product market is the market for the wholesale supply of TV channels, including their ancillary services and covering all types of infrastructure. The question whether this product market can be further segmented between (i) FTA and pay TV channels, and in turn whether pay TV channels can be  further  segmented  between  basic  pay  and  premium  pay  TV  channels,  or

(i)   FTA and basic pay TV channels on the one hand, and premium pay TV channels on the other hand could be left open, as the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning  of the EEA Agreement under any plausible product market definition. The question whether this product  market  can  be  further  segmented  by  genre  (e.g., sports, films and series) could be left open, as the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning  of the EEA Agreement under any plausible product market definition.

5.3.2.        Geographic market definition

5.3.2.1.     Previous Commission decisions

(35)   In its past decisional practice, the Commission has previously considered that the market for wholesale supply of TV channels could be national,33 sub-national34 or potentially comprising a broader linguistically homogeneous area.35 In its recent decision  of  12  November  2019  in  case  M.9064  –  Telia     Company/Bonnier Broadcasting Holding, the Commission concluded that the market was national in scope.36

5.3.2.2.     The Notifying Parties’ view

(36)   The Notifying Parties submit that the market for wholesale supply of TV channels is national.37

5.3.2.3.     The Commission’s assessment

(37)   The results of the market investigation indicated that, despite being sometimes negotiated on a regional basis, that is to say, encompassing the Nordic region, the agreements between TV broadcasters and retail suppliers of AV services for the wholesale supply of TV channels are mainly negotiated on a national basis.38

(38)   In light of the above, for the purpose of this Decision, the Commission concludes that the relevant geographic market for the wholesale supply of TV channels, and all its possible sub-segments, is national in scope.

5.4.    Retail supply of AV services

(39)   Retail providers of AV services offer packages of linear AV services and/or non- linear AV services to end customers. Such linear and non-linear AV services can be augmented with ancillary services, such as catch-up TV or TV everywhere.

(40)   The retail supply of AV services is the lower level in the AV value chain. Retail AV services can be delivered to end-users though a number of technical means including cable, satellite and IPTV. OTT players deliver channels and content in both a linear and non-linear fashion through the use of the open Internet.

5.4.1.         Product market definition

5.4.1.1.     Previous Commission decisions

(41)   In its past decisional practice, the Commission considered the retail supply of FTA TV and pay TV as separate markets, but ultimately left open the product market definition.39 The Commission also considered whether pay TV could be segmented  further  according  to:  (i)  linear  vs  non-linear  pay  TV    services;40 (ii) premium vs basic pay TV services.41 However, the Commission left open the market definition with regard to each of these potential sub-segments.

(42)   In addition, the Commission considered a possible segmentation of the market for the retail supply of AV services according to distribution technology (for example,  cable,  OTT,  satellite,   IPTV   or   terrestrial).   In   its   decisions   of 12 November 2019 in case M.9064 – Telia Company/Bonnier Broadcasting Holding, and of 30 May 2018 in case M.7000 – Liberty Global/Ziggo, the Commission considered that all the different distribution technologies were part  of the same product market,42 while leaving the exact product market definition open in a number of other decisions.43

(43)   In Sweden, Finland, and Denmark retail suppliers of AV content can enter into either collective agreements (with landlords or housing cooperatives, the so-called multiple dwelling units ("MDUs")) or individual agreements (with individual households, the so-called single dwelling units ("SDUs")). In SDUs the end customer typically chooses its own TV distributor and pays directly for its subscription. In MDUs, on the other hand, it is common to have a collective agreement between the landlord / housing association and a single TV  distributor / cable operator.

(44)   The Commission also previously considered whether retail TV services to SDUs and MDUs form part of the same product market but ultimately left the market definition open.44

5.4.1.2.     The Notifying Parties’ view

(45)   The Notifying Parties submit that the Transaction should be assessed on the basis of an overall market for retail supply of TV channels in all four geographies, and that any segmentation according to (i) the type of distribution platform, (ii) pay TV vs FTA TV services, (iii) basic pay and premium pay TV services, (iv) linear vs non-linear services, or (iv) SDUs vs MDUs.45

5.4.1.3.     The Commission’s assessment

(46)   The results of the market investigation were mixed as regards the product market for the retail supply of AV services.

(47)   As regards a possible segmentation between FTA and pay AV services, some respondents considered that that the retail supply of FTA TV channels and the retail supply of pay TV channels form separate product markets as pay TV bundles tend to bought “through” a package which includes FTA TV. Other respondents stressed that FTA and pay TV channels are often bundled within the same packages, and should therefore be considered as part of the same product market at retail level.46

(48)   As regards a possible segmentation between basic and premium pay AV services, some respondents considered that the retail supply of pay TV services should be further segmented between basic and premium pay AV services, as basic pay TV content tends to be of a “general entertainment” nature while premium content tends to be more niche or genre-specific (e.g., sports, films). Other respondents considered that these are alternative products, notably from the supply-side, and, as such, part of the same product markets.47

(49)   As regards a possible segmentation between linear and non-linear pay AV services, some respondents consider that the market for the retail supply of AV services should be further segmented between linear services (namely TV channels) and non-linear services, such as SVOD.48 In that respect, TV2 Norge stressed that between 2010 and 2018 in Norway, the number of pay TV households has been stable and reported pay TV revenue has grown,  while  several SVOD services have been launched in the market. TV2 Norge added that around 90% of SVOD subscribers are also linear pay TV subscribers, and that there would be no sign of steep decline in the linear pay TV market (except for linear premium pay films and series products), while the SVOD market is forecasted to grow.49 Other respondents, such as HBO Nordic,50 considered that linear and non-linear services are part of the same markets given that they all compete for consumers' attention and spending.51

(50)   As regards distribution technologies, a majority of respondents to the market investigation considered that the market for the retail supply of AV services should  not  be  further  segmented  according  to  distribution  forms,  given   that (i)   retail  suppliers  typically  use  several  platforms  to  deliver  their      services, (ii)  most households have access to different combinations distribution  networks,52 and (iii) end customers would mainly consider the different distribution forms as alternative to each other.53

(51)   As regards a possible segmentation between SDUs and MDUs, some respondents considered that the retail supply of AV services to SDUs and the retail supply to MDUs belong to distinct product markets notably given (i) differences in terms of pricing, (ii) contract length, and (iii) breath of content. Other respondents simply considered that the distinction is not relevant or needed.54

(52)   In light of the above, the Commission considers that, for the purpose of this Decision, the relevant product at retail level is the market for the retail supply of AV services encompassing all distribution technologies. The question whether the retail supply of AV services should be further segmented between (i) FTA and pay AV services can be left open, as well as the question whether in turn the retail supply of pay AV services should be segmented according to (ii) linear and non- linear pay AV services, (iii) premium and basic pay AV services, and (iv) AV services to MDUs and SDUs, as the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement under any plausible product market definition.

5.4.2.        Geographic market definition

5.4.2.1.     Previous Commission decisions

(53)   In previous decisions, the Commission considered that the market for the retail provision of TV services is either national, or limited to the geographic coverage of a supplier's cable network.55  In its recent decision of 12 November 2019 in  case M.9064 – Telia Company/Bonnier Broadcasting Holding, the Commission concluded that the market was national in scope.56

5.4.2.2.     The Notifying Parties’ view

(54)   The Notifying Parties submit that the market for retail supply of AV services is national.57

5.4.2.3.     The Commission’s assessment

(55)   The results of the market investigation indicated that retail suppliers of AV services mainly acquire license rights to distribute AV services at national level.58 In addition, the market investigation in this case did not provide any new  elements justifying a departure from Commission's previous decisional practice.

(56)   In light of the above, for the purpose of this Decision, the Commission concludes that the relevant geographic market for the retail supply of AV services, and all its possible sub-segments, is national in scope.

5.5.    Retail supply of fixed internet access services

5.5.1.   Product market definition

5.5.1.1.     Previous Commission decisions

(57)   In recent cases, the Commission considered but ultimately left open possible segmentations according to (i) product type (distinguishing narrowband, broadband, and dedicated access), and (ii) distribution technology (distinguishing xDSL, fibre, cable). Moreover, the Commission acknowledged that the retail market for fixed internet access services should not be divided according to download speed.59

(58)   The Commission has also considered possible segmentations as to customer type, distinguishing between (i) residential and small business customers, on the one hand,  and  larger  business  and  public  authorities,  on  the  other  hand;60   and (ii)   MDUs such as housing associations or apartment buildings, and SDUs such as individual households.61

5.5.1.2.     Notifying Party’s view

(59)   In its initial submission, the Notifying Party submits that there is one overall product market for retail fixed internet access services.62

5.5.1.3.     Commission’s assessment

(60)   With regard to a possible segmentation of the market for the retail provision of fixed internet access services according to product and customer type or  according to distribution technology (that is to say, xDSL, cable or fibre), the Commission considered that nothing in the Commission’s file provided reason to depart from its approach in previous cases.

(61)   In light of the foregoing, the Commission does not depart from its previous assessment, and concludes, for the purposes of this Decision, that the exact scope of the product market definition in relation to the provision of retail fixed internet access services can be left open, as the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement under any plausible product market definition.

5.5.2.         Geographic market definition

5.5.2.1.     Previous Commission decisions

(62)   In its previous decisions, the Commission concluded that the retail market for the provision of fixed internet services was national in scope.63

5.5.2.2.     Notifying Party’s view

(63)   The Parties submit that the relevant geographic market should be defined as national and not local or broader than national (i.e. Scandinavian or pan- Nordic).64

5.5.2.3.     Commission’s assessment

(64)   The market investigation did not provide any indication that the Commission should depart from its findings in previous cases, according to which the geographic market should be national.

(65)   In light of the foregoing, the Commission does not depart from its previous assessment, and concludes, for the purpose of this Decision, that the relevant market for the provision of fixed internet services is national.

5.6.      Provision of satellite transponder capacity

(66)   Satellite transmission is used for the distribution of TV signals and provision of telecommunication services.65

(67)   Each satellite transmits signals via  a  number  of  transponders  and  antennas  (i.e. beams), which are typically tailored to a frequency band.66 The function of a satellite transponder is to receive the signal from the uplink, translate the signal in frequency and amplify the signal before routing the signal to a downlink antenna. For the distribution of TV signals, the TV content is fed into an uplink antenna, which in turn is beamed up to a satellite; the signal is then beamed from the satellite down into the receiving customers’ dishes. Customers of such broadcasting services can either be TV broadcasters or TV (DTH) distributors.67 The antennas on board the satellites used to emit the DTH signals are shaped to optimize the footprint to the desired geographical region and such shaping is frequency dependent. There are a number of different satellite frequency bands that are used for different applications, i.e. the C-band, X-band, Ku-band, Ka- band, the Q-band, V-band and the W-band.68

(68)   In the Nordics, satellite customers have access to satellite transponder services offered by Telenor, via its subsidiary Telenor Satellite (“TS”), and SES ASTRA AB ("SES"), subsidiary of globally active SES ASTRA S.A. (“SES Group”). While TS provides satellite transponder capacity from four satellites (Thor 5,  Thor 6, Thor 7 and 10-0269) located at the 1°W orbital position, SES provides its services from two satellites (Astra 4A and SES-5) located at the 5°E orbital position. Both operators’ satellites mainly carry Ku-bands and a limited number  of Ka-bands, while SES’ satellites are also equipped with C-bands.

5.6.1.         Product market definition

5.6.1.1.     Previous Commission decisions

(69)   In its past decisional practice, the Commission identified a possible market for the provision of satellite transponder capacity used for distribution of TV signals and telecommunication services (e.g. telephony, data services).70 The Commission considered that such market may include the provision of uplink services (transmission  to  the  satellite),  encoding,  and  various  other  technical   ground services for broadcasting. In the Commission’s most recent decision, the precise market definition was left open.71

5.6.1.2.     The Notifying Parties’ view

(70)   The Notifying Parties submit that the supply of satellite transponder capacity for broadcasting on the Ku-band and for telecommunication services are distinct product markets.72 They explain that the Ku-band is the specific frequency band in Europe used for broadcasting, while other frequency bands cannot readily be used for broadcasting. For instance, to use the Ka-band for broadcasting, which has in any case a higher signal attenuation, TS would have to launch a new Ka- band satellite designed to deliver broadcasting services and replace customers’ antennas and set-top boxes. In contrast, telecommunication services are provided via the Ku-band as well as the dedicated Ka- and C-bands.

