The National Telecommunications Agency (Anatel) decided, on August 10, to apply a precautionary measure suspending any act related to the merger of Time Warner by AT&T in Brazil until Anatel’s final pronouncement on the compliance of the operation with article 5 of Law 12,485 / 2011(Pay TV Act), which establishes limits to the vertical integration between producers and programmers of Pay TV, on the one side, and providers of the telecommunications service, on the other side.
The precautionary order was imposed based on a reconsideration request formulated by the Brazilian Association of Radio and Television Broadcasters (ABERT) and the Brazilian Radio and Television Association (ABRATEL), regarding Anatel’s decision to submit the merger to the Administrative Council of Economic Defense (CADE) to assess the competitive aspects, under the perspective of Law 12,299/2011 (the Brazilian Antitrust Act).
The Specialized Federal Prosecutor’s Office of Anatel (PFE) has also manifested in the sense that matters related to the Pay TV Act should be dealt “at a procedural subsequent moment” to CADE’s manifestation.
On August 21, CADE’s General-Superintendence gave its opinion on this case, in the sense that the transaction cannot be approved as presented, so the merger was contested before the CADE Court based on the following premises:
- The transaction involves the acquisition of Time Warner’s total control by AT&T, which is the controller of Grupo Sky in Brazil.
- Time Warner Group has significant market power because of the quantity, audience and relevance of its channels. It also has brands and broad portfolio power and operates in a market with multiple entry barriers and significant gains in scale and scope.
- AT&T, through Sky, has significant market power, being the second largest Payed-TV operator in Brazil.
- The proposed vertical integration aligns the interests between a TV programmer and a telecom operator, both with relevant market power. Such alignment incentives for downstream and upstream market closure, with several possibilities and effectives forms of discrimination.
- The structure resulting from the operation would allow Time Warner to access sensitive information from all of its competitors. Likewise, AT&T will have access to the conditions negotiated by its competitors with a major distributor of content in the Brazilian market.
- The Regulatory Agencies of the sector, Ancine and Anatel, expressed an understanding that the operation indeed rises competitive concerns directly related to the verticalization.
CADE also declared the merger as complexed. Reason why, the case was left to the collegiate of CADE’s Court to decide on the approval or disapproval of the merger. The Court may also approve the merger with restrictions or enter into a Merger Control Agreement (ACC) between the companies to minimize the concerns identified. The deadline for CADE’s final decision is 240 days, extendable by a further 90.
Due to the relevance of the case, several audiovisual companies such as SIMBA, ESPN, DISCOVERY, FOX and NEOTV have shown interest in monitoring the development of the process as interested third parties.
- Written by Vitor Cunha