EUROPEAN COMMISSION DG Competition

Only the English text is available and authentic.

REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION Date: 30/10/2023

In electronic form on the EUR-Lex website under document number 32023M11153

EUROPEAN COMMISSION

Brussels, 30.10.2023 C(2023) 7497 final

PUBLIC VERSION

In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description.

Czech Media Invest a.s. Soukalova 2039/1d, Modřany, 143 00 Prague 4 Czechia

Dear Sir or Madam,

(1) On 25 September 2023, the Commission received notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004, by which Czech Media Invest a.s. (‘CMI’ or the ‘Notifying Party’, Czechia), through its wholly owned subsidiary International Media Invest a.s. (‘IMI’, Czechia) intends to acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the whole of Editis Holding (‘Editis’, France, together with CMI, 3the ‘Parties’), by way of a purchase of shares (the ‘Transaction’).

1 OJ L 24, 29.1.2004, p. 1 (the ‘Merger Regulation’). With effect from 1 December 2009, the Treaty on the Functioning of the European Union (‘TFEU’) has introduced certain changes, such as the replacement of ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU will be used throughout this decision.

2 OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).

3 Publication in the Official Journal of the European Union, OJ C, C/2023/104, 4.10.2023.

Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111

1. T HE PARTIES

(2) CMI is active in the media sectors (print, digital, on-demand video and radio in Czechia, France, and Romania). In France, CMI is primarily active in the magazine publishing sector, through Elle, Art & Decoration, France Dimanche and Marianne, as well as online magazines. CMI is jointly controlled by EP Corporate Group, a.s. (‘EPCG’, Czechia) with a 50% stake, E-Commerce and Media Investments, a.s. (‘ECMI’, Czechia) with a 40% stake and TYMON a.s. (‘TYMON’, Czechia) with 4 a 10% stake. EPCG, an investment holding company controlled by Mr Daniel Křetínský, is active mainly in the energy, infrastructure and media sectors. ECMI, a holding company controlled by Mr Patrik Tkáč, focuses on investment in media and real estate. TYMON, a holding company belonging to Mr Roman Korbačka, controls companies active in real estate, retail of clothes, electricity generation and energy engineering.

(3) Editis is a book publishing group active in France and French-speaking countries. Editis gathers 53 publishers in the field of literature, education and reference books. Editis is also active in the marketing and distribution of books to dealers such as bookshops, specialised shops, hypermarkets, supermarkets and pure players that sell only books online, through its subsidiary Interforum.

2. T HE OPERATION

(4) On 9 June 2023, the Commission approved the acquisition of Lagardère S.A. (‘Lagardère’) by Vivendi S.E. (‘Vivendi’) (the ‘Vivendi/Lagardère decision’) upon condition of the divestiture of:

(a) Vivendi’s publishing business consisting of Editis. The acquisition of this divested business by the Notifying Party is the subject of the Transaction.

(b) Vivendi’s celebrity press magazine Gala.

(5) On 23 April 2023, IMI and Vivendi signed a Put Option Agreement, whereby IMI would acquire 100% of the share capital and voting rights of Editis on the terms and conditions set forth in the Sale and Purchase Agreement (the ‘SPA’) for a price of EUR […]. IMI and Vivendi signed the SPA on 16 June 2023.

(6) After completion of the Transaction, CMI (via IMI) will have sole control over Editis. The Transaction therefore constitutes a concentration pursuant Article 3(1)(b) of the Merger Regulation.

3. UNION DIMENSION

(7) The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 000 million (CMI: EUR […]; Editis: EUR […]). Each of them

4 While currently, CMI’s shareholders are EPCG, ECMI and TYMON, pursuant to a shareholder’s agreement of 22 August 2023 between EPCG, TYMON and J&T CAPITAL PARTNERS (‘JTCP’), ECMI will be replaced by JTCP (case M.11122 – EPCG/JTCP/TYMON/CMI).

5 M.10433 – Vivendi/Lagardère.

6 Taking into account the turnover of CMI as well as those of its parent companies, i.e., EPCG, ECMI and TYMON. Turnover figures are for 2021 except for Editis (2022).

7 has an EU-wide turnover in excess of EUR 250 million (CMI: EUR […]; Editis: EUR […]), but they do not each achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension pursuant to Article 1(2) of the Merger Regulation.

4. COMPETITIVE ASSESSMENT

(8) The Transaction gives rise to a vertical link between the sale of books by publishers to retailers upstream and the retail sale of books by retailers to readers downstream.

