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Canal Plus fined for failing to meet TPS takeover commitments

French competition regulator L’Autorité de la Concurrence has retrospectively withdrawn approval for pay-TV channel Canal Plus’ 2006 acquisition of rival satellite operator TPS, after ruling that it had failed to meet some requirements agreed at the time of the merger. The authority also fined Canal Plus €30 million (about $40 million) and required the company to submit a new application for approval within a month.

Canal Plus responded by calling the decision “highly unusual and disproportionate in relation to the alleged breaches identified”, adding that it is “naturally not possible to challenge a merger” that took place almost five years ago. It also said that it “welcomes the opportunity given to it to open the discussion with the Competition Authority as part of the new notification request.”

Such a retrospective ruling so long after the event is certainly unusual, but the authority would say that this was because it only recently became apparent that the original agreement had been flouted. According to the Competition Authority, Canal Plus had agreed to unbundle seven channels it had acquired from TPS and make them available to Internet Service Providers for competitive services. These were TPS Star, Cinéstar, Cinéculte, Cinétoile, Sport 1 and Télétoon, all of which the authority said were not made available by the date it had agreed with Canal Plus and its parent company Vivendi. The authority also said Canal Plus had charged ISPs too much for the key channel, TPS star.

This unbundling commitment was crucial because TPS was the main pay TV rival to Canal Plus and so the takeover threatened to create an effective monopoly in France. Now, however, Canal Plus faces stiff competition in French pay TV from Orange, which has been focusing more on multi-screen services with greater ability to purchase a la carte rather than bundled packages.

The competition ruling will have little immediate effect on Canal Plus operations, but could make the authority more reluctant to grant approval for its planned purchase of a 60 percent stake in two TV channels owned by Bollore Group. This is crucial to the current Canal Plus strategy of expanding in the French advertising funded free to air market.

The controversy surrounding the Canal Plus follows from the internal conflict resulting whenever a pay TV operator is also a significant content provider. As an operator, it wants to provide its customers with a full range of content via its own network from whatever source, and if possible prevent rivals from giving it to their customers. But as a content provider its interests lie in having as many outlets as possible, including other ISPs. It seems that the competition authority is suggesting Canal Plus’ interests as an operator prevailed in this case by being slow to make key channels available to rivals.

This can be compared to the past situation in the UK, when the two dominant pay TV providers, satellite operator BSkyB and cable company Virgin Media, were both also major content providers. There were various disputes over access to each other’s content, until Virgin Media in 2009 decided to focus on being a pure quadruple play operator and sold its TV channels including Bravo and Living to BSkyB itself for £160 million (about $250 million). As part of this deal, Virgin Media was allowed to offer the then relatively new Sky HD sports and movie channels for the first time. The move appeared to benefit both companies, which now exercise a strong duopoly in UK pay TV.