(71)   The Notifying Parties argue that the supply of satellite transponder capacity for broadcasting on the Ku-band at the orbital positions of 1°W and 5°E are distinct product markets.73 On the one hand, TV distributors cannot readily switch to the purchase of capacity from a satellite located at another orbital position due to prohibitively high switching costs.74 In particular, customers' satellite dishes are pointed towards a specific orbital position such that a switch to another orbital position would involve dish turning. On the other hand, TV broadcasters currently require transmission over both 1°W and 5°E to reach all Nordic satellite customers, as TV-signals transmitted over 1˚W cannot be received by household satellite dishes pointed to 5˚E and vice versa.75

5.6.1.3.     The Commission’s assessment

(72)   The market investigation conducted in the present case has not provided clear evidence with regard to the exact delineation of the product market definition.

(73)   As regards the question whether satellite transponder capacity used for broadcasting on the Ku-band and telecommunication services via all frequency bands constitute distinct product markets, the market investigation has not resulted in many meaningful responses and the received responses were not consistent.76 While one satellite operator in principle confirmed the Notifying Parties’ view, it also explained that “large portion of the transponders can be  used for various applications, i.e., it is not possible to fully distinguish between transponders for broadcasting versus other applications”.77 Nevertheless, this satellite operator also indicated that the type of the contracted frequency band (i.e. Ku-, Ka- or C-bands) is one of the main price determining factors.78 [Confidential strategic information relating to Telenor's satellite business].79 In contrast, another satellite operator indicated that transponders are not dedicated to, or configured specifically for, one of these two services only.80 In particular, there seems to be some flexibility with regard to the use of the Ku-band for broadcasting and telecommunication purposes.81

(74)   As regards the question whether satellites at different orbital positions constitute distinct product markets, the market investigation has not fully confirmed the Notifying Parties’ arguments. While the majority of respondents confirmed that switching is a difficult, lengthy and costly process for TV distributors, which requires the repointing of customers’ satellite dishes, they also provided several past switching examples between satellite operators in Europe.82 With regard to TV broadcasters, respondents explained that some smaller channels only require distribution via one satellite platform and thus see suppliers at different orbital positions as substitutes.83 However, neither TS nor SES indicated that the  presence of a competing satellite operator at a different orbital position would be […].84  At the same time, the Notifying Parties explained in a different context  that satellite operators may grant discounted prices for switching customers as support for the migration costs.85

(75)   The Commission considers that, in any event, for the purposes of this decision,  the exact product market definition with regard to the market for satellite transponder capacity can be left open. The question whether the supply of satellite transponder capacity should be further segmented between satellite transponder capacity used for (i) broadcasting (via the Ku-band) and telecommunication services (via all frequency bands) can be left open as well as the question whether the supply of satellite transponder capacity should be segmented between the provision from (ii) orbital position 1°W and orbital position 5°E, as the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement under any plausible product market definition.

5.6.2.         Geographic market definition

5.6.2.1.     Previous Commission decisions

(76)   The Commission has previously concluded that the geographic scope of the market for satellite transponder capacity only encompassed the Nordic countries, and not the EEA as a whole.86 In the Commission’s most recent decision, the gathered   information   suggested  that   the  market   for   the  supply   of satellite transponder capacity is regional in scope, however, the precise market definition was left open.87

5.6.2.2.     The Notifying Parties’ view

(77)   The Notifying Parties consider that the geographic scope of the market for the supply of satellite transponder capacity would correspond to the combined footprints of the respective satellites at an orbital position, taking into account the strength of the beam over a particular area and the number of dishes in that area pointed towards the satellites.88 Accordingly, the geographic market for the  supply of satellite transponder capacity for broadcasting at the 1°W orbital position would be at least the Nordics, if not the Nordics and Central and Eastern Europe (“CEE”).89

5.6.2.3.     The Commission’s assessment

(78)   The results of the market investigation confirmed that it is relevant to look at satellites’ combined footprint from an orbital position (technical reach) and the location of the customer base (number of dishes pointed towards an orbital position). The results also confirmed the specific footprints of TS’ and SES’ satellites provided by the Notifying Parties.90

(79)   TS’ Ku-band transponders for broadcasting at the 1°W orbital position cover the Nordic and CEE region. In the former, TS supplies Canal Digital while it supplies customers in Czechia, Hungary, Romania and Slovakia in the latter. From the 1°W orbital position, TS also covers the Middle East for data services. TS currently does not have any capacity dedicated to [Confidential strategic information relating to Telenor's satellite business].91

(80)   SES’ Ku-band transponders for broadcasting at the 5°E orbital position also cover the Nordic and CEE region. In the former, SES currently supplies Viasat while it supplies customers in Estonia, Latvia, Lithuania and Ukraine in the latter. In addition, from the 5°E orbital position, SES also covers the Middle East and Sub- Saharan Africa for broadcasting, and the whole of Africa for telecommunication services.92

(81)   Both TS’ and SES’ satellites have a dedicated number of Nordic and European transponders for broadcasting. The Nordic beam covers the Nordic countries and the  Baltics. The  European  beam covers  a  wider  geographic  area, including the Nordic countries as well as the CEE region where the signal strength93 is the highest. In addition, SES transmits broadcasting services via a Sub-Sahara  African beam. Both satellite operators have wider beams for offering telecommunication services, which also cover maritime areas around Europe,  such as the Mediterranean See and parts of the Atlantic Ocean.94

(82)   Satellites have some built-in flexibility to adjust the broadcasting capacity per coverage  area.95   One  the  one  hand,  capacity  can  be  flexible  between beams, i.e. the satellite operator can configure which beam a given transponder uses (transponder routing flexibility). On the other hand, satellites may have flexible antenna deployment mechanisms which allow antennas to be moved by  one (older satellites) or several (modern satellites) degrees (beam location flexibility), however, movement is limited by interference issues with neighbouring satellite operators. Satellite operators decide in the design phase of a satellite whether to include such flexibility on their satellite, with such flexibility having an impact on cost. Both TS and SES confirmed that their satellites at the 1°W and 5°E orbital position [Confidential strategic information relating to Telenor's satellite business].96 Hence, there is some supply-side substitutability between the transponders and/or beams typically used for different geographic regions.

(83)   The overlapping footprints of TS’ and SES’ satellites from the 1°W and 5°E orbital position suggest a certain degree of homogeneity in the competitive conditions in the Nordic and CEE region. Nevertheless, despite TS’ and SES’ similar footprints, the supply structure may differ between the Nordic and CEE region depending on the presence of other competitors and the number of dishes pointed towards an orbital position. The latter determines how likely it is that TV broadcasters or TV distributors would switch between orbital positions. The supply structure in the Middle East and Africa seems to be significantly different from the Nordic and CEE region.

(84)   In terms of pricing, neither TS nor SES indicated that customers’ geographic location is […] in the supply of satellite transponder capacity from the 1°W and 5°E orbital positions.97

(85)   While the information gathered confirms the regional scope (Nordics, or Nordics and CEE region), the Commission considers that, in any event, for the purposes of this decision, the exact geographic market definition with regard to the market for satellite transponder capacity and its possible sub-segments can be left open, as the Transaction does not raise serious doubts as to its compatibility with the internal market or the functioning of the EEA Agreement under any plausible geographic market definition.

6.     COMPETITIVE ASSESSMENT

6.1.    Identification of affected markets

6.1.1.      Economic units with an independent power of decision

6.1.1.1.     Relationship between the Norwegian state and Telenor

(86)   Telenor’s largest shareholder is the Norwegian State, which has a 54.7% shareholding interest.98

(87)   Telenor submits that it is operated independently, and that the Norwegian State does not solely or jointly, exercise any positive or negative, de jure or de facto, power over strategic decisions of Telenor for the following reasons.

(88)   First, the Norwegian State does not determine Telenor's strategic commercial decision making. While the Norwegian State accounts for a majority of votes at Telenor’s General Meetings, Telenor considers that certain provisions of the Norwegian Public Limited Liability Companies Act 1997 ("PLLCA") would limit the Norwegian State’s ability, as majority owner, to instruct Telenor in a manner inconsistent with its strategy or general activities.99

(89)   Second, strategic decisions of Telenor (such as approval of budget, business plan, major investments and appointment of senior management) are made by  the Board of Directors of Telenor, [Confidential information relating to internal Telenor decision making]. The Norwegian State has not appointed any representative on the Board. As a majority shareholder, the Norwegian State is represented with one out of four members on Telenor's Nomination Committee, which nominates shareholder representatives to Telenor's  Corporate Assembly and the Board, as well as the Nomination Committee itself.100

(90)   The Commission considers that, in any event, it is not necessary for the Commission to reach a definitive conclusion on the independence of Telenor  from the Norwegian State as the Transaction does not raise serious doubts as to its compatibility with the internal market regardless of whether or not Telenor has an independent power of decision from the Norwegian state.

6.1.1.2.     Relationship between the Norwegian state and NRK

(91)   The public broadcaster NRK is fully owned by the Norwegian State.

(92)   Telenor submits that the Ministry of Culture holds a 100% shareholding interest  in NRK, which is a tax-funded broadcaster. The Norwegian Broadcasting Act authorises NRK to engage in broadcast activities. NRK is obliged to offer public service  broadcasting  via  radio,  TV  and  the  Internet  to  the  entire  population covering a broad range of content. NRK is active in the market for (i) the retail supply of AV services through RiksTV, a joint venture with TV2 and its own OTT streaming service; (ii) the wholesale supply of TV channels where NRK provides its channels to TV distributors.

(93)   The Commission considers that, in any event, it is not necessary for the Commission to reach a definitive conclusion on the independence of NRK from the Norwegian state as the Transaction does not raise serious doubts as to its compatibility with the internal market regardless of whether or not Telenor has an independent power of decision from the Norwegian state.

6.1.1.3.     Conclusion

(94)   The Commission considers that the questions whether each of Telenor and NRK makes up a separate economic unit with an independent power of decision from the Norwegian State or whether they belong to the same economic unit can be left open as the Transaction does not raise serious doubts as to its compatibility with the internal market regardless of the answer to these questions.101

6.1.2.   Affected markets in Norway, Sweden, Finland and Denmark

(95)   The Transaction gives rise to the following possible horizontally affected markets:102

-     in Norway: (i) the overall market for the retail supply of AV services (including or excluding non-linear OTT services), and any of the following possible sub-segments: (ii) the market for the retail supply of pay AV services (including or excluding non-linear OTT services), (iii) the market  for the retail supply of basic pay AV services (including or excluding non- linear OTT services), (iv) the market for the retail supply of premium pay  AV services (including or excluding non-linear OTT services), (v) the market for the retail supply of pay AV services for MDUs (including or excluding non-linear OTT services), (vi) the market for the retail supply of pay AV services for SDUs (including or excluding non-linear OTT services), (vii) the market for the retail supply of basic pay AV services to MDUs (including or excluding non-linear OTT services), (viii) the market for the retail supply of basic pay AV services to SDUs (including or excluding non-linear OTT services), (ix) the market for the retail supply of premium pay AV services for MDUs (including or excluding non-linear OTT services), and (x) the market for the retail supply of premium pay AV services for SDUs  (including or excluding non-linear OTT services);

-     in Sweden: (i) the overall market for the retail supply of AV services excluding non-linear OTT services, and any of the following possible sub- segments: (ii) the market for the retail supply of pay AV services (including or excluding non-linear OTT services), (iii) the market for the retail supply of basic pay AV services (including or excluding non-linear OTT services), (iii)  the market for the retail supply of premium pay AV services (including  or excluding non-linear OTT services), (v) the market for the retail supply of pay AV services for MDUs, (vi) the market for the retail supply of pay AV services  for  SDUs  (including  or  excluding  non-linear  OTT   services);103 (vii) the market for the retail supply of basic AV services for MDUs (including or excluding non-linear OTT services), (viii) the market for the retail supply of premium AV services for MDUs (including or excluding non-linear OTT services), (ix) the market for the retail supply of basic AV services for SDUs (including or excluding non-linear OTT services), (x) the market for the retail supply of premium AV services for SDUs (including or excluding non-linear OTT services).

