In the Guidelines, the ACCC has identified five key issues to which it may attribute greater prominence in media merger assessments. Where concerns arise, the ACCC will normally be receptive to the parties offering a remedy, usually by way of court-enforceable undertaking:
- Competition and media diversity
The ACCC views media diversity through the prism of market concentration and competition. A merger that increases market concentration will reduce the number of ‘voices’, reduce choice for consumers and potentially reduce quality of content, thereby reducing media diversity. In a media context, the ACCC will therefore be concerned not only with adverse price impacts of a merger, but also on non-price impacts, particularly any adverse impacts on the quality of content for consumers.
A recurrent issue will be the way the ACCC assesses mergers involving different modes of content delivery. In clearing the proposed joint bid for interests in Ten Network Holdings Limited by Birke Pty Ltd and Illyria Nominees Television Pty Ltd in July 2017, the ACCC considered convergence between different modes of content delivery, but did not form a concluded view as to whether free to air TV, print newspapers and online news sites were in the same or separate product markets. The converging nature of different modes of content delivery is clearly a difficult issue that the ACCC will face in considering future mergers.
- Impact of technological change
The media sector is inherently dynamic. The ACCC will assess media mergers in light of potential changes over the foreseeable future (typically one or two years). In doing so, the ACCC may consider the scope for technological convergence in that time frame as well as market innovations that may facilitate competitive entry. However, the ACCC will require credible evidence that such changes will occur and will give little weight to mere speculation.
Similarly, the ACCC will consider the disruptive effects of new technologies. The ACCC may give disproportionate weight to new market entrants with low market shares if there is credible evidence that such firms will quickly become vigorous and effective competitors. In doing so, the ACCC may look at international trends and examples.
While digital disruption has been viewed as a key driver of competition, the mere presence of digital competitors may not resolve all ACCC concerns. For example, the proposed merger between APN Outdoor and oOh!media was abandoned after the ACCC expressed concerns about impact on competition in the out-of-home advertising market. The ACCC considered that online platforms were not a substitute for traditional billboards, in respect of the supply of advertising opportunities to advertisers.
- Access to key content
The ACCC has historically considered that insufficient access to premium or compelling content can be a barrier to entry. Such premium content can have a ‘halo’ effect and attract significant numbers of customers. Consequently, such content may be subject to exclusive supply arrangements that favour larger providers with deeper pockets at the expense of smaller market entrants.
In considering mergers, the ACCC will consider the extent to which the merger may prevent third party competitors from acquiring access to key content, thereby reducing competition. This is not a new consideration for the ACCC. For example, to be permitted to proceed with its purchase of Austar in 2012, Foxtel provided an undertaking to address ACCC concerns about access to exclusive content.
The ACCC will also consider the way content holders may have countervailing power such that they may choose alternate platforms for their content.
- Two-sided markets and network effects
A two-sided market is one in which a platform or intermediary brings together two distinct groups of users which interact with each other. Two-sided markets often arise in the context of services which generate revenue through advertising. Many Internet services involve two-sided platforms, often in the context of a free service. For example, Google provides a free ‘search’ function to consumers, but also sells advertising space to advertisers around the ‘search’ results to target those consumers.
Network effects are present in a market if the value a user places on a product or service increases as the number of users of that product or service increases. For example, the benefit to an individual from using a social networking site increases if all their friends also use that site. Network effects can raise the barriers to entry and expansion, and impede effective competition from developing. In such cases, the ‘winner takes all’.
By raising barriers to entry, network effects may be important in assessing the competitive effects of some media mergers. The level of such barriers to entry may depend on the context. Platform-to-platform competition, for example, can sometimes be viewed as competition for the market rather than in the market if the network effects are sufficiently transient.
- Bundling and foreclosure
Bundling (or tying) refers to the practice of supplying or offering to supply complementary products as a package. The practice of bundling may be efficient, and the ACCC is only concerned where these strategies are likely to have the effect of substantially lessening competition. Cross-platform media mergers may provide the merged entity with the opportunity to bundle or tie the supply of products or services, for example content or advertising opportunities, across multiple platforms
The ACCC will also closely examine any media merger that enables the merged entity to leverage its market power in one market to substantially lessen competition in another market. For example, a vertical merger between a content supplier that produces premium content and a free-to-air network may raise competition concerns if rival networks or competitors on other platforms need access to premium content to compete effectively.