Can antitrust law save newspapers?

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The President of the Federal Cartel Office, Andreas Mundt, answers questions about media cartel and merger law.

Media Industry: Mr. Mundt, the industry journal HORIZONT recently stated that the eternal question of competition about the German media capital has now finally been decided. The media capital of Germany is neither Hamburg nor Berlin, nor Munich or Cologne, but rather the small Bonn on the Rhine, where the Federal Cartel Office resides. Because more and more fate decisions in the industry are being made here in Bonn. Will the media bring you a lot of work in the next few years?

Andreas Mundt: A lot is dramatized and a lot is hyped. But it is correct: The media industry is currently going through a structural change. The media companies are reacting to a changed media usage behavior of their customers and to an increased media convergence. In this upheaval process, competition is becoming more intense. In particular, we expect an increasing number of mergers, but also an increase in collaborations. At the same time, there are areas in which market power already exists or attempts are being made to transfer market power from the established markets to the digital world. We must be vigilant here.

Media Industry: Against the background of the structural crisis affecting the daily newspapers, political calls have been made for years to maintain the publishers' economic viability through a noticeable relaxation of special media antitrust and merger law. Your predecessors Ulf Böge and Bernhard Heitzer always decided on such reform projects and fought them with great personal zeal. Do you fully subscribe to the militant tradition of your predecessors?

Mundt: I do not consider a loosening of the rules for the control of press mergers to be necessary or expedient. Nor does it make sense, from our point of view, to introduce exceptions to the antitrust rules for the press sector. First of all, in my opinion, the economic survival of publishing houses in Germany is not in question. This is the result of the latest study by the Association of German Newspaper Publishers. After that, the German newspapers are doing much better than comparable newspapers in the USA. In Germany, for example, the number of titles has remained stable over the past ten years, the shrinkage of the advertising market has been significantly lower than in the USA and the financing share of advertising income in total income, at around 50%, is of less importance in Germany than in the USA with over 80%. The efforts on the part of companies to develop into media houses that unite the various media genres under one roof have contributed to this comparatively better situation for German newspapers. Smaller publishing houses that are unable to do this on their own have come together to form cooperations or joint ventures, for example in the area of ​​online platforms. The economic starting point of the demands is thus overstated. More importantly, relaxing the merger control and antitrust rules in the press sector would not really improve the economic situation. Antitrust law is not part of the problem, it is part of the solution. With the control of the press merger, the legislature wants to protect competition and keep alternative options open for readers and advertisers. The regulations indirectly protect diversity of opinion. The special turnover thresholds in the press sector have also proven themselves: Germany still has a diverse press landscape. Our case practice also proves that the applicable antitrust law is sufficiently flexible even in a changing media world. I therefore see no need for change.

Media economy: The new chairman of the Monopolies Commission, Prof. Justus Haucap, represents in one point of view in this issue of MedienWirtschaft, among others. the thesis that, above all, the market definition on the advertising markets of the daily newspapers should be handled less restrictively by the cartel office due to the new competition from the Internet. The Monopolies Commission had already put this forward in its special report on press merger control in 2004. So far, however, the Federal Cartel Office has insisted on assuming separate advertising markets for newspapers and the Internet. When will you finally follow the advice of the Monopolies Commission?

Mundt: We are attentive to new developments in the advertising markets. But uniform advertising markets for newspapers and Internet advertising have not yet been found in the case practice of the European Commission or that of the American or British competition authorities. The market conditions have not yet adjusted so much that these advertising markets have already grown together. So far, we have seen more of a complementary use of the daily newspaper and the Internet by the advertising industry. This may change in the future. Market segments in which structural change is already well advanced are e.g. B. Real estate, car and job advertisements. The Monopolies Commission had already recommended in a special report in 2004 that we keep an eye on increasing digitalization in our decision-making practice. That was far-sighted and good advice that we have been following for a long time. Because our task is to analyze and evaluate every merger case for anti-competitive effects, regardless of whether they come from the analog or digital world. Ultimately, the examination of merger projects is always a case-by-case analysis of the prevailing market conditions at a specific point in time.

Media economy: The publishers, on the other hand, would like a general statutory exemption from cooperation in the advertising markets. Some media economists consider this to be justifiable even if price cartels dominate the market, since the regional and local economy ultimately only contributes to the endangered public good of a functioning public opinion formation in regional and local areas, which can demonstrably only be supported by economically powerful daily newspapers. Do you find this argument absurd?