(9) This link results from (i) Editis’ activities in the sale of books from publishers to retailers (which is part of its activities throughout the book value chain), and (ii) the fact that Daniel Křetínský, who jointly controls CMI, holds through Vesa Equity Investment S.à.r.l (‘Vesa’), over which it has sole control, a 25.03% shareholding in Fnac Darty, a French retail group specialised in sales of entertainment and leisure products (including books), consumer electronics, and domestic appliances. Fnac Darty is the leading retailer of French-speaking books in the EEA, and Editis’ second largest customer (behind Amazon). Although, as explained in Section 4.2.1, this minority shareholding does not confer to Mr Křetínský control on Fnac Darty, the Commission has decided to examine in detail the vertical impact of the Transaction in light of the concerns expressed by market participants during the M.10433 Vivendi/Lagardère merger assessment.

(10) The Commission notes that following discussions with representatives of book retailers and book publishers, who have publicly voiced their concerns, Mr Křetínský decided to publicly state, in a written document, the principles that will guide CMI and Vesa (as owner of Editis for the former and as a minority shareholder in Fnac Darty for the latter). This statement of principles has been signed on 6 October 2023 by representatives of CMI and Vesa. In this document, Vesa and CMI declared that they commit vis-à-vis book retailers to (a) treat all bookshops in a non-discriminatory manner, (b) keep the current level of discount granted by Editis to retailers, and (c) grant no exclusivity to Fnac Darty. As the Commission considers that the Transaction does not in the current circumstances raise serious doubts as regards its compatibility with the internal market, this statement of principles will not be further discussed in this decision.

4.1. Market definition

4.1.1. Sale of books by publishers to retailers

(11) The sale of books is the activity by which publishers sell books to retailers who, in turn, sell them to consumers. Editis is active on this market as a publisher.

4.1.1.1. The Commission’s past practice

(12) As regards the product market, in Vivendi/Lagardère, the Commission segmented the market for the sale of books by publishers to retailers by major categories of books, type of reseller and book format.

(13) With respect to the geographic market, in Vivendi/Lagardère, the Commission analysed the effects of the Transaction at a supra-national level, corresponding to an area covering the French-speaking part of the EU including France, Belgium and Luxembourg. As for school textbooks, the Commission analysed the effects of the Transaction at national level (France), based on the prevalence of national school programmes.

4.1.1.2. The Notifying Party’s view

(14) The Notifying Party agrees with the product and geographic market definitions as considered by the Commission in its previous decisions.

4.1.1.3. Assessment of the Commission

(15) The Commission has not received any indications during the market investigation that it should depart, in this case, from the market definition adopted by the Commission in Vivendi/Lagardère. The Commission will therefore carry out its analysis based on a segmentation of the markets for sale of books by major categories of books, type of reseller and book format.

4.1.2. Retail sale of books to consumers

4.1.2.1. The Commission’s past practice

(16) As regards the product market, in a previous decision, the Commission considered distinct markets for the sale of books to consumers: (i) sale of books by retailers to end consumers (in brick-and-mortar shops), (ii) distance selling (including internet sales, mail orders and book clubs), (iii) second-hand book dealers, and (iv) sale of large reference works by sales agents. In a previous case, the Commission concluded on the existence of an overall market for the sale of books to end consumers including sales in brick-and-mortar shops as well as distance selling, whilst in another case, the question was left open.

(17) With respect to the geographic market, in Lagardère/Natexis/VUP, the Commission found that the geographic scope of the market for the sales of books to consumers corresponds to an area covering the French-speaking part of the EU including France, Belgium and Luxembourg. In two decisions concerning respectively Denmark and Spain, the Commission found this market to be national.

4.1.2.2. The Notifying Party’s view

(18) The Notifying Party agrees with the product and geographic market definitions as considered by the Commission in its previous decisions.

4.1.2.3. Assessment of the Commission

(19) The Commission has not received any elements during the market investigation indicating that it should depart, in this case, from the market definitions adopted by the Commission in its previous decisions. The Transaction will therefore be assessed on the overall market for the sale of books to consumers, without further segmentation, in the French-speaking area of the EU including France, Belgium and Luxembourg.

4.2. Competitive assessment

(20) As explained above, the Transaction gives rise to a vertical link resulting from the fact that Daniel Křetínský, who jointly controls CMI, holds a minority shareholding in Fnac Darty, a French retail group specialised in sales of entertainment and leisure products (including books), consumer electronics, and domestic appliances.

