On 6 November 2018, the European Commission ("Commission") approved Disney's USD 71.3 billion bid to acquire parts of Fox, subject to Disney divesting its stake in television channels joint venture. As a result of the transaction, Disney and Fox will combine their film and television studios and their cable and international television businesses. The Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network are not part of the transaction.
| What you need to know - Key takeAways |
- Phase 1 commitments are acceptable only when the competition problem is readily identifiable and can easily be remedied. However, the Commission has only 25 working days (subject to a 10 working day extension if commitments are offered) to complete its Phase 1 investigation.
- Therefore, it is advisable to allow sufficient time to engage in comprehensive pre-notification discussions with the Commission in cases that give rise to prima facie competition concerns and where the parties would be willing to offer Phase 1 commitments – in the Disney/Fox case there was a delay of nine months between the announcement of the transaction and the formal notification to the Commission.
- In practice, such pre-notification contacts mean that the case team is more likely to be able to rule out more remote competition concerns and to be in a position to identify those competition concerns capable of being easily remedied.
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The transaction was first announced on 14 December 2017, but was not notified to the Commission until 14 September 2018, some nine months later. During its investigation, the Commission investigated the impact of the transaction in those markets in which the parties' activities overlap.
The Commission investigated how the transaction could impact on suppliers such as producers, actors and make-up artists, as well as distributors of films and content such as cinemas and pay-tv broadcasters. However, the Commission did not identify any competition concerns as a result of overlaps in the parties' activities in relation to either:
- the production and distribution of films for release in movie theatres; or
- the distribution of content for home entertainment and licensing of films and other TV content.
This was on the basis that the merged entity would continue to face significant competition from other players, such as Sony, Universal and Warner Bros.
The Commission identified competition concerns in several EEA Member States as a result of overlaps in the parties' activities in relation to the wholesale supply of "factual" TV channels, i.e., channels that predominantly broadcasting documentaries. However, these concerns were addressed as a result of commitments offered by Disney to divest its interest in all factual channels it controls in the EEA, namely: History, H2, Crime & Investigation, Blaze and Lifetime. These channels are currently controlled by A+E Television Networks, a joint venture between Disney and Hearst.
As a result of the commitments offered by Disney, the Commission was able to clear the transaction without opening a longer Phase 2 investigation.
Whilst this decision does demonstrate that it is possible to obtain a Phase 1 clearance in respect of large and complex transactions, giving rise to significant competitive overlaps, it is an important reminder that this will in all likelihood require:
- a lengthy informal pre-notification stage;
- the parties to have reached a clear position on the remedies they would be willing to offer in advance of the formal notification date; and
- full divestiture of overlapping businesses in those markets that give rise to significant competition concerns.