Mundt: The reasoning you have presented is not new. In view of the actual circumstances, however, it is incorrect and in fact not very effective, to put it cautiously. The local daily newspapers classify themselves as “healthy at heart” and well equipped for the challenges of structural change.

Media economy: Many publishers bitterly accuse the Bundeskartellamt of submitting potential competition even where it does not exist when assessing merger projects among neighboring newspapers. The publishers are therefore calling for a clear guess rule in the GWB: Where it can be proven that everything has remained quiet for ten years, potential competition should no longer be accepted. What do you think of the allegations and how do you rate the reform proposal?

Mundt: Local newspapers are often without competitors in their area. If we see that a neighboring newspaper is a potential competitor, then we have to take that into account. After all, this potential competition is often the only remaining competitive corrective to the top dog's market power. But: Potential competition cannot be assumed across the board. We have no general guesswork for or against potential competition from neighboring newspapers. In some decisions we accepted potential competition, in others, such as the Schweriner Volkszeitung / Nordkurier case decided last year, we saw no incentives for competition in the neighboring newspaper and approved the merger. The presumption rule you mentioned does not do justice to reality. The merger control is based on a forecast of future developments. References to the past can only be an indication of the prevailing market conditions. However, other, particularly current, indications can be much more important. Whether you say yes or no to potential competition, you need a clear and convincing explanation on a case-by-case basis.

Media economy: However, some observers believe that they see that the Federal Cartel Office has shown itself to be a little more generous in decisions on neighborhood mergers in the past two years than in previous years. Ralph Langhoff has been chairman of the 6th Decision Division since the end of 2007 and is therefore responsible for media. Shortly before, Ulf Böge had left office. At the beginning of the year you took over the presidency. Is the media industry right when it expects the generation change to create a new openness to the recognition of the new structural problems in the industry?

Mundt: Independently of specific persons, the Bundeskartellamt examines each case comprehensively against the background of the competitive economic conditions. That is our legal mandate. Nothing has changed about this. We are of course aware that there are also structural problems in the industry. In general: some markets are very stable, others are subject to constant change. The media industry has certainly belonged to the latter category in recent years. In particular, the changes in user behavior are competitively relevant. This is reflected in our decisions, here we have understood the current developments. And in the future, too, you will not be able to observe a schematic, but rather a decision-making practice that adapts to changing market conditions.

Media economy: The Federal Court of Justice is currently dealing with the Axel Springer / Pro7Sat.1 merger. The Federal Cartel Office prohibited the case in 2006, inter alia. with the argument that the merger would give Springer the opportunity to offer advertising campaigns for products coordinated across multiple media from a single source and thus to run cross-media advertising campaigns for third parties. This would strengthen Springer's dominant position.

Mundt: Yes, with this line of argument the Bundeskartellamt took up a development that was still in its infancy at the time. The increasing connection between media has increased significantly since then. I think that this development is denied by only a few.

Media economy: Can we conclude from this answer that if the merger project were to be reissued, Springer would inevitably have to fail again due to merger control under antitrust law?

Mundt: The prohibition was now over four years ago. In this respect, one would have to look at the current situation. The Bundeskartellamt based its prohibition on a number of reasons. We then saw problems in the television advertising market, in the advertising market for newspapers and in the reader market for street-selling newspapers. The world has moved on since 2006. But that z. For example, I cannot see any significant changes in the reader market for street-selling newspapers. When a very strong market position is strengthened, competitive problems are obvious. But of course, we must thoroughly examine and evaluate every merger against the background of the current competitive circumstances.

Media economy: In any case, can we say that the Cartel Office will also consider existing and sufficiently recognizable cross-media effects in its decisions in the future, as was the case for the first time with the Springer / ProSiebenSat.1 decision?

Mundt: In every merger control decision, we look at the relevant factors in the market. We would certainly consider demonstrable reinforcement effects through cross-media effects. We cannot turn a blind eye to facts that are relevant to decision-making.

Media economy: If so: Shouldn't you then also have to acknowledge that economic and journalistic research is increasingly coming to the conclusion that regional and local newspaper monopolies can even deliver better results in terms of efficiency, quality and diversity than competing newspapers As an overview in this issue of MedienWirtschaft shows? Wouldn't it be appropriate to use a certain “efficiency defense” argument alongside the argument of the restructuring merger?