(21) The vertical links relate to (i) the markets for the sale of books to retailers on which Editis is active (upstream) and (ii) the market for the sale of books to end consumers on which Fnac Darty is active (downstream).

(22) In the first place, the Commission has assessed whether Mr Křetínský’s minority shareholding confers to Mr Křetínský’s control over Fnac Darty. In the second place, the Commission has assessed risks of customer and input foreclosure in light of the minority shareholding held by Mr Křetínský.

4.2.1. Mr Křetínský’s current minority shareholding does not confer control over Fnac Darty

(23) According to the information submitted by the Notifying Party, the main shareholders of Fnac Darty are currently: Vesa with 25.03% of the share capital and voting rights, Cececonomy AG with 24.20% and Indexia Développement SAS with 11.26%. No other shareholder holds more than 3.7% of the shares.

(24) In its 2022 Universal Registration Document, Fnac Darty indicates that “[n]o shareholder controls Fnac Darty”. The Commission’s assessment supports the conclusion that, currently, Mr Křetínský does not have control over Fnac Darty.

4.2.1.1. No de jure control

(25) First, although Mr Křetínský (through Vesa) is the largest shareholder in Fnac Darty, he does not have a majority of the voting rights in Fnac Darty.

(26) Second, no specific rights are attached to Vesa’s 25.03% shareholdings that would enable Vesa to determine the strategic commercial behaviour of Fnac Darty. Indeed, based on Fnac Darty’s by-laws, decisions are adopted by the Board of Directors of Fnac Darty on a simple majority basis and no shareholder holds any special rights in connection to its level of shareholding. Since Vesa does not have the right to appoint more than half of the Board members, Vesa cannot block any such decisions.

(27) Third, there is no shareholder agreement between the various shareholders of Fnac Darty that would enable Vesa to exercise joint control on, or otherwise influence strategic decisions taken by, Fnac Darty, together with other shareholders.

4.2.1.2. No de facto control

(28) Based on the attendance rates achieved at the last five shareholder meetings of Fnac Darty, which are comprised between 75 and 85% in general, Vesa would not have obtained a majority on a de facto basis in these meetings with its current shareholding. It is therefore not highly likely that they will achieve a majority at the shareholders’ meetings. The Commission has not found elements suggesting a communality of interests between the minority shareholders of Fnac Darty that would lead to the exercise of de facto joint control.

(29) The market investigation has not revealed any elements that would suggest that Vesa would have a de facto control over Fnac Darty.

4.2.1.3. Conclusion on the existence of control

(30) Based on these elements, the Commission considers that, currently, Mr Křetínský does not have control, either de jure or de facto, over Fnac Darty.

4.2.2. The Transaction is unlikely to raise vertical foreclosure concerns

(31) In the light of Section 4.2.1, the Commission has carried out its competitive assessment based on the finding that Mr Křetínský does not have control over Fnac Darty. Any new development giving Mr Křetínský the possibility to exercise a (de jure or de facto, positive or negative, sole or joint) decisive influence over Fnac Darty, if it were to materialise, would have to form the subject-matter of a separate and distinct assessment, where appropriate, under the relevant EU or national competition rules.

(32) Thus, the Commission will assess inter alia whether Mr Křetínský's minority participation in Fnac Darty might affect Editis' incentives in the markets where it has vertical relations with Fnac Darty.

4.2.2.1. Legal framework

(33) Pursuant to Article 2(2) and (3) of the Merger Regulation, the Commission must assess whether a concentration would significantly impede effective competition in the internal market or in a substantial part of it, in particular through the creation or strengthening of a dominant position. In this respect, a merger can entail horizontal and/or non-horizontal effects.

(34) With regard to non-horizontal effects, a merger can entail such effects when it involves companies operating at different levels of the same value chain or in closely related markets.

(35) In assessing potential vertical effects of a merger, the Commission analyses, among others, whether the merger results in foreclosure so that actual or potential rivals’ access to supplies or markets is hampered or eliminated as a result of the merger, thereby reducing those companies’ ability and/or incentive to compete. Such foreclosure may discourage entry or expansion of rivals or encourage their exit. Foreclosure thus can be found even if the foreclosed rivals are not forced to exit the market. It is sufficient that the rivals are disadvantaged and consequently led to compete less effectively. Such foreclosure is regarded as anti-competitive where the merging companies — and, possibly, some of their competitors as well — are as a result able to profitably increase the price charged to consumers.