-                 in Finland: (i) the overall market for the retail supply of AV services excluding non-linear OTT services, and any of the following possible sub- segments: (ii) the market for the retail supply of pay AV services (including or excluding non-linear OTT services), (iii) the market for the retail supply of basic pay AV services (including or excluding non-linear OTT services), (iv) the market for the retail supply of pay AV services for MDUs (including or excluding non-linear OTT services), (v) the market for the retail supply of pay AV services for SDUs (including or excluding non-linear OTT services), (vi) the market for the retail supply of basic pay AV services to MDUs (including or excluding non-linear OTT services), (vii) the market for the retail supply of basic pay AV services to SDUs (including or excluding non- linear OTT services), (viii) the market for the retail supply of premium pay AV services to SDUs excluding non-linear OTT services;

-                in Denmark: (i) the market for the retail supply of basic AV services for SDUs; and (ii) the market for the retail supply of premium pay AV services for SDUs excluding non-linear OTT services.

(96)   The Transaction gives rise to vertically affected markets as a result of (i) NENT’s activities in the upstream markets for wholesale supply of TV channels and the JV’s activities in the downstream markets for the retail supply of AV services in Norway, Sweden, Finland and Denmark; and (ii) Telenor’s activities in the upstream market for the provision of satellite transponder capacity and the JV’s activities in the downstream markets for the retail supply of AV services.

(97)   Furthermore, both Notifying Parties will remain independently active in a number of the same markets as the JV, notably: (i) the retail supply of AV services in Norway, Sweden and Finland, and (ii) under the alternate scenario, in which Telenor and the Norwegian state are considered part of the same economic unit, the markets for the retail supply of AV services and the wholesale supply of TV channels in Norway.

(98)   Each of these potential effects is discussed in turn in the following sections. After setting out the market shares in the relevant markets and possible sub-segments (section  6.2),  the  Commission  will  first  assess  the  potential  horizontal   non-coordinated effects stemming from the Transaction (section 6.3). Then the Commission will assess the potential non-horizontal effects stemming from the Transaction (section 6.4). Finally, the Commission will assess the potential cooperative effects of the Transaction (section 6.5).

6.2.       Market shares

(99)   According to the Horizontal Merger Guidelines and the Non-Horizontal Merger Guidelines,104 in the assessment of the effects of a merger, market shares constitute a useful first indication of the structure of the markets at stake and of the competitive importance of the relevant market players.

6.2.1.          TV value chain and fixed broadband services

6.2.1.1.     Norway

(A)    Wholesale supply of TV channels

(100)   Table 1, reproduced below, shows the market shares of NENT and its main competitors in the market for the wholesale supply of TV channels in Norway (based on 2018 data) by share of viewing. NENT’s market share (based on 2018 data) was respectively [5-10]% for the wholesale supply of combined FTA/pay TV channels, and [10-20]% for the wholesale supply of pay TV channels and [10-20]% for the wholesale supply of basic pay TV channels, and [20-30]% for the wholesale supply of premium pay TV channels, and [20-30]% for the wholesale supply of premium pay TV sports channels, and [30-40]% for the wholesale supply of premium pay TV non-sports channels.

Table 1: Market shares in 2018 in the market for the wholesale supply of TV channels by share of viewing

Source: Form CO, Annex 68.

(101)   Table 2, reproduced below, shows the market shares of NENT and its main competitors in the market for the wholesale supply of TV channels in Norway (based on 2018 data) by value. NENT’s market share in 2018 was respectively [10-20]% for the wholesale supply of pay TV channels and [5-10]% for the wholesale supply of basic pay TV channels, and [30-40]% for the wholesale supply of premium pay TV channels, and [40-50]% for the wholesale supply of premium pay TV sports channels, and [20-30]% for the wholesale supply of premium pay TV non-sports channels.

Table 2: Market shares in 2018 in the market for the wholesale supply of TV channels by value

Source: Form CO, Annex 68.

(B)  Retail supply of AV services

(102)   Table 3 reproduced below presents the market shares of the Parties in the market for the retail supply of AV services, and any possible sub-segment. The JV will hold a market share of [10-20]% by value in the Norwegian market for the retail supply of AV services (based on 2018 data) and below 30% in all market segments except for the market for the supply of premium pay-TV retail AV services, excluding non-linear OTT providers and the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players. The  Parties will hold a market share of [40-50]% by value in the Norwegian market for the retail supply of AV services (based on 2018 data).

Table 3: Market shares in 2018 in the market for the retail supply of AV services by revenue

Source: Form CO, Annex 12.

(103)   Tables 4 and 5, reproduced below, shows the market shares of the JV and its main competitors in the market for the retail supply of AV services and possible sub- segments by subscribers. The JV would have even a more limited market position with a market share of approximately [10-20]%. The Parties would have a combined market share of [20-30]%.

Table 4: Market shares in 2018 in the market for the retail supply of AV services by subscribers

Source: Form CO, Annex 12.

(104)   The JV’s market position would not significantly differ in a market segment for the retail supply of premium pay AV services where it will have a combined market share of approximately [10-20]% in the premium pay market segment excluding non-linear OTT services, such as Netflix. The Parties’ combined  market share will also be similar and of approximately [20-30]%.

Table 5: Market shares in 2018 in the market for the retail supply of AV services by subscribers 

Source: Form CO, Annex 12.

(105)   Table 6 reproduced below presents the market shares of the Parties in the market for the retail supply of AV services, sub-segmenting the SDUs and MDUs market segment by basic and premium market segment by revenue. The JV will have a higher market position of [40-50]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players. The Parties will have a higher market position of [50-60]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players.

Table 6: Market shares in 2018 in the market for the retail supply of AV services for MDUs and SDUs segmented by basic and premium by revenue

Source: RFI 16, Annex 1.

(106)   Table 7 reproduced below presents the market shares of the Parties in the market for the retail supply of AV services, sub-segmenting the SDUs and MDUs market segment by basic and premium market segment by revenue. The JV will have a higher market position of [20-30]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players. The Parties will have a higher market position of [20-30]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players.

Table 7: Market shares in 2018 in the market for the retail supply of AV services for MDUs and SDUs segmented by basic and premium by subscribers

Source: RFI 16, Annex 1.

6.2.1.2.     Sweden

(A)    Wholesale supply of TV channels

(107)   Table 8, reproduced below, shows the market shares of NENT and its main competitors in the market for the wholesale supply of TV channels in Sweden (based on 2018 data) by share of viewing. NENT’s market share (based on 2018 data) was respectively [10-20]% for the wholesale supply of combined FTA/pay TV channels, and [20-30]% for the wholesale supply of pay TV channels and [10-20]% for the wholesale supply of basic pay TV channels, an [50-60]% for the wholesale supply of premium pay TV channels, and [50-60]% for the wholesale supply of premium pay TV sports channels, and [50-60]% for the wholesale supply of premium pay TV non-sports channels.

Table 8: Market shares in 2018 in the market for the wholesale supply of TV channels by share of viewing

Source: Form CO, Annex 68.

(108)   Table 9, reproduced below, shows the market shares of NENT and its main competitors in the market for the wholesale supply of TV channels in Sweden (based on 2018 data) by value. NENT’s market share (based on 2018 data) was respectively [20-30]% for the wholesale supply of pay TV channels and [10-20]% for the wholesale supply of basic pay TV channels, and [50-60]% for the wholesale supply of premium pay TV channels, and [50-60]% for the wholesale supply of premium pay TV sports channels, and [40-50]% for the wholesale supply of premium pay TV non-sports channels.

Table 9: Market shares in 2018 in the market for the wholesale supply of TV channels by value 

Source: Form CO, Annex 68.

(B)   Retail supply of AV services

(109)   Table 10, reproduced below, presents the market shares of the Parties in the market for the retail supply of AV services, and any possible sub-segment. The JV will hold a market share of [20-30]% by value in the Swedish market for the retail supply of AV services (based on 2018 data) and below 30% in all market segments except for the market for the supply of premium pay-TV retail AV services, excluding non-linear OTT providers as well as market for the supply of pay-TV retail AV service, excluding non-linear OTT providers as well as the supply of pay-TV retail premium AV services for SDUs, excluding non-linear OTT providers. The Parties will hold a market share of [30-40]% by value in the Swedish market for the retail supply of AV services (based on 2018 data).

Table 10: Market shares in 2018 in the market for the retail supply of AV services by revenue

Source: Form CO, Annex 12.

(110)   Tables 11 and 12, reproduced below, shows the market shares of the JV and its main competitors in the market for the retail supply of AV services and possible sub-segments by subscribers. The JV would have even a more limited market position with a market share of approximately [5-10]%. The Parties would have a combined market share of [10-20]%.

Table 11: Market shares in 2018 in the market for the retail supply of AV services by subscribers 

Source: Form CO, Annex 12.

(111)   The JV’s market position would not significantly differ in a market segment for the retail supply of premium pay AV services where it will have a combined market share of approximately [10-20]% in the premium pay market segment excluding non-linear OTT services, such as Netflix. The Parties’ combined  market share will also be similar and of approximately [20-30]%.

Table 12: Market shares in 2018 in the market for the retail supply of AV services by subscribers

Source: Form CO, Annex 12.

(112)   Table 13 reproduced below presents the market shares of the Parties in the market for the retail supply of AV services, sub-segmenting the SDUs and MDUs market segment by basic and premium market segment by revenue. The JV will have a higher market position of [30-40]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players. The Parties will have a higher market position of [40-50]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players.

Table 13: Market shares in 2018 in the market for the retail supply of AV services for MDUs and SDUs segmented by basic and premium by revenue

Source: RFI 16, Annex 1.

(113)   Table 14 reproduced below presents the market shares of the Parties in the market for the retail supply of AV services, sub-segmenting the SDUs and MDUs market segment by basic and premium market segment by subscribers. The JV will have a higher market position of [20-30]% in the market for the retail supply of basic AV services for SDUs, excluding non-linear OTT players. The Parties will have a higher market position of [30-40]% in the market for the retail supply of basic AV services for SDUs, excluding non-linear OTT players.

Table 14: Market shares in 2018 in the market for the retail supply of AV services for MDUs and SDUs segmented by basic and premium by subscribers

Source: RFI 16, Annex 1.

(C)  Retail supply of fixed internet access services

(114)   NENT is also active in the market for the retail supply of fixed internet access services in Sweden. In such market, based on 2018 data, Telia is the market  leader with a market share of [30-40]% followed by Tele2 and Telenor with market shares of respectively [20-30]% and [10-20]%. Viasat has a limited  market share of [0-5]%.

(115)   In the narrower market segment for the supply of fixed internet access services to private customers, based on 2018 data, Telia is the market leader with a market share of [30-40]% followed by Tele2 and Telenor with market shares of respectively [20-30]% and [10-20]%. Viasat has a limited market share of [0-5]%.105

6.2.1.3.     Finland

(A)    Wholesale supply of TV channels

(116)   Table 15, reproduced below, shows the market shares of NENT and its main competitors in the market for the wholesale supply of TV channels in Finland (based on 2018 data) by share of viewing. NENT’s market share (based on 2018 data) was respectively below [0-5]% for the wholesale supply of combined FTA/pay TV channels, and below [30-40]% for the wholesale supply of premium pay TV channels as well as for the wholesale supply of premium pay TV sports channels.

Table 15: Market shares in 2018 in the market for the wholesale supply of TV channels by share of viewing 

Source: Form CO, Annex 68.

(117)   Table 16, reproduced below, shows the market shares of NENT and its main competitors in the market for the wholesale supply of TV channels in Finland (based on 2018 data) by value. NENT’s market share (based on 2018 data) was [30-40]% for the wholesale supply of premium pay TV channels, and [30-40]% for the wholesale supply of premium pay TV sports channels, and [30-40]% for the wholesale supply of premium pay TV non-sports channels.

Table 16: Market shares in 2018 in the market for the wholesale supply of TV channels by value

Source: Form CO, Annex 68.

(B)   Retail supply of AV services

(118)   Table 17, reproduced below, presents the market shares of the Parties in the market for the retail supply of AV services, and any possible sub-segment. The JV will hold a market share of [5-10]% by value in the Finnish market for the retail supply of AV services (based on 2018 data) and below 30% in all market segments except for the market for the supply of pay-TV for SDU, excluding non- linear OTT providers.106 The Parties will hold a market share of [20-30]% by value in the Finnish market for the retail supply of AV services (based on 2018 data).

