Antitrust Authority director general Adv. Michal Halperin has approved the merger between Reshet and Channel 10. Approval of the merger is subject to a condition obligating Reshet to sell its holdings in the news company, which it jointly holds with Keshet Broadcasting. The sale will take place before the merger is implemented.
Halperin's decision is based on the failing firm doctrine and the conclusion that without a merger, Channel 10 is extremely likely to leave the market, with severe consequences for competition and the public. If Channel 10 leaves the market, it means that one of the two main news companies on television will disappear, leaving only one important news company.
Halperin's announcement said that approval of the merger was preferable to opposing it from the standpoint of competition, despite its possible negative impact on competition.
In order to make sure that the conditions for the failing firm doctrine are fulfilled, the Antitrust Authority examined Channel 10's financial situation in recent years, particularly following the splitting of Channel 2 in November 2017. Consideration of the channel's economic situation and the many figures presented show the existence of significant doubt concerning Channel 10's ability to continue existing without a merger.
The Antitrust Authority found that following the splitting of Channel 2, Channel 10 faced competition from two channels broadcasting for a full week. The advertising revenue pie grew slightly during the relevant period, but certainly not to the same extent as the increase in broadcasting hours following the Channel 2 split. In addition, Channel 10 found itself competing against Reshet and Keshet under unequal regulatory conditions; while Keshet and Reshet shared their joint news company's expenses and current affairs programs produced in the framework of the news company, Channel 10 bore the entire expenses of its news company by itself.
All of this, plus objective accounting and financial figures, led Halperin to the conclusion that Channel 10 on its current format was an economic failure.
The Antitrust Authority also took into account the likelihood of another buyer with which a merger would be preferable from a competitive standpoint. As part of its consideration of this point, documents and figures were presented to the Antitrust Authority showing the measures taken by Channel 10 in order to find an alternative buyer both by itself and through intermediaries. These efforts were unsuccessful. The overall circumstances examined led the Antitrust Authority director general to the conclusion that in the absence of an alternative buyer, the acquisition of Channel 10 would be less harmful to competition.
The two examinations conducted showed that approval of the merger does not reduce the number of competitors in comparison with opposing the merger, because in any case only two commercial channels will remain in the market.
The examination also showed that in the absence of a merger, there was a considerable likelihood that one main news company would remain in the market in the coming years (held jointly by Reshet and Keshet).
Halperin concluded that this situation would be competitively inferior to a merger, for two principal reasons: firstly, the public will have fewer news broadcasting alternatives than without a merger and there would therefore be less competition in news broadcasting. Secondly, this structure leaves Reshet and Keshet as partners in the bulk of their content production in the framework of the news company, and this cooperation is liable to reduce their incentives to compete at all.
According to Halperin's announcement, the condition imposed will guarantee the existence of two major independent news companies and will sever the existing connection between Reshet and Keshet. Approval of the merger subject to this condition is therefore preferable from the standpoint of competition to closing down Channel 10.
Published by Globes [online], Israel business news - www.globes-online.com - on August 8, 2018
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