(36) The Non-Horizontal Merger Guidelines distinguish between two forms of foreclosure: (i) input foreclosure, when access of downstream rivals to supplies is hampered; and (ii) customer foreclosure, when access of upstream rivals to a sufficient customer base is hampered.

(37) In assessing both types of foreclosure, the Commission assesses whether the merged entity (i) would have the ability to engage in foreclosure, (ii) whether it would have the incentive to do so, and (iii) what would be the overall impact on effective competition in the affected markets.

4.2.2.2. Input foreclosure

4.2.2.2.1. Ability

(39) The results of the market investigation indicate that CMI-Editis may have the ability to foreclose Fnac Darty’s competitors post-Transaction.

(40) First, Editis is among the largest publishers of books in French-speaking countries in the EEA. It ranks number 2 after Hachette Livres. Editis holds a significant market position in a number of book publishing markets, and is often among the top 3 players. For example, Editis holds market shares above 30% in the markets for schoolbooks and educational supporting materials, notably in relation to smaller retailers. It holds a market share around [30-40]% in the markets for pocketbooks sold to hypermarkets and smaller retailers and reference works sold to hypermarkets. It cannot therefore be excluded that Editis holds a certain degree of market power in some different markets for the sale of books.

(41) Furthermore, Editis has a very wide range of books and is present in all categories of books, which is not the case of most of its competitors. As explained in Vivendi/Lagardère. Editis, like Hachette, is a very significant trading partner for bookshops. Moreover, Editis has high market shares (between [30-40]% and [50-60]%, depending on the sales channel) for the marketing of books (promotion of books to retailers and, in some cases, negotiation of the remuneration and/or retailers’ discounts), a neighbouring market of the various markets for sale of books. This means that Editis is an important partner for bookshops, to which Editis promotes not only its books, but also books of smaller publishers that rely on Editis for this particular activity. This presence of Editis across a wide range of books and its high market share in adjacent markets such as the marketing and distribution of books, has a strengthening effect on its position on the various markets for sale of books, as explained in the Vivendi/Lagardère decision.

(42) During the market investigation, a majority of bookshops indicated that Editis is likely to have the ability to discriminate smaller bookshops in favour of Fnac Darty. Such discrimination could take place in different ways, for example through lower discounts to smaller bookshops, exclusivities or privileged partnerships granted to Fnac Darty only, notably when organising authors’ promotion tours. Fnac-Darty could also benefit from lower distribution charges or obtain priority deliveries for best sellers. In that regard, Editis publishes each year several best-sellers that could be considered as “must-carry” products by bookshops in French-speaking countries.

(43) In view of the above, the Commission considers that the merged entity may have the ability to foreclose Fnac Darty’s competitors post-Transaction in the various markets for the sale of books to retailers.

4.2.2.2.2. Incentives

(44) The Commission investigated the incentives that the merged entity may have to restrict the access of Fnac Darty’s competitors to Editis’s books, for example by increasing the price charged to these downstream competitors (through lower discounts). In this respect, the market investigation revealed that an input foreclosure strategy is unlikely to be profitable at this point because the downstream profits that the merged entity would obtain through its minority share appear unlikely to compensate the upstream losses that it would likely incur should it decide now to deviate its sales to Fnac-Darty. Importantly, the lack of (lasting) control over Fnac-Darty also suggests that a long-term strategy of businesses’ integration is not likely at this point.

(45) The short-term profit gains resulting from the sales increase of Editis’ books by Fnac Darty would depend on the diversion ratios of consumers from rival retailers to Fnac Darty, i.e., the percentage of consumers that would switch retailers in favour of Fnac Darty if they do not find a specific book in the shop in which they initially went, or the percentage of consumers choosing Editis’ books in Fnac-Darty rather in competing retailers as a result promotion materials in Fnac-Darty not offered to competing retailers.

(46) The Notifying Party estimated this diversion ratio to be 25.3% from smaller Tier 2 and 3 bookshops (and 27.6% from larger Tier 1 bookshops). These diversion ratio estimates are based on Fnac Darty’s market share in the overall retail market for books in France ([20-30]%) as well as the market shares for Tier 1 bookshops on the one hand, Tier 2 and 3 bookshops on the other hand.

(47) The Notifying Party indicated that these diversion ratios could be underestimated given Fnac Darty’s market position in terms of attractiveness in the eye of consumers and its large in-shop offering. Nevertheless, the Notifying Party submits that these diversion ratios show that the downstream gains for Fnac Darty would be limited because only a minority of customers would likely switch to Fnac Darty’s shops.