Table 17: Market shares in 2018 in the market for the retail supply of AV services by revenue

Source: Form CO, Annex 12.

(119)   Tables 18 and 19 reproduced below, shows the market shares of the JV and its main competitors in the market for the retail supply of AV services and possible sub-segments by subscribers. The JV would have even a more limited market position with a market share of approximately [0-5]%. The Parties would have a combined market share of [10-20]%.

Table 18: Market shares in 2018 in the market for the retail supply of AV services by subscribers

Source: Form CO, Annex 12.

(120)   The JV’s market position would not significantly differ in a market segment for the retail supply of premium pay AV services where it will have a combined market share of approximately [0-5]% in the premium pay market segment excluding non-linear OTT services, such as Netflix. The Parties’ combined  market share will also be similar and of approximately [10-20]%.

Table 19: Market shares in 2018 in the market for the retail supply of AV services by subscribers

Source: Form CO, Annex 12.

(121)   Table 20 reproduced below presents the market shares of the Parties in the market for the retail supply of AV services, sub-segmenting the SDUs and MDUs market segment by basic and premium market segment by revenue. The JV will have a higher market position of [20-30]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players. The Parties will have a higher market position of [20-30]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players.

Table 20: Market shares in 2018 in the market for the retail supply of AV services for MDUs and SDUs segmented by basic and premium by revenue

Source: RFI 16, Annex 1.

(122)   Table 21 reproduced below presents the market shares of the Parties in the market for the retail supply of AV services, sub-segmenting the SDUs and MDUs market segment by basic and premium market segment by subscribers. The JV will have a higher market position of [10-20]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players. The Parties, in the markets where Viasat’s and Canal Digital’s overlap, will have a higher market position of [20-30]% in the market for the retail supply of basic AV services for SDUs, excluding non-linear OTT players.

Table 21: Market shares in 2018 in the market for the retail supply of AV services for MDUs and SDUs segmented by basic and premium by subscribers

Source: RFI 16, Annex 1.

6.2.1.4.     Denmark

(A)     Wholesale supply of TV channels

(123)   Table 22, reproduced below, shows the market shares of NENT and its main competitors in the market for the wholesale supply of TV channels in Denmark (based on 2018 data) by share of viewing. NENT’s market share (based on 2018 data) was respectively [10-20]% for the wholesale supply of combined FTA/pay TV channels, and [10-20]% for the wholesale supply of pay TV channels and [10-20]% for the wholesale supply of basic pay TV channels, and [20-30]% for the wholesale supply of basic pay TV sports channels.

Table 22: Market shares in 2018 in the market for the wholesale supply of TV channels by share of viewing

Source: Form CO, Annex 68.

(124)   Table 23 reproduced below, shows the market shares of NENT and its main competitors in the market for the wholesale supply of TV channels in Denmark (based on 2018 data) by value. NENT’s market share (based on 2018 data) was respectively [30-40]% for the wholesale supply of pay TV channels and [30-40]% for the wholesale supply of basic pay TV channels, and [50-60]% for the wholesale supply of basic pay TV sports channels, and [40-50]% for the  wholesale supply of premium pay TV non-sports channels.

Table 23: Market shares in 2018 in the market for the wholesale supply of TV channels by value

Source: Form CO, Annex 68.

(B)  Retail supply of AV services

(125)   Table 24 reproduced below, presents the market shares of the Parties in the  market for the retail supply of AV services, and any possible sub-segment. The JV will hold a market share of [5-10]% by value in the Danish market for the retail supply of AV services (based on 2018 data) and below 30% in all market segments. The Parties will hold a market share of [10-20]% by value in the Danish market for the retail supply of AV services (based on 2018 data).

Table 24: Market shares in 2018 in the market for the retail supply of AV services by revenue

Source: Form CO, Annex 12.

(126)   Tables 25 and 26 reproduced below, shows the market shares of the JV and its main competitors in the market for the retail supply of AV services and possible sub-segments by subscribers. The JV would have even a more limited market position with a market share of approximately [0-5]%. The Parties would have a combined market share of [5-10]%.

Table 25: Market shares in 2018 in the market for the retail supply of AV services by subscribers

Source: Form CO, Annex 12.

(127)   The JV’s market position would not significantly differ in a market segment for the retail supply of premium pay AV services where it will have a combined market share of approximately [10-20]% in the premium pay market segment excluding non-linear OTT services, such as Netflix. The Parties’ combined  market share will also be similar and of approximately [10-20]%.

Table 26: Market shares in 2018 in the market for the retail supply of AV services by subscribers

Source: Form CO, Annex 12.

(128)   Table 27 reproduced below presents the market shares of the Parties in the market for the retail supply of AV services, sub-segmenting the SDUs and MDUs market segment by basic and premium market segment by revenue. The JV will have a higher market position of [20-30]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players. The Parties will have a higher market position of [20-30]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players.

Table 27: Market shares in 2018 in the market for the retail supply of AV services for MDUs and SDUs segmented by basic and premium by revenue

Source: RFI 16, Annex 1.

(129)   Table 28 reproduced below presents the market shares of the Parties in the market for the retail supply of AV services, sub-segmenting the SDUs and MDUs market segment by basic and premium market segment by subscribers. The JV will have a higher market position of [20-30]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players. The Parties will have a higher market position of [20-30]% in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players.

Table 28: Market shares in 2018 in the market for the retail supply of AV services for MDUs and SDUs segmented by basic and premium by subscribers

Source: RFI 16, Annex 1.

6.2.2.        Satellite transponder capacity

6.2.2.1.     Nordic region

(130)   Table 29 shows TS’ and its main competitors’ market shares in the supply of satellite transponder capacity from all orbital positions in the Nordic region in 2018 by revenue. TS had a market share of [60-70]% while SES had a market share of [30-40]%. Their market shares were very similar in a market limited to broadcasting (TS: [70-80]%, SES: [20-30]%). TS’ captive sales to Canal Digital represented about […]% of its total sales and more than […]% of its sales for broadcasting purposes.

Table 29: Market shares in 2018 in the market for the supply of satellite transponder capacity

Source: Form CO, Table 222.

(131)   If, instead, the market for satellite transponder capacity were to be segmented by orbital position, TS and SES would have a market share of [90-100]% at 1°W and 5°E, respectively.

6.2.2.2.     Nordic and CEE region

(132)   Table 30 shows TS’ and its main competitors’ market shares in the supply of satellite transponder capacity from all orbital positions in the Nordic and CEE region in 2018 by revenue. TS had a market share of [10-20]% while SES had a market share of [20-30]% (from several orbital positions). Their market shares were slightly  higher  in  a  market  limited  to  broadcasting  (TS:  [10-20]%,  SES: [20-30]%). TS’ captive sales to Canal Digital represented about […]% of its total sales and close to […]% of its sales for broadcasting purposes.

(133)   SES supplies the CEE region also from other orbital positions than 5°E, namely from 19.2°E, 23.5°E and 31.5°E. Other satellite operators active in the CEE  region are Intelsat (1°W, 45.1°E and 85°E), Eutelsat (13°E, 16°E and 36.0°E), Hellas Sat (39.0°E) and Amos (4°W).

Table 30: Market shares in 2018 in the market for the supply of satellite transponder capacity

Source: Form CO, Table 225 and Notifying Parties’ reply to RFI 15, question 1. Note that the table does not include all satellite operators and DTH platforms in CEE, in particular it does not include some local operators active in Russia,, as the Notifying Parties do not have a comprehensive view on satellite operators active.

(134)   If, instead, the market for satellite transponder capacity were to be segmented by orbital position, TS would have an overall market share of about [70-80]% and of close to [90-100]% for broadcasting purposes at 1°W, Intelsat being the other competitor active at 1°W. SES would have a market share of [90-100]% at 5°E.

6.3. Horizontal assessment

6.3.1.    Introduction

(135)   A merger giving rise to significant impediment of effective competition may do so as a result of the creation or strengthening of a dominant position in the relevant markets. Moreover, mergers in oligopolistic markets involving the elimination of important constraints that the parties previously exerted on each other, together with a reduction of competitive pressure on the remaining competitors, may also result in a significant impediment to effective competition, even in the absence of dominance.107

(136)   In fact, the Horizontal Merger Guidelines describe horizontal non-coordinated effects as follows: “A merger may significantly impede effective competition in a market by removing important competitive constraints on one or more sellers who consequently have increased market power. The most direct effect of the merger will be the loss of competition between the merging firms. For example, if prior to the merger one of the merging firms had raised its price, it would have lost some sales to the other merging firm. The merger removes this particular constraint. Non-merging firms in the same market can also benefit from the reduction of competitive pressure that results from the merger, since the merging firms’ price increase may switch some demand to the rival firms, which, in turn, may find it profitable to increase their prices. The reduction in these competitive constraints could lead to significant price increases in the relevant market.”108

(137)   The Horizontal Merger Guidelines list a number of factors which may influence whether or not significant horizontal non-coordinated effects are likely to result from a merger, such as the large market shares of the merging firms, the fact that the merging firms are close competitors, the limited possibilities for customers to switch suppliers, or the fact that the merger would eliminate an important competitive force.109 That list of factors applies equally regardless of whether a merger would create or strengthen a dominant position, or would otherwise significantly impede effective competition due to non-coordinated effects. Furthermore, not all of these factors need to be present to make significant non- coordinated effects likely and it is not an exhaustive list.110

(138)   In addition, the Horizontal Merger Guidelines describe a number of  factors, which could counteract the harmful effects of the merger on competition, including the likelihood of buyer power, the entry of new competitors on the market, and efficiencies.

6.3.2. Horizontal non-coordinated effects in the retail supply of AV services in Norway

(139)   Telenor is active in the retail supply of AV services in Norway via DTH through its wholly owned subsidiary, Canal Digital (which will be contributed to the JV), and via cable and IPTV through the Telenor brand (which will not be contributed to the JV). NENT is active in the retail supply of AV services in Norway via DTH and IPTV through its wholly owned business, Viasat (which will be contributed  to the JV), and OTT through Viaplay (which will not be contributed to the JV).

(140)   In Section 6.1.1., the Commission considered that the question whether Telenor and NRK belong to the same economic unit or whether they make up separate economic units with an independent power of decision can be left open as the Transaction does not raise serious doubts as to its compatibility with the internal market regardless of the answer to this question.111 In particular, as regard to a potential horizontal overlap among NRK112, the Parties and the JV, the Commission considers that the Transaction does not raise serious doubts as to its compatibility with the internal market for the following reasons. First, the increment brought by the Transaction would be limited to Viasat’s customer base of […] subscribers (approximately [0-5]% of subscribers in the Norwegian  market for the retail supply of linear AV services). Second, the Transaction would lead to a reduction of influence over Canal Digital’s DTH business which will be jointly owned with NENT. Third, several respondents to the market investigation indicated that Canal Digital and RiksTV were closely competing pre- Transaction113 and the Transaction would not change the competitive dynamics between Canal Digital and RiksTV. Fourth, RiksTV is jointly owned by TV2,  part of the Egmont group, which would have a different incentive  and  may oppose strategies that may favour Telenor or the JV. Finally, the Transaction would have a limited impact on the trend of switching to fiber-based technology happening in the Norwegian market, presented in Section 6.4.2.1.B.b) where providers of retail AV services through fiber, such as Altibox and Telia, are gaining subscribers vis-à-vis providers of retail AV services through DTH, as the JV, and DTT, as RiksTV.114.

6.3.2.1.     The Notifying Parties’ view

(141)   The Notifying Parties submit that the Transaction does not raise competition concerns on the basis of any plausible definition of the relevant product market in Norway for the reasons set out below.

(142)   First, the Notifying Parties claim that the distribution of pay TV services over DTH is in irreversible structural decline in Norway and across the Nordic region. This would be illustrated by both Telenor's and NENT's DTH platforms losing a substantial number of Norwegian subscribers to competitors which distribute services over other platforms.

