Written By John F. Rook, Andrew D. Little and Adam Kalbfleisch
On January 25, 2010, Canada's Competition Bureau announced that the Commissioner of Competition had reached an agreement with Ticketmaster Entertainment, Inc. and Live Nation, Inc. that resolved concerns that their merger would prevent competition substantially in the ticketing services market in Canada. Ticketmaster and Live Nation agreed to a three-part remedy to address the competition concerns of both the Commissioner and the United States Department of Justice, resulting in a North American solution.
Competition Review and Remedy
Ticketmaster is the largest provider of ticketing services in the world and Live Nation is the largest promoter of live entertainment events globally. Each occupies the same strong position as ticketer and promoter respectively for live entertainment at venues located in Canada. In late 2007, Live Nation announced that it had entered into a long-term agreement with a leading European ticketing company to license its ticketing platform in North America, enabling Live Nation to launch its own ticketing business. Live Nation subsequently began ticketing events in the United States and, prior to announcing the proposed merger with Ticketmaster, had intended to enter the ticketing services market in Canada to compete against Ticketmaster.
Antitrust agencies in several countries, including the Competition Bureau in Canada and the United States Department of Justice, reviewed the proposed merger to assess its impact on relevant markets. The Bureau's review led to the conclusion that the proposed merger prevented Live Nation from entering the ticketing services market in Canada and would raise barriers that would deter other companies from entering the market to compete against the merged entity.
Absent a negotiated resolution with the parties to the proposed merger, the Commissioner had several options for a remedy by commencing an application to the Competition Tribunal. In addition to interim remedies such as an injunction, the Commissioner may seek an order prior to closing requiring the parties not to proceed with a proposed merger (or part of it). Alternatively, up to a year after closing, the Commissioner may seek a dissolution of a completed merger or a disposal of assets or shares. In both scenarios, the Commissioner must prove that the impugned merger prevents or lessens competition substantially (or is likely to do so).
Prevention of Competition
The Competition Bureau's news release on January 25, 2010, stated that following a detailed review, "the Bureau concluded that the proposed merger between Ticketmaster and Live Nation raised serious competition concerns, as it would prevent Live Nation from entering the Canadian marketplace as a direct competitor to Ticketmaster" (emphasis added).
There are very few decided cases where the Competition Tribunal has concluded that a merger (or proposed merger) would prevent competition substantially under section 92 of the Competition Act. While the announcements of previous negotiated merger resolutions have referred to a lessening and/or prevention of competition and occasionally to a market entrant, an argument based on the prevention of competition has only succeeded in two previous cases decided by the Competition Tribunal.1
The three-part remedy agreed between the Commissioner, Ticketmaster and Live Nation is also noteworthy. The remedy combines both structural and behavioural elements.
First, Ticketmaster must divest its subsidiary ticketing business either to Comcast-Spectacor, a significant sports team and venue owner based in Philadelphia, or to another buyer acceptable to the Commissioner and to the U.S. Department of Justice. The Consent Agreement with the Commissioner, like its American counterpart, includes a hold-separate provision that requires the merging parties, pending the divestiture, to "preserve, maintain and operate [the subsidiary and its assets] as an independent, ongoing, economically viable competitive business, with management, sales and operations of its assets held entirely separate, distinct and apart" from the merged entity's other operations.
The second structural part of the remedy requires Ticketmaster to provide Anschutz Entertainment Group, Inc. (AEG) with (i) a private label ticketing service, for a period of up to five years, for use by AEG to provide ticketing services, and (ii) an option to acquire an exclusive and perpetual licence of its ticketing system software. AEG is Live Nation's principal competitor in the live event promotion business, as well as an owner and operator of large venues in the United States and Ticketmaster's largest customer. The licence, when exercised, includes a fully functioning ticketing system and a separate, customized website with "branding, look and feel" determined by AEG. The apparent purpose of this part of the remedy is to enable AEG to provide its own ticketing services.
The third component of the remedy is the behavioural component. The agreement forbids the merged entity, for a period of 10 years, from retaliating against a venue owner that is, or is contemplating, using another company's ticketing services. The merged entity is also subject to restrictions on anti-competitive bundling of services, namely (i) making the provision of ticketing services conditional on a venue entering an exclusive contract with the merged entity to provide live events; and (ii) conditioning the provision of live events on the venue entering into an exclusive ticketing services agreement.
Other Recent Asset Divestitures
A classic structural remedy, the asset divestiture has been used to address concerns of the Competition Bureau in four other merger matters since mid-2009. For example, in the Suncor/Petro-Canada merger, the parties agreed to divest over 100 retail gas stations in southern Ontario; to sell over 1 billion litres of annual terminal storage and distribution capacity for refined petroleum products for a 10-year period; and to sell a specified annual quantity of unbranded gasoline to independent marketers in Toronto for 10 years. In relation to the possible acquisition by Agrium, Inc. of CF Industries Holdings Inc., Agrium agreed to divest 50 percent of a fertilizer production facility in Alberta and to enter a five-year supply agreement with a new market entrant into Western Canada, if Agrium were successful in its acquisition. Like the Ticketmaster/Live Nation matter, in each of the other four matters the Commissioner's agreement with the parties was formalized by a Consent Agreement registered with the Competition Tribunal.2
Earlier in 2009, the Competition Bureau announced the resolution of competition concerns in two additional matters without such a registered Consent Agreement. These resolutions, in Dow Chemical Company's acquisition of Rohm and Haas Company and in BASF SE's proposed acquisition of Ciba Holding AG, involved the divestiture of intangible assets (including intellectual property rights) relevant to Canadian markets. The divestitures were committed to the Commissioner and formally agreed with antitrust agencies outside Canada as part of agreements to divest businesses of the acquired companies. These two announcements, like the North American solution in Ticketmaster/Live Nation, are a reminder of the increasing importance of international cooperation and comity in competition matters that affect markets in more than one jurisdiction.
The Consent Agreement entered amongst the Commissioner, Ticketmaster and Live Nation continues the Bureau's long-standing practice of requiring asset divestitures to eliminate a substantial lessening or prevention of competition caused by a proposed merger. It is noteworthy because it was based on the Competition Bureau identifying the prevention of an entrant into a market as a serious competition concern arising from a proposed merger, and because of the combination of structural and behavioural components in the agreed remedy. Overall, asset divestitures continue to be the price of admission for some mergers.
- See Commissioner of Competition v. Superior Propane Inc. et al. (2000), 7 C.P.R. (4th) 385 (Comp. Trib.) and Commissioner of Competition v. Canadian Waste Services Holdings Inc. et al. (2001), 11 C.P.R. (4th) 425 (Comp. Trib.).
- The other matters are Pfizer's acquisition of Wyeth and the merger of Merck & Co., Inc. and Schering-Plough Corporation.