Formosa Television Co., Ltd., Taiwan Television Enterprise Limited, China Television Co., Ltd., and Chinese Television System

Case:

Key Words:

joint broadcast, London Summer Olympics

Reference:

Fair Trade Commission Decision of July 25, 2012 (the 1081st Commissioners' Meeting), Letter Kung Lian Tzu No. 101005

Industry:

Television Broadcasting (6021)

Relevant Laws:

Article 14(1) of the Fair Trade Law

Summary:

1. Formosa Television Co., Ltd. (hereinafter referred to as FTC), Taiwan Television Enterprise Ltd. (hereinafter referred to as TTV), China Television Co., Ltd. (hereinafter referred to as CTV), and Chinese Television System (hereinafter referred to as CTS), the four major broadcast (or over-the-air) television operators in the country (hereinafter referred to as the four broadcast TV stations), intended to jointly broadcast the 2012 London Summer Olympics and filed an application for approval of their concerted action.
2. Contents of the concerted action application:
   (1) Duration: July 28 to August 13, 2012.
   (2) Broadcast range: the main island, Penghu, Kinmen, and Mazu.
   (3) Contents of the concerted action:
   1. Joint purchase of broadcasting rights: The four broadcast TV stations would negotiate with ELTA TV to acquire the rights to broadcast the 2012 London Summer Olympics on broadcast television, satellite television and cable television. The four broadcast TV stations would broadcast the games jointly and share the fees.
   2. Joint renting of satellite transmission and fiber-optic lines: The organizer of the 2012 London Summer Olympics requested all authorized broadcasters to use the Multi-channel Distribution Service (MDS). ASIASAT-5 would be used to receive signals and 3 submarine cable lines also had to be rented to transmit signals for news and events involving contestants from Chinese Taipei. To achieve all the goals, the four broadcast TV stations signed a contract with ELTA TV for joint renting of satellite transmission and fiber-optic lines and broadcasting.
   3. Distribution of events to be broadcasted: Through ELTA TV, the four broadcast TV stations would acquire the authorization to broadcast the 2012 London Summer Olympics on broadcast TV, Cable TV and satellite TV. Besides the opening and closing ceremonies that the four broadcast TV stations would broadcast at the same time, the remaining games and events would be divided into four groups and the four broadcast TV stations would draw lots to decide the group each station was to broadcast.
   4. Distribution of advertising clients and determination of advertising rates: Since the four broadcast TV stations would evenly share the costs for broadcasting the Olympics while the income and expenditure balance of each station also had to be taken into consideration, the advertising clients for the period would be evenly divided but each station would conduct its own marketing.
3. Ground for approval:
   (1) Joint acquisition of broadcasting rights: Broadcast rights fees have always been the largest burden for broadcasters of the Olympics. Because of the broadcast rights fees, the four broadcast TV stations had been unable to acquire the rights to broadcast the 2012 London Summer Olympics directly from the International Olympic Committee. After ELTA TV obtained the rights by paying an exorbitant amount of fees, the Ministry of Culture helped the four broadcast TV stations enter a contract with ELTA TV to get the authorization of broadcasting the London Summer Olympic games. If each of the four broadcast TV stations had tried to obtain the authorization on its own through price competition, it would have pushed up the fees for the broadcast rights. Meanwhile, cable TV and IPTV (MOD of Chunghwa Telecom) in the country were subscription-based and not as prevalent as broadcast TV. Therefore, the joint acquisition of broadcast rights by the four broadcast TV stations could not only enable them to share the costs and avoid increase of rights fees as a result of making competitive offers, but also serve the purpose of having the Olympics broadcasted extensively. It would help reduce the costs for the enterprises participating in the concerted action and viewers would also be able to watch the Olympics on broadcast TV and other platforms. Hence, the FTC acted according to the provision set forth in Article 14 (1) of the Fair Trade Law and an approval from the FTC was given for the concerted action.
   (2) Joint renting of satellite transmission and fiber-optic lines: The expenses required to rent satellite transmission and fiber-optic lines were also part of the costs for broadcasting the Olympics. The purpose was the same as the joint acquisition of the broadcast rights - to increase the market power of the purchasing side and decrease the rent for fiber-optic lines, including 11 lines from the MDS and the use of 3 submarine cable lines. If the applicants had rented satellite transmission and the submarine cable lines individually, it could create waste as certain bandwidths would become idle. For this reason, the FTC believed that joint leasing would benefit the overall economy and public interest and therefore gave its approval.
   (3) Distribution of events to be broadcasted: The 2012 London Summer Olympics included 302 events in 26 sports to be completed in 17 days (include the opening and closing ceremonies). On average, there would be 20 events per day. Hence, despite the addition of digital channels to broadcast the events, it would be impossible for any of t he stations to broadcast the entire events on its own. Distribution was thus necessary. Moreover, as the Olympics would only last for a short period of time, any negative impact on market competition would be limited and such distribution would not impair the competitiveness between the applicants when the Olympic events were broadcasted. Therefore, the FTC believed such distribution would benefit the overall economy and public interest and gave the approval.
   (4) Distribution of advertising clients and determination of advertising rates: Since the four broadcast TV stations would distribute the Olympic events to be broadcasted and, besides the opening and closing ceremonies, no events would be jointly broadcasted, issues regarding consistency of signal transmission and time difference in running of commercials did not exist. There would be no need to divide the advertising income. At the same time, the distribution of advertising clients had no connection with the joint acquisition of the rights to broadcast the Olympics, nor would it involve cost reduction and efficiency enhancement that would be grounds for approval of concerted actions. On the contrary, the distribution of advertising clients could only lessen competition in gaining advertising business. Hence, the FTC did not give its approval for the application regarding the advertisement part of the concerted action.
   (5) To maintain fair competition in advertising during the concerted action period, to prevent any of the applicants from using the concerted action approval to engage in other concerted actions, and also to facilitate supervision, the FTC reminded the applicants not to increase advertising rates without justification or make joint rate decisions, divide advertising clients together, or take advantage of the approval for this concerted action to engage in other concerted actions. The applicants were required to present written reports of the income and expenditure during the concerted action period within one month after the concerted action terminated.

Summarized by: Hsu, Cho-Yuan; Supervised by: Chiou, Shwu-Fen