(143)   Second, the Notifying Parties submit that Viasat has a limited presence in TV distribution in Norway. It would hold a market share in the overall market for retail AV services of less than [0-5]% (by subscribers). In addition, the Transaction would result in a MHHI of 1,827 with a merger increment of 12, and by subscribers the JV would hold a share in excess of 20% only in the possible market for the retail supply of pay AV services for SDUs (excluding non-linear OTT services).

(144)   Third, the Notifying Parties argue that the JV will face fierce competition from a wide range of AV distributors active in Norway across multiple distribution platforms, including Telenor, Telia/Get, RiksTV, Lyse/Altibox, and a plethora of linear and non-linear OTT services including Netflix, HBO Nordic and TV broadcasters' own services, such as TV2 Norge 's Sumo and Discovery's Dplay.

(145)   Fourth, the Notifying Parties stress that, by divesting one-third shareholding interest in the Norwegian DTT pay TV operator, RiksTV, to NRK and TV2, Telenor reduced its overall presence in the retail market in Norway.

(146)   Fifth, the Notifying Parties note that the roll-out of high-speed fibre networks is continuing at pace across Norway, and that all Norwegian households should  have access to high-speed broadband services in 2023. The Notifying Parties note add that traditional TV viewership continues to decrease as video consumption shifts to streaming services and online platforms.115

6.3.2.2.     The Commission’s assessment

(147)   The Commission considers that the Transaction does not give rise to serious doubts as to its compatibility with the internal market as a result of horizontal effects on the market for the retail supply of AV content in Norway, or any possible narrower affected markets, for the following reasons.

(148)   First, Canal Digital and Viasat, which mainly offer retail AV services through DTH distribution, are in continued decline in Norway. Indeed, Canal Digital and Viasat’s DTH customer bases have respectively decreased by […]% and […]% between January 2016 and July 2019,116 while the number of subscribers of retail AV services through fibre has increased by 30% between 2016 and 2018. Over  the same time period, the number of subscribers receiving AV services via cable, DTH and DTT in Norway has decreased by 17%, 11% and 7%, respectively.117 These trends suggest a shift towards retail AV services over fibre which would likely continue post-Transaction, and confirm the structural decline of DTH distribution in Norway.

(149)   Second, despite the Parties having a relatively strong market position when looking at their 2018 market shares by value, the Commission considers that the factors detailed below limit their market position.118

Based  on  2018  figures,  the  Parties  will  hold  a  market  share  by  value   of (i)   [40-50]% in the market for the retail supply of pay AV services (JV: [10-20]%, Telenor: [10-20]%, NENT: [0-5]%), and [40-50]% when excluding non-linear OTT services (JV: [20-30]%, Telenor: [20-30]%), (ii) [40-50]% in the market for the retail supply of basic pay TV services (JV: [10-20]%, Telenor: [20-30]%, NENT:    [0-5]%),    and    [40-50]%    excluding    non-linear    OTT     providers (JV: [10-20]%, Telenor: [20-30]%), (iii) [30-40]% in the market for the retail supply of premium  pay  TV  services  (JV:  [20-30]%,  Telenor:  [5-10]%, NENT: [0-5]%),   and    [40-50]%    excluding    non-linear    OTT    providers (JV: [30-40]%, Telenor: [10-20]%), (iv) [40-50]% in the market for the retail supply of pay AV services for MDUs (JV: [10-20]%,  Telenor:  [20-30]%,  NENT: [0-5]%),  and  [40-50]%  when  excluding  non-linear  OTT   services  (JV: [10-20]%, Telenor [30-40]%), (v) [40-50]% in the market for the retail supply of pay AV services for SDUs (JV:  [20-30]%,  Telenor:  [10-20]%,  NENT: [0-5]%),  and  [40-50]%  when  excluding  non-linear  OTT   services  (JV: [20-30]%, Telenor [10-20]%), (vi) [50-60]% in the market for the retail supply of basic pay AV services to MDUs (JV: [10-20]%, Telenor: [30-40]%, NENT:  [0-5]%),  and  [50-60]%  when  excluding  non-linear  OTT  services  (JV: [10-20]%, Telenor: [30-40]%), (vii) [40-50]% in the market for the retail supply of basic pay AV services to SDUs (JV: [20-30]%, Telenor: [10-20]%, NENT:  [0-5]%),  and  [40-50]%  when  excluding  non-linear  OTT  services  (JV: [20-30]%, Telenor: [10-20]%), (viii) [20-30]% in the market for the retail supply of premium pay AV services to MDUs (JV: [5-10]%, Telenor: [10-20]%, NENT:  [0-5]%),  and  [30-40]%  when  excluding  non-linear  OTT  services  (JV: [10-20]%, Telenor: [20-30]%), and (ix) [30-40]% in the market for the retail supply of premium pay AV services to SDUs (JV: [20-30]%, Telenor: [5-10]%, NENT:  [0-5]%),  and  [50-60]%  when  excluding  non-linear  OTT  services  (JV: [40-50]%, Telenor: [5-10]%).

(150)   By subscribers, the Parties would generally have a more modest market position, when looking at 2018 market shares by volume in the following possible affected markets: (i) [20-30]% in the overall market for the retail supply of AV services (JV: [10-20]%, Telenor, [10-20]%, NENT: [5-10]%), and [30-40]% when excluding   non-linear   OTT   services   (JV:   [10-20]%,   Telenor:      [10-20]%), (ii)  [20-30]%  in  the  market  for  the  retail   supply   of   pay   AV   services   (JV: [10-20]%, Telenor: [10-20]%, NENT: [5-10]%), and [30-40]% when excluding   non-linear   OTT   services   (JV:   [10-20]%,   Telenor:      [20-30]%), (iii)  [40-50]% in the market for the  retail  supply  of  basic  pay  TV  services  (JV: [10-20]%, Telenor: [20-30]%, NENT: [10-20]%), and [40-50]% excluding non-linear OTT providers (JV: [10-20]%, Telenor: [20-30]%), (iv) [10-20]% in the market for the retail supply of premium pay TV services (JV: [5-10]%, Telenor: [0-5]%, NENT: [0-5]%), and [20-30]% excluding non-linear OTT providers (JV: [10-20]%, Telenor: [5-10]%), (v) [20-30]% in the market for the retail supply of pay AV services for MDUs (JV: [0-5]%, Telenor: [10-20]%, NENT: [5-10]%), and  [30-40]%  when  excluding  non-linear  OTT  services  (JV: [5-10]%, Telenor [30-40]%), (vi) [20-30]% in the market for the retail  supply of pay AV services for  SDUs  (JV:  [10-20]%,  Telenor:  [5-10]%,  NENT: [5-10]%),  and  [30-40]%  when  excluding  non-linear  OTT  services (JV: [20-30]%, Telenor [10-20]%), (vii) [50-60]% in the market for the retail supply of basic pay AV services to MDUs (JV: [5-10]%, Telenor: [30-40]%, NENT: [10-20]%), and [40-50]% when  excluding  non-linear  OTT  services  (JV: [5-10]%, Telenor: [40-50]%), (viii) [40-50]% in the market for the retail supply of basic pay AV services to SDUs (JV: [20-30]%, Telenor: [10-20]%, NENT: [10-20]%), and [40-50]% when  excluding  non-linear  OTT  services  (JV: [20-30]%, Telenor: [10-20]%), (ix) [5-10]% in the market for the retail supply of premium pay AV services to MDUs (JV: [0-5]%, Telenor: [0-5]%, NENT:   [0-5]%),   and   [10-20]%   when   excluding   non-linear   OTT  services (JV: [0-5]%, Telenor: [10-20]%), and (x) [10-20]% in the market for the retail supply of premium pay AV services to SDUs (JV: [5-10]%, Telenor: [0-5]%, NENT:  [0-5]%),  and  [20-30]%  when  excluding  non-linear  OTT  services  (JV: [20-30]%, Telenor: [0-5]%).

(151)   Considering the hypothetical market including non-linear OTT services, OTT players would exercise a competitive constraint on the Parties and the JV. In this respect, it is notable that in Norway there would remain post-Transaction numerous OTT players who would constrain the JV, namely Netflix and HBO Nordic as well as new entrants Disney+ whose OTT service is expected to launch in the second half of 2020 in the Nordics. Further, the results of the market investigation indicated that in Norway SVOD providers exercise a constraint on retail suppliers of premium pay films and series AV services via traditional platforms. Indeed, one Norwegian market participant noted the decline of linear premium pay films and series TV services due to them being substituted by SVOD services such as HBO.119

(152)   However, even considering the hypothetical market excluding non-linear OTT services, the Transaction would not significantly increase the Parties’ market position. The Commission notes that, in the first place, before the Transaction, Telenor and Canal Digital were already part of the same economic entity with approximately […] subscribers. In the second place, the merger  specific increment is limited to the […] subscribers brought by Viasat, corresponding to a market share of maximum [0-5]% by value and [0-5]% by subscribers.

(153)   Third, the JV would have a limited market position in most of the possible affected markets for the retail supply of AV services in Norway. Based on 2018 figures, the JV will hold a market share by value of (i) [10-20]% in the market for the retail supply of pay AV services, and [20-30]% when excluding non-linear OTT services, (ii) [10-20]% in the market for the retail supply of basic pay AV services, and [10-20]% when excluding non-linear OTT services, (iii) [20-30]%  in the market for the retail supply of premium pay AV services, (iv) [10-20]% in the market for the retail supply of pay AV services for MDUs, and [10-20]% when excluding non-linear OTT services, and (v) [20-30]% in the market for the retail supply of pay AV services for SDUs, and [20-30]% when excluding non- linear OTT services, (vi) [10-20]% in the market for the retail supply of basic pay AV services to MDUs, and [10-20]% when excluding non-linear OTT services, (vii) [20-30]% in the market for the retail supply of basic pay AV services to SDUs, and [20-30]% when excluding non-linear OTT services, (viii) [5-10]% in the market for the retail supply of premium pay AV services to MDUs, and [10-20]% when excluding non-linear OTT services, and (ix) [20-30]% in the market for the retail supply of premium pay AV services to SDUs.

(154)   By subscribers, the JV would generally have more limited 2018 market shares. Based on 2018 figures, the JV will hold a market share by volume of (i) [10-20]% in the overall market for the retail supply of AV services, and [10-20]% when excluding non-linear OTT services, (ii) [10-20]% in the market for the retail supply of pay AV services, and [10-20]% when excluding non-linear OTT services, (iii) [10-20]% in the market for the retail supply of basic pay AV services, and [10-20]% when excluding non-linear OTT services, (iv) [5-10]%  in the market for the retail supply of premium pay AV services, and [10-20]% when excluding non-linear OTT services, (v) [0-5]% in the market for the retail supply of pay AV services for MDUs, and [5-10]% when excluding non-linear OTT services, and (vi) [10-20]% in the market for the retail supply of pay AV services for SDUs, and [20-30]% when excluding non-linear OTT services, (vii) [0-5]% in the market for the retail supply of basic pay AV services to MDUs , and [5-10]% when excluding non-linear OTT services, (viii) [20-30]% in the market for the retail supply of basic pay AV services to SDUs, and [20-30]% when excluding non-linear OTT services, (ix) [0-5]% in the market for the retail supply of premium pay AV services to MDUs, and [0-5]% when excluding non-linear OTT services, and (x) [5-10]% in the market for the retail supply of premium pay AV services to SDUs, and [20-30]% when excluding non-linear OTT services.

(155)   Fourth, several alternative suppliers of retail AV services, in particular Telia, RiksTV and Altibox, would remain active in any possible affected markets for the retail supply of AV services in Norway. In the market for the retail supply of pay AV services, they would have a 2018 market share by value of [10-20]%, [10-20]% and [10-20]%, respectively.120 Telia is a well-established telecommunications and media company with a strong presence in the Nordic region. A majority of respondents to the market investigation in Norway considered that sufficient competing providers will continue to exert a constraint on the JV post-Transaction.121

(156)   Fifth, the trend towards increased fibre and cable distribution has coincided with an observable increase in the coverage of high speed broadband download speeds, thereby enabling high quality OTT viewing in Norway. As shown in Figure 4 below, areas serviced by broadband download speeds of over 10 Mbps have increased from 81% in 2018 to 87% in 2019. This improved infrastructural framework for the provision of IPTV and OTT services means that IPTV and OTT players are likely to exert a growing competitive constraint on the JV in the coming years. In that respect, one Norwegian market participant noted that the SVOD market is forecasted to grow by 13% annually over the 2019-2023 period (Source: PwC Global Entertainment and Media Outlook 2019-2023).122

6.3.3.   Horizontal non-coordinated effects in the retail supply of AV services in Sweden

(157)   Telenor is active in the retail supply of AV services in Sweden via DTH through its wholly owned subsidiary, Canal Digital (which will be contributed to the JV) and via cable and IPTV through the Telenor brand (which will not be contributed to the JV). NENT is active in the retail supply of AV services in Sweden via DTH and IPTV through its wholly owned business, Viasat (which will be contributed  to the JV) and OTT through Viaplay (which will not be contributed to the JV).

