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The Competition Council's Approval of the Establishment of a Joint Venture between Post Danmark A/S and 365 Media Scandinavia A/S

30. august 2006

4/0120-0401-0002/ISA/FAB The Council Meeting on 30 August 2006

On 30 August 2006 the Competition Council has approved the establishment of a joint venture between Post Danmark A/S and 365 Media Scandinavia A/S. Post Danmark and Media Scandinavia notified the establishment of the joint venture to the Competition Authority as the establishment represented a merger according to the Danish Competition Act.

History of the case

Post Danmark is a partially state-owned corporation with exclusive right to distributing post under 50 grams. Moreover, Post Danmark operates in a variety of competitive fields, such as markets for distribution of unaddressed items including local, regional and national newspapers.

365 Media Scandinavia is a corporation owned by the Icelandic company Dagsbrún hf, a holding company of an Icelandic media group. 365 Media Scandinavia was established March 2006 with the object of publishing Nyhedsavisen. Nyhedsavisen is a new free newspaper in Denmark expected to appear for the first time on 6 October 2006.

The notified joint venture is to distribute Nyhedsavisen 6 times a week before 7 a.m. Moreover, the joint venture is to distribute other unaddressed items together with Nyhedsavisen.

The Competition Council’s assessment of the effects of the merger

The Competition Council found that the merger would have an impact on competition in (i) the market for distribution of unaddressed items, including local, regional and national newspapers where Post Danmark has a dominant position, (ii) market for publishing of newspapers and (iii) market for newspaper advertisements.

The competition Council found that the merger, in isolation, had a positive impact on the 3 product markets in question. In the market for distribution of unaddressed items, the joint venture introduced a new service in the form of distribution in the morning before 7 a.m. In the newspaper market and the newspaper advertisement market the announcement of the joint venture entailed that, already before the approval of the merger by the Competition Council, several new free newspapers were introduced.

However, at the same time, the Competition Council found that the merger would have such significantly negative impact on the market for distribution of unaddressed items that the merger, in overall terms, could not be approved without remedies. This is due to the fact that the establishment of the joint venture might strengthen Post Danmark’s dominant position in the market and that such strength of the dominant position would have a significant anti-competitive impact. The misgivings over the merger are especially due to the fact that Post Danmark might develop an interest in using the joint venture for anti-competitive conduct to the detriment of Post Danmark’s competitors.

After negotiation with the Competition Authority, Post Danmark and 365 Media Scandinavia committed themselves to 9 remedies to meet the concerns over the merger. The commitments prevent Post Danmark from using the joint venture to carry out activities that, because of Post Danmark’s dominant position, will be contrary to the Competition Act. This is achieved by the joint venture complying with certain minimum prices and only entering into short-term client agreements. Furthermore, the commitments ensure that Post Danmark and the joint venture are kept separate and that the joint venture will not benefit from Post Danmark or exchange services on terms to the detriment of competition in the market. This is achieved e.g. by Post Danmark not transferring certain resources as for instance front door keys and customer database to the joint venture.

As the remedies met the Competition Council’s misgivings over the merger, the Council approved the merger with the remedies. At the same time the remedies were made a precondition for the approval.