Commission clears merger of New Zealand's two major cinema advertising companies
Published06 Apr 2001
The Commerce Commission today cleared of a business acquisition that would merge New Zealand's two major cinema advertising services companies, Television and Media Services Limited (TMS) Media Entertainment Group Limited (MEG).
Commission Chair John Belgrave said that the Commission was satisfied that, should the proposal go ahead, a merged TMS/MEG would not be dominant in any market.
In its application, TMS argued that the relevant market for the proposal was an advertising market including different media not solely cinema advertising services.
Mr Belgrave said that the Commission noted that there may be some substitutability between different media but considered a national market for cinema advertising services to be more appropriate. This market accounts for less than 1 percent of the total advertising spend in the country.
The proposal would result in high market share in a cinema advertising services market, but the Commission was satisfied that in this market high market share would not equate to dominance.
The Commission concluded that the countervailing power of movie exhibitors, in particular, would be likely to provide an effective constraint on a merged TMS/MEG.
Exhibitors, particularly Hoyts Cinemas Limited and Village Roadshow Limited, told the Commission that they believe they have countervailing power in the market. If they were unhappy with a cinema advertising services company, then they could deal direct with advertising agencies.
The majority of the independent cinemas had no objections to the proposed merger. They were comfortable that their niche audiences gave them negotiating power.
"These factors, along with the likelihood of some constraint from other media, led the Commission to conclude that dominance would not be acquired or strengthened, and so to give a clearance," Mr Belgrave said.
Public copies of the Commission's decision, number 420, are available from its website, www.comcom.govt.nz, and from reception at its Wellington office, Level 7 Landcorp House, 101 Lambton Quay. Public copies of TMS's application are available from the Commission by e-mail, contact baden.mccaardle@comcom.govt.nz, and in hard copy from reception.
Background
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened in any market. Parties can apply for a clearance, which the Commission will give if it is satisfied that dominance would not be acquired or strengthened.