6.3.3.1.     The Notifying Parties’ view

(158)   The Notifying Parties submit that the Transaction does not raise competition concerns on the basis of any plausible definition of the relevant product market in Sweden for the reasons set out below.

(159)   First, the Notifying Parties claim that the distribution of pay TV services over DTH is in irreversible structural decline in Sweden and across the Nordic region. This would be illustrated by both Telenor's and NENT's DTH platforms losing a substantial number of Swedish subscribers to competitors which distribute services over other platforms.

(160)   Second, the Notifying Parties submit that both Canal Digital and Viasat have a limited presence in TV distribution in Sweden, each with market shares in the overall market for retail AV services of less than [5-10]% (by subscribers). In addition, the Transaction would result in a MHHI of 2,265 with a merger increment of 144, and by subscribers the JV would hold a share in excess of 20% only in the possible market for the retail supply of pay AV services for SDUs (excluding non-linear OTT services).

(161)   Third, the Notifying Parties argue that the JV will face fierce competition from a wide range of AV distributors active in Sweden across multiple distribution platforms, including Tele2/Com Hem, Telia, Telenor, Sappa and a plethora of linear and non-linear OTT services including Netflix, HBO Nordic and TV broadcasters' own services, such as Discovery's Dplay.

(162)   Fourth, the Notifying Parties note that the roll-out of high-speed fibre networks is continuing at pace across Sweden, and has reached 77% of Swedish households at the end of 2018, up from approximately 60% in 2014. They expect this trend to continue for at least two to three years. The Notifying Parties note that traditional TV viewership continues to decrease as video consumption shifts to streaming services and online platforms, including via mobile networks.123

6.3.3.2.     The Commission’s assessment

(163)   The Commission considers that the Transaction does not give rise to serious doubts as to its compatibility with the internal market as a result of horizontal effects on the market for the retail supply of AV content in Sweden, or any possible narrower affected markets, for the following reasons.

(164)   First, Canal Digital and Viasat, which mainly offer retail AV services through DTH distribution, are in continued decline in Sweden. Indeed, Canal Digital and Viasat’s DTH customer bases have respectively decreased by […]% and […]% between January 2016 and July 2019,124 while the number of subscribers of retail AV services through fibre has increased by 33% between 2016 and 2018. Over  the same time period, the number of subscribers receiving AV services via cable, DTH and DTT in Sweden has decreased by 10%, 11% and 23%, respectively.125 These trends suggest a shift towards retail AV services over fibre which would likely continue post-Transaction, and confirm the structural decline of DTH distribution in Sweden.

(165)   Second, the Parties would have a moderate to high market position in most of the possible affected markets for the retail supply of AV services in Sweden.126 Based on 2018 figures, the Parties will hold a market share by value of (i) [30-40]% in the  market  for  the  retail  supply  of  pay  AV  services  (JV:  [20-30]%,  Telenor: [5-10]%, Viaplay: [0-5]%) , and [30-40]% when excluding non-linear OTT services (JV: [30-40]%, Telenor: [5-10]%) (ii) [30-40]% in the market for the retail supply of basic pay AV services (JV: [20-30]%, Telenor: [10-20]%, Viaplay: [5-10]%), and [30-40]% when  excluding  non-linear  OTT  services  (JV: [20-30]%, Telenor: [10-20]%), (iii) [20-30]% in the market for the retail supply of premium  pay  AV  services  (JV:  [20-30]%,  Telenor  [0-5]%,  Viaplay: [0-5]%), and  [30-40]%  when  excluding  non-linear  OTT  services  (JV: [30-40]%, Telenor: [5-10]%) (iv) [30-40]% in the market for the retail  supply of pay AV services for SDUs (JV: [20-30]%; [5-10]%; [5-10]%), and [40-50]%  when  excluding  non-linear  OTT  services   (JV:   [30-40]%,   Telenor: [5-10]%). Only in the possible market for the retail supply of pay AV services to MDUs are the shares more moderate, at [20-30]% (JV: [10-20]%; Telenor: [10-20]%).127 Based on market shares shown in Table 14 by subscribers, the Parties would have a combined market position above 20% also in the market for (i) the retail supply of AV services for MDUs, irrespective of a segmentation in basic and premium, either including or excluding non-linear OTT players;  and (ii) the retail supply of AV services segmented for SDUs, irrespective of a segmentation in basic and premium, either including or excluding non-linear OTT players. The JV would have a combined market position above 20% exclusively, in the markets of the retail supply of AV services for SDUs, irrespective of a segmentation in basic and premium, either including or excluding non-linear OTT players.

(166)   However, when looking by subscribers, the Parties would have more limited 2018 market shares. Based on 2018 figures, the Parties will hold a market share by volume of (i) [20-30]% in the overall market for the retail supply of AV services excluding    non-linear    OTT    services    (JV:    [10-20]%,    Telenor:  [5-10]%), (ii)            [20-30]% in the market for the  retail  supply  of  basic  pay  AV  services  (JV: [5-10]%, Telenor: [10-20]%, Viaplay: [5-10]%), and [20-30]% when excluding    non-linear    OTT    services    (JV:    [5-10]%,    Telenor:  [10-20]%), (iii)              [20-30]% in the market for the retail supply of premium pay AV services excluding    non-linear    OTT    services    (JV:    [10-20]%,    Telenor:    [0-5]%), (iv)             [20-30]% in the market for the retail supply of AV services for SDUs excluding non-linear OTT services (JV: [20-30]%, Telenor: [5-10]%).128  Based  on market shares shown in Table 14 by subscribers, the Parties would have a combined market position above 20% also in the market segments for (i) the retail supply of basic AV services for SDUs ([30-40]%), (ii) the retail supply of basic AV services for SDUs, excluding non-linear OTT players ([30-40]%), (iii) the retail supply of premium AV services for SDUs, excluding non-linear OTT players ([20-30]%). The JV would have a combined market position above 20% exclusively in the market segments for (i) the retail supply of basic AV services for SDUs, excluding non-linear OTT players ([20-30]%), (iii) the retail supply of premium AV services for SDUs, excluding non-linear OTT players ([20-30]%).

(167)   Considering the hypothetical market including non-linear OTT services, OTT players would exercise a competitive constraint on the Parties and the JV. In this respect, it is notable that in Sweden there would remain post-Transaction numerous OTT players who would constrain the JV, namely Netflix and HBO Nordic as well as new entrants Disney+ whose OTT service is expected to launch in the second half of 2020 in the Nordics. In addition, the market investigation indicated that the share of OTT, as well as IPTV, is growing rapidly in Sweden,  as the share of linear TV watching is decreasing and the share of non-linear watching is increasing.

(168)   However, even considering the hypothetical market excluding non-linear OTT services, the Transaction would not significantly increase the Parties’ market position. In the MDU segment, Viasat was scarcely present with approximately […] subscribers, corresponding to a market share of [0-5]% under the narrowest product market definition of the market for the retail supply of retail AV services for MDUs excluding non-linear. In the SDU segment, the Parties will have a higher combined market share of [30-40]% in the market for the retail supply of AV services for SDUs excluding non-linear OTT services. However, in such market segment alternative providers would remain active including Telia, Tele2 and other providers of retail AV services through fibre. First, similarly to Telenor, Telia and Tele2 are also active in the market for the retail supply of fixed internet access and mobile telecommunications services. Second, as indicated above at paragraph 157, in Sweden there is a trend of switching to fibre-based technology. Such trend is partly driven by the “open fibre” model prevalent in Sweden.129 Open fibre networks reach approximately 1.5 million households in Sweden. Telenor estimates that approximately [60-70]% of the open fibre network is owned by municipalities, approximately [20-30]% by Telia, approximately [10-20]% by IP-Only and approximately [0-5]% of the network by Telenor. Therefore, the Commission considers that alternative operators and technologies to provide retail AV services would remain under the narrowest product market definition.

(169)   Third, several alternative suppliers of retail AV services, in particular Tele2 and Telia, would remain active in any possible affected markets for the retail supply  of AV services in Sweden. In the market for the retail supply of pay AV services, they would have a 2018 market share by value of [20-30]% and [10-20]%, respectively.130 Telia is a well established telecommunications and media company with a strong presence in the Nordic region. A majority of   respondents to the market investigation in Sweden considered that sufficient competing providers will continue to exert a constraint on the JV post-Transaction.131

(170)   Fourth, the trend noted above in paragraph 157 of increasing roll-out of fibre is providing a growing proportion of Swedish households with access to high-speed broadband services that are needed for the quality viewing of OTT services. It is notable that the share of Swedish households that had access to broadband with download speeds in excess of 100 Mbps was 18% in 2018 with less than 0.1% of households with access to download speeds not exceeding 10Mbps.132 There is also an observable increase in OTT subscribers in Sweden, growing from around  3 million in 2015 to around 5 million in 2019.133 This infrastructural framework, with growing fibre services that are making high quality OTT consumption possible, will likely enhance the competitive pressure exerted by OTT players in Sweden in the coming years. Therefore, regardless of the precise product market definition, the competitive pressure exerted by OTT players on the JV will be enhanced in the coming years, exercising an increased constraint on the JV.

6.3.4.            Horizontal non-coordinated effects in the retail supply of AV services in Finland

(171)   Telenor is active in the retail supply of AV services in Finland via DTH through its wholly owned subsidiary, Canal Digital (which will be contributed to the JV), and via cable, IPTV and OTT through its wholly owned subsidiary, DNA (which will not be contributed to the JV). NENT is active in the retail supply of AV services in Finland via DTH through its wholly owned business, Viasat (which will be contributed to the JV), and OTT through Viaplay (which will not be contributed to the JV).

6.3.4.1.     The Notifying Parties’ view

(172)   The Notifying Parties submit that the Transaction does not raise competition concerns on the basis of any plausible definition of the relevant product market in Finland for the reasons set out below.

(173)   First, the Notifying Parties submit that the JV will have a limited presence in TV distribution in Finland, with a market share in the overall market of less than [0-5]% (by subscribers). The overlap between the Parties' contributions to the JV would be de minimis. In addition, the Transaction would result in a MHHI of 2,398 with a merger increment of negative 31 (-31).

(174)   Second, the Notifying Parties argue that the JV will face fierce competition from  a wide range of AV distributors active in Finland across multiple distribution platforms, including Digita, DNA, Telia, Elisa, and a plethora of linear and non- linear OTT services.

(175)   Third, the Notifying Parties submit that (i) the Transaction would not give rise to any affected markets in Finland when considering market shares by subscribers, and (ii) even taking into account market shares by revenue, the JV’s market  share would exceed 20% only in the possible market for the retail supply of pay AV services for SDUs (excluding non-linear OTT services).134

6.3.4.2.     The Commission’s assessment

(176)   The Commission considers that the Transaction does not give rise to serious doubts as to its compatibility with the internal market as a result of horizontal effects on the market for the retail supply of AV content in Finland, or any possible narrower affected markets, for the following reasons.

(177)   First, the Parties would have a modest market position in the following possible affected markets for the retail supply of AV services in Finland.135 Based on 2018 figures, the Parties will hold a market share by value of (i) [20-30]% in the market for the retail supply of pay AV services (JV: [5-10]%, Telenor:  [10-20]%,  NENT: [5-10]%),  and  [20-30]%  when  excluding  non-linear  OTT  services (JV: [10-20]%, Telenor: [10-20]%), (ii) [20-30]% in the market for the retail supply of pay AV services  for  MDUs  (JV:  [0-5]%,  Telenor:  [10-20]%,  NENT: [5-10]%),  and  [20-30]%  when  excluding  non-linear  OTT  services (JV: [0-5]%, Telenor [20-30]%), and (iii) [20-30]% in the market for the retail supply of premium pay AV services to SDUs excluding non-linear OTT services (JV: [20-30]%, Telenor: [0-5]%).

