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Decision by the Danish Competition Appeal Tribunal - TV2's prices and conditions for the selling of TV-commercials

01. november 2006

4/0120-8700-0015/SCL

On 1 November 2006 the Danish Competition Appeal Tribunal concluded that TV2/Danmark A/S had not abused its dominant position on the market for TV-advertising in Denmark.

The Competition Appeal Tribunal thereby annulled parts of the Danish Competition Council decision from December 2005 in which TV2´s annual rebate was found to infringe Article 82 of the Treaty and section 11(1) in the Danish Competition Act. The Competition Council had concluded that TV2´s annual rebate had a loyalty-enhancing effect, which in turn generated a foreclosure effect by limiting the ability of rivals to sell to advertisers.

Contrary to the decision by the Competition Council the Appeal Tribunal stated that, in light of the special characteristics of the market for TV-advertising, the information provided in the Councils decision was insufficient to support the conclusion that TV2’s annual rebate was loyalty-enhancing.

The Appeal Tribunal declared that a dominant company’s use of measures, in the battle for customers, other than those normally used in the competition on the relevant market constitutes an abuse of dominance. As regards bonus and rebate systems, the Appeal Tribunal stated that such measures will infringe article 82 of the Treaty and Section 11 in the Danish Competition Act, if no objective justifications relating to market conditions can be provided by the dominant company.

The Appeal Tribunal stated that the market for TV-advertising differs from conventional markets for consumer goods. First of all, TV-companies main costs relate to the production of programmes and are therefore less variable than in conventional consumer goods markets. Secondly, non exclusive annual agreements are used by all parties on the market. Finally, the marginal utility of additional show-ings of a given TV-advertisements is decreasing and advertisers therefore buy airtime on several TV-stations in order to reach new viewers.

The Appeal Tribunal concluded that in light of the special characteristics of the market for TV-advertising it was not possible to compare the use of annual rebates on such a market with the use of progressive rebates on conventional goods markets. Arguments based on case law relating to other markets could therefore not be applied in order to show that the use of progressive rebates on the market for TV-advertising had loyalty-enhancing effects. Further evidence was necessary in order to show that the use of progressive rebates constituted an abuse.

The Appeal Tribunal stated that even though the decision by the Competition Council included more detailed information, the information provided for was insufficient to support the assumption that TV2’s annual rebate had a loyalty-enhancing effect.