CADE releases report on TV sector

Brazil’s antitrust authority, the Administrative Council for Economic Defense (CADE), has just released a report on the TV sector (“Report”). The Report summarizes CADE’s experience of more than 20 years in reviewing mergers and conducting investigations involving the TV sector. Below we summarize key findings and takeaways from the Report:

• The last significant entry into the free-to-air TV segment in Brazil was in 1999, which suggests the existence of relevant barriers to entry in this segment. This assessment is corroborated by very high sunk costs associated with launching a free-to-air TV business. The same is true for the pay TV segment;
• Pay TV and free-to-air TV services are not substitutes for each other, and therefore are not part of the same relevant market;
• The relevant product market definition of licensing rights for programs produced for pay TV is segmented by genre, so channels of a similar genre are part of the same relevant product market;
• Competition among sports channels depends on programming, meaning that not every sports channel is necessarily a substitute for other sports channels. Any competitive analysis should start with an assessment of which broadcasting rights are owned by each channel (i.e., sports categories, national v. international championships etc.);
• Sports broadcasting rights are particularly relevant for the pay TV segment. Restrictions limiting the sale/licensing of such rights are potentially harmful to competition;
• The acquisition of sports rights is the main barrier to entry in the TV sector in Brazil. The dynamics of tenders tend to favor established players and switching is very low;
• Although the bundling of broadband internet access, television, telephone and wireless phone services may be a common practice in the telecom industry, CADE will continue to review each of these services as part of discrete relevant product markets. The Report states that the bundling of services may also constitute a barrier to entry in the pay TV market, but at the same time acknowledges that it generates efficiency and enhances consumer welfare;
• Even though many users may choose “over-the-top” services (i.e., streaming platforms) over pay TV services, CADE has consistently considered that pay TV channels and streaming platforms are not substitutes, and therefore should not be viewed as part of the same relevant product market;
• In any competitive analysis in the TV sector, CADE will not only take into account the market share, but also the differentiation, quality and variety of the programming of the players involved;
• In merger cases requiring remedies, CADE is usually open to both structural and behavioral remedies.

The decision to publish the Report shows the close attention CADE is paying towards the TV sector, and suggests that greater scrutiny may be applied to future matters undergoing CADE’s review.

For further information, please contact Mattos Filho’s Antitrust and Entertainment practices.