(178)   By subscribers, the Parties would also have a modest market position, when looking at 2018 market shares by volume in the following possible affected markets: (i) [20-30]% in the overall market for the retail supply of AV services excluding    non-linear    OTT    services    (JV:    [0-5]%,    Telenor:    [10-20]%), (ii) [20-30]% in the market for the retail supply of pay AV services (JV: [0-5]%, Telenor: [10-20]%, NENT: [0-5]%), (iii) [20-30]% in the market for the retail supply of pay AV services  for  MDUs  (JV:  [0-5]%,  Telenor:  [20-30]%,  NENT: [0-5]%), (iv) [10-20]% in the market for the retail supply of pay AV services for SDUs (JV: [5-10]%, Telenor: [0-5]%, NENT: [5-10]%), and  [10-20]%  when  excluding  non-linear  OTT  services   (JV:   [10-20]%,   Telenor: [5-10]%), and (v) [10-20]% in the market for the retail supply of premium  pay  AV  services  to  SDUs  excluding   non-linear   OTT   services (JV: [10-20]%, Telenor: [0-5]%).

(179)   The Parties would have a higher market share by value of (i) [30-40]%, in the possible market for the retail supply of pay AV services for SDUs (JV: [10-20]%, Telenor: [0-5]%, NENT: [5-10]%), and [30-40]% when excluding  non-linear OTT services (JV: [30-40]%, Telenor: [0-5]%), (ii) [30-40]% in the market for  the retail supply of basic pay TV services (JV: [5-10]%, Telenor: [20-30]%, NENT:   [5-10]%),   and   [30-40]%   excluding   non-linear   OTT    providers (JV: [5-10]%, Telenor: [20-30]%), (iii) [30-40]% in the market for the retail supply of basic pay AV services to MDUs (JV: [0-5]%, Telenor: [20-30]%, NENT:  [0-5]%),  and  [20-30]%  when  excluding  non-linear  OTT  services  (JV: [0-5]%, Telenor: [20-30]%), and (iv) [50-60]% in the market for the retail supply of basic pay AV services to SDUs (JV: [30-40]%, Telenor: [5-10]%, NENT:  [10-20]%),  and  [50-60]%  when  excluding  non-linear  OTT     services (JV: [40-50]%, Telenor: [10-20]%). The Parties would also have a higher market share by volume of (i) [20-30]% in the market for the retail supply of pay AV services    excluding    non-linear    OTT    (JV:    [0-5]%,    Telenor:    [20-30]%), (ii) [30-40]% in the market for  the  retail  supply  of  basic  pay  TV  services  (JV: [0-5]%, Telenor: [30-40]%, NENT: [5-10]%), and [30-40]% when excluding non-linear OTT services (JV: [0-5]%, Telenor: [30-40]%), (iii) [30-40]% in the market for the retail provision of pay TV services for MDUs excluding non-linear OTT services (JV: [0-5]%, Telenor: [30-40]%), (iv) [30-40]% in the market for the  retail  supply  of  basic  pay  AV  services  to  MDUs  (JV:   [0-5]%,   Telenor: [30-40]%, NENT: [0-5]%), and [30-40]% when excluding non-linear OTT services (JV: [0-5]%, Telenor: [30-40]%), and (v) [40-50]% in the market for the retail supply of basic pay AV  services  to  SDUs  (JV:  [10-20]%,  Telenor: [5-10]%, NENT: [20-30]%), and [20-30]% when excluding non-linear OTT services (JV: [10-20]%, Telenor: [10-20]%).

(180)   Considering the hypothetical market including non-linear OTT services, OTT players would exercise a competitive constraint on the Parties and the JV. In this respect, it is notable that in Finland there would remain post-Transaction numerous OTT players who would constrain the JV, namely Netflix and HBO Nordic as well as new entrants Disney+ whose OTT service is expected to launch in the second half of 2020 in the Nordics. In addition, the market investigation indicated that the share of OTT, as well as IPTV, is growing rapidly in Finland, as the share of linear TV watching is decreasing and the share of non-linear  watching is increasing.136

(181)   However, even considering the hypothetical market excluding non-linear OTT services, the Transaction would not significantly increase the Parties’ market position. The Commission notes that Telenor and Canal Digital were already part of the same economic entity, before the Transaction, and the merger specific increment is limited to the […] subscribers brought by Viasat, corresponding to a market share of maximum [0-5]% by revenue and [0-5]% by subscriber under the narrowest product market definition.

(182)   Second, the JV would have a limited market position in most of the possible affected markets for the retail supply of AV services in Finland. Based on 2018 figures, the JV will hold a market share by value of (i) [5-10]% in the market for the retail supply of pay AV services, and [10-20]% when excluding non-linear OTT services, (ii) [5-10]% in the market for the retail supply of basic pay AV services, and [5-10]% when excluding non-linear OTT services, (iii) [0-5]% in  the market for the retail supply of pay AV services for MDUs, and [0-5]% when excluding non-linear OTT services, (iv) [10-20]% in the market for the retail supply of pay AV services for SDUs, (v) [0-5]% in the market for the retail  supply of basic pay AV services to MDUs, and [0-5]% when excluding non-linear OTT services, and (vi) [20-30]% in the retail supply of premium pay AV services to SDUs excluding non-linear OTT services.

(183)   By subscribers, the JV would have even more limited 2018 market shares. Based on 2018 figures, the JV will hold a market share by volume of (i) [0-5]% in the overall market for the retail supply of AV services excluding non-linear OTT services, (ii) [0-5]% in the market for the retail supply of pay AV services, and [0-5]% when excluding non-linear OTT services, (iii) [0-5]% in the market for  the retail supply of basic pay AV services, and [0-5]% when excluding non-linear OTT services, (iv) [0-5]% in the market for the retail supply of pay AV services for MDUs, and [0-5]% when excluding non-linear OTT services, (iv) [5-10]% in the market for the retail supply of pay AV services for SDUs, and [10-20]% when excluding non-linear OTT services, (vii) [0-5]% in the market for the retail supply of basic pay AV services to MDUs (including or excluding non-linear OTT services), (vii) [10-20]% in the market for the retail supply of basic pay AV services to SDUs, and [10-20]% when excluding non-linear OTT services, and (viii) [10-20]% in the market for the retail supply of premium pay AV services to SDUs excluding non-linear OTT services.

(184)   The JV would have a higher market share by value, of (i) [30-40]%, in the possible market for the retail supply of pay AV services for SDUs excluding non- linear OTT services, and (ii) [30-40]% in the retail supply of basic pay AV services to SDUs, and [40-50]% when excluding non-linear OTT services. Nevertheless, for the reasons set out above in paragraph 180, the Commission considers that regardless of the precise product market definition, the competitive pressure exerted by OTT players on the JV will be enhanced in the coming years, thereby exercising an increased constraint on the JV.

(185)   Third, several alternative suppliers of retail AV services, in particular Telia and Elisa would remain active in any possible affected markets for the retail supply of AV services in Finland. In the market for the retail supply of pay AV services, they would have a 2018 market share by value of [10-20]% and [10-20], respectively.137 Telia is a well established telecommunications and media company with a strong presence in the Nordic region. Elisa is also a strong vertically integrated Finnish player.

6.3.5.            Horizontal non-coordinated effects in the retail supply of AV services in Denmark

(186)   In Denmark, Telenor is active in the retail supply of AV services in Denmark via DTH through its wholly owned subsidiary, Canal Digital (which will be contributed to the JV). NENT is active in the retail supply of AV services in Denmark via DTH through its wholly owned business, Viasat (which will be contributed to the JV), and OTT through Viaplay (which will not be contributed  to the JV).

(187)   The combined market position of the JV will be below 20% under any possible market segmentation of the market for the retail supply of AV services except for the market for the retail supply of premium AV services for SDUs excluding non- linear OTT services, where the Parties will have a combined market shares of [20-30]% by subscribers and [20-30]% by revenue, and the market for the retail supply of basic AV services for SDUs, where the Parties would have a combined market shares by subscribers of [20-30]%, of which the JV, [5-10]% and NENT [10-20]% (based on 2018).

6.3.5.1.     The Notifying Parties’ view

(188)   The Notifying Parties submit that the Transaction does not raise competition concerns on the basis of any plausible definition of the relevant product market in Denmark for the reasons set out below.

(189)   First, the Notifying Parties submit that the JV will have a limited presence in TV distribution in Denmark.

(190)   Second, the Notifying Parties argue that the JV will face fierce competition from  a wide range of AV distributors active in Denmark across multiple distribution platforms, including TDC and Stofa, and a plethora of linear and non-linear OTT services.

6.3.5.2.     The Commission’s assessment

(191)   The Commission considers that the Transaction does not give rise to serious doubts as to its compatibility with the internal market as a result of horizontal effects on the market for the retail supply of AV content Denmark, or  any possible narrower affected markets, for the following reasons.

(192)   First, in the market for the retail supply of basic AV services for SDUs, the  Parties would have a combined market shares by subscribers of [20-30]%, of which the JV, [5-10]% and NENT [10-20]% (based on 2018). The Commission considers that the increment brought by the Transaction is limited to Canal Digital’s market share of [5-10]% by subscribers, and several alternatives would remain including TDC, Stofa and Waoo! with market shares of respectively [20-30]%, [10-20]% and [10-20]%.

(193)   Second, the Parties would have a modest market position in the possible affected market for the retail supply of premium AV services for SDUs excluding non- linear OTT services in Denmark. Based on 2018 figures, the Parties will hold a market share by value of [20-30]% by subscribers and [20-30]% by revenue in this market.138 As neither Telenor nor NENT would be active in this possible affected market, the JV would hold a similar market share by value of [20-30]% by subscribers and [20-30]% by revenue.

(194)   Third, the increment brought by the transaction is limited to the […] subscribers brought by Canal Digital, corresponding to a market share of [0-5]% by revenue and [0-5]% by subscribers in the market for the retail supply of premium AV services for SDUs, excluding non-linear OTT players.

(195)   Fourth, several alternative providers would remain available including but not limited to Telia, TDC, Stofa and Waoo! with market shares by subscribers of respectively [20-30]%, [5-10]%, [5-10]% and [5-10]%.139

6.3.6.  Conclusion

(196)   In light of the foregoing, the Commission considers that the Transaction does not give rise to serious doubts as to its compatibility with the internal market as a result of horizontal effects on the markets for the retail supply of AV content in Norway, Sweden, Finland and Denmark.

