Competition Authority Fears Bigness More Than Foreign Competitors

Michael Hedges September 19, 2022 Follow on Twitter

The world of mergers and acquisitions is bigger than ever. Investors, shareholders and individuals are still fat with cash from years of easily available low or no interest financing bolstered by recurring revenues. Acquisition remains the preferred means of corporate expansion. It’s relatively cheap and easy. But bigness is not necessarily beautiful in certain quarters.

Just after markets closed last Friday (September 16) Bouygues and RTL Group notified one and all that the proposed merger of French television broadcasters TF1 Group and M6 Group had been “abandoned.” It would have been a big deal, merging the first and third largest French TV broadcasters along with their advertising and production subsidiaries. Giving it up is also a big deal.

After a series of hearings the French Competition Authority made clear that approval of the merger “at the very least” would require the divestment of the TF1 TV channel or the M6 TV channel, the leading assets of the respective companies. “The parties have therefore concluded that the proposed merger no longer has any strategic rationale,” said the terse joint statement. They reiterated that the merger would have “provided an appropriate response to the challenges resulting from the increased competition from the international platforms.”

The two companies announced those “exclusive negotiations” in May 2021, coincidentally the same date Warner Media/AT&T and Discovery made known their plans for fusion. The pitch from Bouygues principal Martin Bouygues and Bertelsmann chief executive/RTL Group chairman Thomas Rabe was the necessity of European consolidation. Ad revenues had been slipping for three years, gross margins for European TV operators falling for much longer. Herr Rabe made crystal clear the intention to create “national champions” in European television. Parenthetically, that meant taking on those pesky - mostly American - streaming video platforms like Netflix.

In March this year the main partners agreed to spin-off one TV channel each, minor ones, to secure approvals from French media regulator Arcom. TF1 and M6 boards of directors approved the fusion in April, appointing M6 chief executive Nicolas de Tavernost to head the new venture. “Some opponents of the (merger) say that we are too big compared to the French market, others that we are too small compared to international players,” said M de Tavernost, quoted by business news portal Challenges (April 27). “One of the reasons for this (transaction) is that the synergies could be partly reinvested in an ambitious streaming policy, which requires investment. We are going to find a happy medium.” Public broadcaster France Télévisions, ranked second in audience delivery, endorsed the fusion.

As September arrived critics of the fusion sharpened their spears. Pay-TV operator Canal+, subsidiary of conglomerate Vivendi, principally controlled by Vincent Balloré, dropped carriage of TF1 channels, citing an increase in rates charged. Bouygues had earlier rejected an offer by Vivendi for TF1. Mobile platform and ISP Iliad founder Xavier Niel also voiced strong objections, saying the fusion would “create a monster.” “A victory for pluralism” and the “independence of the Competition Authority,” noted left-leaning French news platform Mediapart (September 17) when the TF1/M6 fusion was abandoned. The Competition Authority, however, was paying most attention to the advertising association Union des Marques, which complained about bigness. Responding to the “withdrawal,” the Competition Authority noted its “procedure” had come to an end.

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