Mundt: Competitive structures usually lead to better results than monopolies - this is why the legislature protects competition. I would like to point out, however, that merger control does not break up existing monopolies. Merger control only applies when companies grow through acquisitions. Even then, however, prohibitions are by no means the rule, but are only issued if dominant positions or monopolies are established or strengthened by the merger.

Media economy: The federal government would apparently be ready to relax press merger control as part of the next amendment to the GWB, provided that the publishers' camp presented a unified position. However, the publishers have not yet been able to find each other properly, particularly with regard to raising the acceptance criteria. The smaller publishers in particular have so far refused to raise their turnover thresholds above a limit of EUR 50 million. They fear that without sufficient merger protection they could become victims of destructive competition from the big publishers. Representatives of the big publishers, on the other hand, claim that publishers of the size mentioned will in any case not be able to survive in the long run under the changed conditions of competition between intermediaries. So who is right: the little ones or the big ones?

Mundt: There is indeed something to think about when representatives of the big publishers present the small local newspapers as doomed, but they say of themselves that they are lively and perhaps even more crisis-resistant than the big publishers themselves. For me this is a sign that some big publishers perhaps keeping one's own interests in mind rather than unselfishly rescuing small local newspapers. I do not see any need to raise the eligibility criteria for press merger control.

Media economy: In Switzerland, before 2004, the Competition Commission, which is comparable to the Federal Cartel Office, advocated the complete abolition of the special press merger control. The Swiss competition protectors argued that it could not be the task of an antitrust authority to artificially preserve economically outdated competition structures. Were your Swiss colleagues just too stupid on this question?

Mundt: Our colleagues in the Swiss Competition Commission are anything but stupid. The situation in Switzerland was manageable and it was foreseeable at the time that the elimination of the lower turnover thresholds for media mergers would not lead to major differences due to the market constellation. It's different in Germany. The regional and local newspaper markets that are worth protecting in Germany and that are economically interesting do not exist in Switzerland due to the significant size difference to Germany. Our experience shows that the press merger clause helps prevent anti-competitive mergers in Germany.

Media economy: If the publishers are still divided on some issues on merger control, they are even more divided on another matter: They all feel that they are victims of harmful competition from their common favorite enemy, Google. The publishers accuse Google of the double abuse of a dominant position among the search engines: On the one hand, Google discriminates against the publisher's offers when it comes to displaying hits, and on the other hand, Google denies the publishers a fair share of the advertising revenues that Google generates through the use of publishing services. You are known to have had a corresponding complaint, but so far your company has only requested a statement from Google. How does it look today? Has the statement arrived in the meantime? And isn't at least the opening of formal abuse proceedings inevitable? And if not: why not?

Mundt: Google operates in a very dynamic environment. In this case, antitrust authorities should monitor very closely how competitive processes work on the affected markets and which levers can be used and possibly used. It is no wonder that a company with a presence like Google attracts antitrust complaints. These are also submitted to other antitrust authorities. We would like to tackle the issue together with our European colleagues.

Media economy: In any case, the relationship between publishers and the Internet is a bit difficult. Above all, the “free culture” of the Internet is lamented everywhere. That is why the bosses of large publishers regularly call for publicly and blatantly concerted campaigns in matters of paid content. For you, this must smell like a rather clumsy preparation for cartel agreements.Let us assume that the major publishers have agreed in public on the coordinated introduction of user prices on the Internet. Wouldn't the Bundeskartellamt then have to assess this as cartelization and take action against it?

Mundt: It is natural that companies want compensation for products in which they have invested. However, the GWB sets clear limits to the cooperation between competitors in the demand for payment from customers. It is therefore up to the design of the models for paid content whether the Federal Cartel Office is active or not. But the publishers concerned should be aware of this.

Media economy: The Federal Minister of Economics Rainer Brüderle wants to give the Federal Cartel Office the possibility of unbundling dominant corporations in the future. Do you already see candidates in the media industry?

Mundt: The Federal Minister of Economics has no specific sectors in mind in his project. I can't tell you a branch either - i. H. not even the media industry - in which I have a specific application in mind. The law sees itself as an exceptional instrument for situations that are exceptionally competitive in terms of competition. However, this cannot and should not only be conceived when the emergency is acute, because it would then come too late.

Media economy: Thank you very much for the conversation!

The interview was conducted by Prof. Dr. Frank Lobigs.

Source: MedienWirtschaft 2/2010