6.4.   Non-horizontal assessment

6.4.1.     Introduction

(197)   A merger between companies which operate at different levels of the supply chain may significantly impede effective competition if such merger gives rise to foreclosure.140 Foreclosure occurs where actual or potential competitors' access to supplies or markets is hampered or eliminated as a result of the merger, thereby reducing those companies' ability and/or incentive to compete.141  Such  foreclosure may discourage entry or expansion of competitors or encourage their exit.142

(198)   The Non-Horizontal Merger Guidelines distinguishes between two forms of vertical foreclosure. Input foreclosure occurs where the merger is likely to raise the costs of downstream competitors by restricting their access to an important input. Customer foreclosure occurs where the merger is likely to foreclose upstream competitors by restricting their access to a sufficient customer base.143

(199)   In addition, conglomerate mergers are mergers between firms that are in a relationship which is neither purely horizontal (as competitors in the same relevant market) nor vertical (as supplier and customer). In practice, the focus is on mergers between  companies  that  are  active  in  closely  related  markets  (e.g. mergers involving suppliers of complementary products or of products  which belong to a range of products that is generally purchased by the same set of customers for the same end use).144

6.4.1.1.     Input foreclosure

(200)   Pursuant to the Non-Horizontal Merger Guidelines, input foreclosure arises where, post-merger, the new entity would be likely to restrict access to the products or services that it would have otherwise supplied absent the merger, thereby raising its downstream rivals' costs by making it harder for them to obtain supplies of the input under similar prices and conditions as absent the merger.145

(201)   For input foreclosure to be a concern, the vertically integrated firm should have a significant degree of market power in the upstream market. Only when the  merged firm has such a significant degree of market power, can it be expected  that it will significantly influence the conditions of competition in the upstream market and thus, possibly, the prices and supply conditions in the downstream market.146

(202)   In assessing the likelihood of an anticompetitive input foreclosure scenario, the Commission examines, first, whether the merged entity would have, post-merger, the ability to substantially foreclose access to inputs, second, whether it would have the incentive to do so, and third, whether a foreclosure strategy would have a significant detrimental effect on competition downstream.147

6.4.1.2.     Customer foreclosure

(203)   Pursuant to the Non-Horizontal Merger Guidelines, customer foreclosure may occur when a supplier integrates with an important customer in the downstream market and because of this downstream presence, the merged entity may foreclose access to a sufficient customer base to its actual or potential rivals in the upstream market (the input market) and reduce their ability or incentive to compete, which in turn, may raise downstream rivals' costs by making it harder for them to obtain supplies of the input under similar prices and conditions as absent the merger.  This may allow the merged entity profitably to establish higher prices on the downstream market.148

(204)   For customer foreclosure to be a concern, a vertical merger must involve a company which is an important customer with a significant degree of market power in the downstream market. If, on the contrary, there is a sufficiently large customer base, at present or in the future, that is likely to turn to independent suppliers, the Commission is unlikely to raise competition concerns on that ground.149

(205)   In assessing the likelihood of an anticompetitive customer foreclosure scenario, the Commission examines, first, whether the merged entity would have the ability to foreclose access to downstream markets by reducing its purchases from its upstream rivals, second, whether it would have the incentive to reduce its purchases upstream, and third, whether a foreclosure strategy would have a significant detrimental effect on consumers in the downstream market.150

6.4.1.3.     Conglomerate effects

(206)   According to the Non-Horizontal Merger Guidelines, in most circumstances, conglomerate mergers do not lead to competition problems.151

(207)   However, foreclosure effects may arise when the combination of products in related markets may confer on the merged entity the ability and incentive to leverage a strong market position from one market to another closely related market by means of tying or bundling or other exclusionary practices. The Non- Horizontal Merger Guidelines distinguish between bundling, which usually refers to the way products are offered and priced by the merged entity152 and tying, usually referring to situations where customers that purchase one good (the tying good) are required to also purchase another good from the producer (the tied good).

(208)   Tying and bundling as such are common practices that often have no anticompetitive consequences. Nevertheless, in certain circumstances, these practices may lead to a reduction in actual or potential rivals’ ability or incentive to compete. Foreclosure may also take more subtle forms, such as the degradation of the quality of the standalone product.153 This may reduce the competitive pressure on the merged entity allowing it to increase prices.154

(209)   In assessing the likelihood of such a scenario, the Commission examines, first, whether the merged firm would have the ability to foreclose its rivals,155 second, whether it would have the economic incentive to do so156 and, third, whether a foreclosure strategy would have a significant detrimental effect on competition, thus causing harm to consumers.157 In practice, these factors are often examined together as they are closely intertwined.

(210)   In order to be able to foreclose competitors, the merged entity must have a significant degree of market power, which does not necessarily amount to dominance, in one of the markets concerned. The effects of bundling or tying can only be expected to be substantial when at least one of the merging parties’ products is viewed by many customers as particularly important and there are few relevant alternatives for that product.158 Further, for foreclosure to be a potential concern, it must be the case that there is a large common pool of customers,  which is more likely to be the case when the products are complementary.159 Finally, bundling is less likely to lead to foreclosure if rival firms are able to deploy effective and timely counter-strategies, such as single-product companies combining their offers.160

(211)   The incentive to foreclose rivals through bundling or tying depends on the degree to which this strategy is profitable.161 Bundling and tying may entail losses or foregone revenues for the merged entity.162 However, they may also allow the merged  entity  to  increase  profits  by  gaining  market  power  in  the  tied goods market, protecting market power in the tying good market, or a combination of  the two.163

(212)   It is only when a sufficiently large fraction of market output is affected by foreclosure resulting from the concentration that the concentration may significantly impede effective competition. If there remain effective single- product players in either market, competition is unlikely to deteriorate following a conglomerate concentration.164 The effect on competition needs to be assessed in light of countervailing factors such as the presence of countervailing buyer power or the likelihood that entry would maintain effective competition in the upstream or downstream markets.165

6.4.2.    Possible foreclosure of competing suppliers of retail AV services from accessing NENT’s TV channels (input foreclosure)

6.4.2.1.     Norway

(213)   In Norway, the JV will be active in the retail supply of AV services by combining Canal Digital’s DTH business and Viasat’s DTH and IPTV activities. NENT will remain active in the wholesale supply of FTA and basic pay TV channels, premium pay TV sports channels and premium pay TV non-sports channels. NENT would also remain active as retail supplier of AV services through its OTT applications, Viaplay. Telenor would also remain active in the retail supply of AV services via cable and IPTV through the Telenor brand (which will not be contributed to the JV).166 The merger specific change is the addition of Canal Digital’s downstream activities to NENT’s DTH and IPTV service, Viasat.

(214)   The Commission has assessed the risk that NENT would post-Transaction engage in input foreclosure strategies in Norway by either: (i) total input foreclosure of rival providers of retail AV services through the denial of access to NENT’s channels; and (ii) partial input foreclosure of rival providers of retail AV services through an increase of carriage fees paid by rival providers to NENT or by significantly degrading the quality of channels licensed to rival providers of AV services (for example, by removing significant content or ancillary rights).

(215)   The Commission has assessed the two abovementioned types of input foreclosure strategies for all the types of TV channels, which NENT licenses to retail providers of AV services in Norway, namely: (i) basic pay-TV channels167, (ii) premium pay TV sports channels, and (iii) premium pay TV non-sports channels.

(216)   For the purpose of its assessment, the Commission has considered, as the more likely potential targets of an input foreclosure strategy, the JV’s largest competitors in the retail supply of AV services, irrespective of any potential market segmentation. On the basis of the market shares presented in Section 6.2.1.1.(B), in relation to the market for the retail supply of AV services, the main targets of a potential foreclosure strategy are the other main TV distributors, namely Altibox, RiksTV and Telia.

(217)   The Commission has conducted its assessment on the basis of all possible downstream market definitions. The question as to whether NENT would have  the ability to undertake a total or partial input foreclosure strategy has therefore been undertaken in light of the importance of those channels to TV distributors active in the potential markets for which basic pay TV channels and premium pay TV channels are acquired.168 The Commission’s assessment of the impact of a total or partial foreclosure strategy also applies in respect of the above mentioned possible markets for which TV channels are an important input. Since the importance of NENT’s TV channels and the likely impact of foreclosure to those channels as inputs, is at least as significant on the narrower relevant markets as it is on the broader market for the retail provision of AV services, the Commission hereafter, in this section, refers to the ‘retail supply of AV services’ or ‘retail AV services’ as shorthand for  all  possible  markets comprising  the  retail  supply  of (i)   AV services (ii) linear pay AV services, (iii) linear basic pay AV services (iv) linear   premium   pay   AV    services,   (v)    all   possible    markets   (i)   to (iv) segmented into MDU and SDU.

(218)   In Section 6.1.1, the Commission considered that the question whether Telenor and NRK belong to the same economic unit or whether they make up separate economic units with an independent power of decision can be left open as the Transaction does not raise serious doubts as to its compatibility with the internal market regardless of the answer to this question.169 In particular, as regard to a potential vertical relationship between NRK and the JV, the Commission considers that the Transaction does not raise serious doubts as to its compatibility with the internal market for the following reasons.

(219)   First, for the purpose of the assessment of this Decision, the Commission does not consider NRK as a commercial broadcaster like NENT. NRK  supplies exclusively FTA channels and, differently from NENT, it does not supply pay TV channels to providers of retail AV services. NRK is Norway’s national public broadcaster. NRK’s FTA TV channels are subject to a “must-carry” obligation170 and, differently from other TV broadcasters, including NENT, NRK is not dependent on advertising revenues and carriage fees from TV distributors, because it is funded by governmental taxation. NRK’s FTA TV channels are available to all retail suppliers of AV services via all type of distribution, including OTT.171

(220)   Second, Norwegians are obliged to pay for NRK’s public service broadcasting via a mandatory additional tax. The Commission does not consider likely that distribution of NRK’s TV channels would be limited for customers of competing providers of retail AV services, for example by limiting FTA distribution, while they would still be obliged to pay a tax to receive such channels.

(221)   Third, the Commission considers that end customers might still access NRK’s content and channels through NRK’s retail OTT AV service, NRKTV.

(222)   Moreover, the Transaction does not materially change the incentive to implement a foreclosing strategy. Pre-Transaction, NRK was active as FTA supplier with a market share by volume of approximately [40-50]% in the market for the wholesale supply of FTA and Basic pay TV channels. In the downstream market, in 2018 Telenor and Canal Digital have a combined market share of [40-50]% (Telenor: [20-30]%, Canal Digital: [10-20]%) in the market for the retail supply  of AV services, excluding non-linear where NRK’s channels could be used as an input. Post-Transaction, Telenor will exclusively have a market share of [20-30]% combined with a joint (50%) ownership in the JV with a market share of [20-30]%.

(223)   Finally, the Commission considers that NRK was already vertically integrated pre-Transaction172, and it did not engage into any type of foreclosure strategy vis- à-vis competing providers of retail AV services, such as Telia and Altibox.

(A)  The Notifying Parties’ view

(224)   The Notifying Parties argue that the Transaction will not give NENT the ability and incentive to engage in input foreclosure in Norway. Pre-Transaction, NENT  is already vertically integrated as a supplier and distributor of TV channels. Post- Transaction, NENT will remain active as a supplier of TV channels but NENT’s vertical integration will be reduced with the transfer of its 100% owned entity, Viasat Consumer, into a joint venture 50% co-owned with Telenor.

(225)   With respect to NENT’s ability to undertake an input foreclosure strategy, the Notifying Parties consider that NENT [Confidential strategic views of NENTs sales policy and strategy].

(226)   Even if NENT had the ability to engage in an input foreclosure strategy by preventing rival TV distributors from offering its TV channels to their customers, the Notifying Parties submit the Transaction does not increase incentives for input foreclosure of NENT’s channels from rival distributors. […].

(227)   Even if NENT would have the ability and incentive to engage in an input foreclosure strategy, the Notifying Parties submit that such strategy would not have any significant detrimental effect on effective competition. […].173 […]

(B)  The Commission’s assessment

(228)   The Commission’s assessment of anticompetitive input foreclosure, in light of the results of the market investigation, is set out in the following paragraphs. For this purpose, consistent with paragraph 32 of the Non-Horizontal Merger Guidelines, in relation to each of these practices, the Commission examines, (i) whether the NENT would have, post-merger, the ability to foreclose access to inputs, (ii) whether it would have the incentive to do so, and (iii) whether a foreclosure strategy would have a significant detrimental effect on competition in the downstream markets.

a.    Ability to engage in input foreclosure

(229)   For the reasons set out below, first, the Commission cannot exclude that NENT may have the ability to engage in total or partial input foreclosure of its basic pay TV channels in Norway; second, the Commission considers that NENT will likely have the ability to engage in total or partial input foreclosure of its premium pay TV sports channels in Norway; third, the Commission considers that NENT will not have the ability to engage in total or partial input foreclosure of its premium non-sports pay TV channels in Norway

(230)   First, the Commission assesses whether NENT would have a significant degree of market power in the upstream market for the wholesale supply of TV channels, including all possible sub-segments and whether NENT’s TV channels can be considered an important input within the meaning of the Non-Horizontal Merger Guidelines.174

(231)   Table 31, reproduced below, shows the market shares of NENT and its main competitors in the market for the wholesale supply of TV channels in Norway in 2018 by share of viewing. NENT’s market share in 2018 was respectively  [5-10]% for the wholesale supply of combined FTA/pay TV channels, and [10-20]% for the wholesale supply of pay TV channels and [10-20]% for the wholesale supply of basic pay TV channels, and [20-30]% for the wholesale supply of premium pay TV channels, and [20-30]% for the wholesale supply of premium pay TV sports channels, and [30-40]% for the wholesale supply of premium pay TV non-sports channels.

Table 31: Market shares in 2018 in the market for the wholesale supply of pay TV channels by share of viewing