Anticipated joint venture between BBC Worldwide Limited and Woolworths Group plc

Affected market: Video publishing

No. ME/1191/04

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

The OFT's decision on reference under section 33 given on 20 September 2004

PARTIES

BBC Worldwide Limited (BBCWW) is a wholly-owned subsidiary of the BBC, responsible for the majority of its commercial activities. Its turnover for the financial year 2003/4 was approximately £657 million. BBCWW has five main divisions: magazines; television; channels; global marketing brand development; and consumer publishing (including a sub-division engaged in VHS/DVD (video) publishing with a UK turnover for the financial year 2002/3 of approximately [ ])(see note 1).

Woolworths Group plc (Woolworths) is principally a retailer focused on family and home entertainment and leisure products. It also wholly owns a wholesale distributor of home entertainment products, Entertainment UK Limited (EUK), and a media publishing group, VCI plc (VCI). For the financial year ending 31 December 2003, the UK turnover of VCI was approximately [ ] (see note 1). Its core business is split into three main divisions: video; audio; and production. The video division, Video Collection International Limited, specialises in acquiring, producing and developing publishing rights, and marketing videos.

TRANSACTION

BBCWW proposes to transfer its video publishing activities (excluding its children's, music and learning portfolios) and Woolworths, the video publishing, music publishing and production activities of VCI, to a joint venture (JV). This will be owned 60/40 in favour of BBCWW, but with unanimous voting required on material issues. The JV will be licensed existing BBCWW video rights, plus [certain rights relating to] (see note 2) new BBC programmes that do not involve independent production.

The JV agreement was signed and made public on 9 July 2004. The administrative deadline is 20 September 2004.

JURISDICTION

As a result of this transaction BBCWW and Woolworths (the parties) will acquire joint control of the JV. The parties overlap in the supply of TV programmes published on video, in relation to which the share of supply test in section 23 of the Enterprise Act is met. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

ASSESSMENT

The parties propose to form a JV active in video publishing and whose postmerger share of UK video sales is less than 10 per cent. The OFT's investigation revealed no basis for a positive and reasonable belief that the parties' substantial share of TV genre sales might represent market power as there is no evidence to suggest that a monopolist in such a genre could raise price. The effect on competition will be limited as a result of this transaction. While the entirety of video publishing appears to be the most suitable starting point for considering the scope of the competitive constraints on the JV, it is unnecessary to take a firm position on the appropriate frame of reference in this case as there were no substantiated concerns raised dependent on a firm conclusion in this respect. As noted, the JV's share of video publishing is modest, and it will face competition from a number of major Hollywood film and TV studios. The increment to the share of supply will also be small (less than 5 per cent). Similarly, the vertical relationships with EUK, Woolworths and independent publishers are not significantly affected by the creation of the joint venture, as it would retain the incentive to show no preference to either of its parents and access to content would not materially change.

Consequently, the OFT does not believe that it is or may be the case that the JV may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

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