Case:

The ACCC accepted section 87B undertaking sufficient to resolve competition concerns for merger following concerns that independent exhibitors would be treated unfairly with screen advertising.

Keywords:

Merger, film, undertaking, cinema

Reference:

Proposed merger opposed on 1st October 2002. Undertakings pursuant to section 87B accepted on 13 December 2002.

Industry:

Film and cinema

Relevant laws:

Sections 50 and 87B of the Trade Practices Act 1974

Summary:

The ACCC was concerned that this acquisition would result in a substantial lessening of competition in breach of section 50 because: - the acquisition would increase the level of vertical integration in the cinema industry; and - the business of independent cinema exhibitors, who rely heavily on cinema advertising revenue, could be damaged if Val Morgan was controlled by the major cinema exhibitors. To resolve the Commission's competition concerns, the major exhibitors offered the Commission enforceable undertakings. The undertakings provide that: - two of the acquiring exhibitors will divest their stake in Val Morgan within 18 months of the acquisition; - the undertakings will remain in effect until such time as any advertising contracts existing between Val Morgan and the divesting exhibitors cease to remain in force. Such contracts must, in any case, expire within 12 months of divestment taking place; - Val Morgan will honour existing contracts with independent cinema exhibitors and offer them new cinema advertising contracts when existing contracts expire; and - Val Morgan will guarantee minimum contractual terms to be offered to independent cinema exhibitors. The undertakings also incorporate procedures and checks to ensure the independent exhibitors are dealt with fairly. The Commission was satisfied that the undertakings resolved its competition concerns in relation to the matter.

The Commission accepted undertakings on 13 December 2002 pursuant to section 87B from the three major cinema exhibitors (Hoyts, Greater Union and Village) who jointly acquired the cinema advertising business from Television and Media Services. As provided by that undertaking, the exhibitors sought to vary the undertaking do as to close the slide advertising business.

The Commission formed the view that the closure by the three major exhibitors of their slide advertising business does not appear to significantly affect the competitive position of independent cinema exhibitors in the form of lower advertising revenues. This view was particularly influenced by the number of successful new entrants; and also the trend by a number of cinema exhibitors who have successfully established 'in-house' slide advertising operations.

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