(48) Moreover, as Mr Křetínský does not control Fnac Darty, he is not able to promote Editis’ books in Fnac Darty shops. If Fnac Darty and Editis had the same owner, promotions of Editis’ books in Fnac Darty stores could incentivise a higher number of consumers to switch to Fnac Darty shops (or choose Editis’ books in Fnac-Darty rather than in its rival shops) and increase these diversion ratios beyond what the current market share suggests. This not the case now.

(49) More importantly, if Editis were to foreclose downstream rivals of Fnac Darty, this would risk leading to a loss of sales for Editis that may not be recouped by a comparable gain in Fnac Darty shops. Following the Transaction, Mr Křetínský would have to bear 50% of these potential losses, corresponding to its stake in CMI. Conversely, as Vesa’s stake in Fnac Darty is 25%, Mr Křetínský’s gains from an increase in sales in Fnac Darty would only be indirect (through the payment of dividends stemming from the profits achieved by Fnac Darty) and partial (up to around 12.5% corresponding to Mr Křetínský’s 50.45% stake in Vesa, which has a 25% stake in Fnac Darty), against a loss of earnings of up to 50% for Editis.

(50) In this situation, the incentives to engage in such practices in the current situation appear to be low, especially given that, since Mr Křetínský does not control Fnac Darty, he is currently not incentivized to promote Editis’s books in Fnac Darty shops to try to compensate for potential lost sales in rival retailers.

Respondents to the market investigation have expressed nuanced views as regards incentives to foreclose. In particular, a number of respondents consider that a wise management of Editis would be to develop the acquired company while at the same time trying to maintain a healthy network of independent bookshops, which is important for the promotion of books in general. Others claim that an input

50 foreclosure strategy might be beneficial in the short term.The Commission notes that respondents have assessed these incentives in the context of Mr Křetínský owning a minority stake in Fnac Darty, without control.

(52) Market participants have argued that in a scenario where Mr Křetínský would own Editis and Fnac Darty, this common ownership of a publisher and a bookseller could lead to a strategy maximising profits for both companies, potentially to the detriment of other bookshops and smaller publishers. Joint ownership could also lead to information sharing of contracts and agreements signed by Fnac Darty with publishers competing with Editis, which could provide an advantage to Editis in the market and reinforce its position toward independent bookshops. However, in the current situation, Mr Křetínský, as a minority shareholder, has no access to Fnac Darty’s confidential information. The Notifying Party has confirmed that none of the documents communicated to Mr Křetínský as a minority shareholder contain detailed information regarding Fnac Darty’s commercial policy. Notably, during the Annual General Meeting of 24 May 2023, the shareholders did not receive any detailed communication on Fnac Darty’s commercial policy.

(53) In view of the above, it can be concluded that the merged entity will likely lack in the current circumstances the incentives to foreclose Fnac Darty’s competitors by restricting access or otherwise increasing prices of Editis books to rival retailers.

4.2.2.2.3. Impact

(54) As for the impact of a potential input foreclosure strategy, it can be noted that a small majority of responding bookshops considered that the impact would be neutral rather than negative, in the context of the minority shareholding held by Mr Křetínský in Fnac Darty. The market investigation thus suggests that the Transaction would not in the current context have a material impact on bookshops.

(55) In any event, there is no need to consider the overall impact of such a strategy as the merged entity will lack the incentive to foreclose Fnac Darty’s competitors for the reasons set out above.

(56) Consequently, the Commission concludes that the Transaction does not give rise to serious doubts in relation to input foreclosure concerns.

4.2.2.3. Customer foreclosure

(57) As explained above in Section 4.2.1, Mr Křetínský does not have control over Fnac Darty. He is therefore not able to engage Fnac Darty into practices limiting access to Fnac Darty as an outlet for rival publishers, to the benefit of Editis.

(58) Consequently, the Transaction is unlikely to raise customer foreclosure concerns because of the absence of control of Mr Křetínský on Fnac Darty resulting from his minority shareholding.

50 See responses to questionnaire to bookshops, question B4.

51 Form CO, paragraph 209.

52 Form CO, paragraph 214.

53 See responses to questionnaire to bookshops, question C1.

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5. CONCLUSION

(59) For the above reasons, the European Commission has decided not to oppose the notified operation and to declare it compatible with the internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and Article 57 of the EEA Agreement.

For the Commission

(Signed) Didier REYNDERS Member of the Commission

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