On 20 May 2019, the Italian Competition Authority ("ICA" or "Authority") issued its decision regarding the acquisition by Sky Italian Holding S.p.A. ("Sky") of certain assets of the digital terrestrial Pay-TV owned by Mediaset Premium S.p.A. ("MP"), imposing significant behavioural remedies to mitigate the effects of the closing of the transaction prior to obtaining clearance despite the parties claims that they had unwound the transaction.
| what you need to know - key takeaways |
- Even when permitted, completing a complex deal without waiting for merger clearance may be dangerous: Italian competition law allows parties to close a transaction prior to receiving clearance. However, completing a transaction may have effects that cannot easily be unwound and authorities may impose far-reaching remedies to restore competition..
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Between March and November 2018, Sky and MP entered into a number of preliminary inter-related agreements in preparation for the sale of R2 S.r.l. ("R2") to Sky. R2 runs the terrestrial digital broadcasting technical platform of MP, the main pay-tv competitor of Sky in Italy.
Sky and MP closed the transaction on 30 November 2018, just two days after the filing of the merger to the ICA, without waiting for the ICA's clearance (there is no stand-still obligation under Italian merger control rules). However the parties had included in their agreements a condition which provided for resolution in the event the deal faced opposition from the ICA.
The ICA opened a Phase II investigation, and expressed strong reservations about the effects of the transaction on competition. The ICA claimed in particular that, although the transaction related only to the technology platform owned by MP to distribute its programs, the sale of such assets to Sky necessarily resulted in an exit of MP from the pay-TV market, which in fact took place in April 2019 (MP's service was to become an Internet-only service). Therefore, the ICA concluded that the transaction would have eliminated the main (and nearly only) competitor of Sky in the pay-tv market.
In view of this opposition, the parties considered that the resolutive condition was fulfilled, and R2 was returned to its previous owner. The ICA found, however, that the effects of closing the transaction had not been eliminated by merely giving R2 back to MP. For example, the ICA found that post-transaction a proportion of MP's customers had already migrated to Sky, and the migration was deemed irreversible.
The ICA thus imposed remedies to mitigate these "irreversible" effects. The ICA:
- prohibited Sky from entering into exclusive rights for audio-visual content and linear channels for internet platforms in Italy for three years, so that content would be available for other operators that provide their services through Internet; and
- ordered Sky to grant the access to competitors to any new platform it may develop and that is compatible with the R2's assets, under fair, reasonable and non-discriminatory conditions.
Interestingly, these remedies are not intended to recreate the now defunct MP, but rather to facilitate the entry by new competitors who may suffer from the lack of access to premium content. Indeed, there were a large number of complaints from telecommunications and providers of online streaming services about the transaction, which focused on these exclusivity clauses which impeded access to important content in Italy.
Sky has appealed the ICA decision, which raises numerous interesting legal issues.
With thanks to Sabina Pacifico of Ashurst for her contribution.
