Eric Olson Student Fellow Institute for Consumer Antitrust Studies LOYOLA UNIVERSITY CHICAGO SCHOOL OF LAW

Transcription

1 AM I BEING TOO FORWARD (LOOKING)? NIELSEN S PROPOSED ACQUISITION OF ARBITRON Eric Olson Student Fellow Institute for Consumer Antitrust Studies LOYOLA UNIVERSITY CHICAGO SCHOOL OF LAW INTRODUCTION On September 20, 2013, the Federal Trade Commission approved Nielsen s proposed acquisition of Arbitron with conditions. Both companies offer extensive audience measurement services and sell data to end-users for various applications. The Commission settled charges with Nielsen that its proposed acquisition of Arbitron would substantially lessen competition after Nielsen agreed to divest and license certain assets and intellectual property. Interestingly, the motivation behind this divestment of assets stemmed from the Commission s concerns that the transaction would have an anticompetitive effect on the market for individual-level audience measurement services across multiple platforms, a market that did not yet exist. Noting that merger analysis is forward-looking, Commissioner Wright dissented from the Commission s decision citing a dearth of facts supporting the Commission s concerns. Though Nielsen ultimately entered into a consent decree with the Commission, questions regarding what facts and conditions are sufficient to establish anticompetitive harm in a future market remain. PARTIES TO THE PROPOSED TRANSACTION Nielsen is a leading media research company and provider of global media measurement and research services. 1 Notably, Nielsen provides audience measurement services for television 1 FTC Puts Conditions on Nielsen s Proposed $1.26 billion Acquisition of Arbitron, FEDERAL TRADE COMMISSION (September 20, 2013) [hereinafter FTC Press Release].

2 programming. 2 Nielsen is the industry standard for measuring television audience size and demographics. 3 In 2012, the firm had global revenues of $5.6 billion from its sale of data, analytics, and industry expertise, with approximately half of those revenues generated in the United States. 4 Arbitron is also a leading media measurement and research company. 5 The firm s leading product is a radio ratings service, which estimates the size of the audience by demographic factors. 6 Broadcasters and ad agencies use this information to price ads, while radio stations use the data to make programming and scheduling decisions. 7 This type of service is similar to the service offered by Nielsen for television audiences. 8 In 2012, the firm generated $449 million worth of revenues. 9 THE RELEVANT MARKET The Commission identified national syndicated cross-platform audience measurement services as the relevant market harmed by this transaction. 10 Historically, companies such as Nielsen measured audiences by single media platforms, such as television. However, as advances in technology have allowed viewers to access media through multiple platforms, such as computers, tablets, and smart phones, the demand for cross-platform audience measurement services has grown Statement of the Federal Trade Commission In the Matter of Nielsen Holdings N.V. and Arbitron Inc. at 1, FTC File No [hereinafter Statement of the FTC In the Matter of Nielsen and Arbitron] available at (September 20, 2013). 3 4 See FTC Press Release, supra note Arbitron Inc., Annual Report (Form 10-K), at 6 (Feb. 24, 2012). 8 9 See FTC Press Release, supra note Nielsen Holdings N.V., a Corporation and Arbitron Inc., a Corporation; Analysis of Agreement Containing Consent Order to Aid Public Comment, 78 Fed. Reg , (Sept. 27, 2013) [hereinafter Analysis of Agreement to Aid Public Comment]. 11 2

3 Consumers of this information, such as advertising and media companies, believe that cross-platform services offer a number of advantages to single-platform services. 12 Crossplatform solutions allow consumers to evaluate the entire viewing audience across all platforms, rather than relegating the metrics to traditional platforms like television and radio. 13 Additionally, cross-platform services can measure the degree of audience duplication, or the extent to which the same individuals watch a program using multiple media platforms. 14 With this knowledge, companies like advertising firms are better able to determine the value of their advertisements across platforms and allocate their resources more efficiently. The Commission identified two features needed to create a competitive national syndicated cross-platform audience measurement service: a television audience measurement component and individual-level demographic data, such as the age or sex of the individual audience members. 15 The television component is crucial because television is both the most consumed form of media and accounts for the majority of advertising revenue. 16 Additionally, individual-level demographic data is an essential feature because it allows consumers to use the data to make more informed business decisions. 17 For example, an advertising company would use granular demographic data by coupling information regarding a program s audience with a particular product s target demographic in order to determine the optimal advertising expenditure value Complaint 9, Nielsen Holdings N.V., FTC File No (Sept. 20, 2013) See Analysis of Agreement to Aid Public Comment, supra note 10, at

4 THE OVERLAP AND REMEDY Neither Nielsen nor Arbitron currently participate in the market for national syndicated cross-platform audience measurement services; in fact, no company does. 18 As noted in the Commission s statement, [t]his type of cross-platform measurement product has yet to be developed and marketed. 19 The Commission identified this area as a future market, 20 and the Antitrust Guidelines for the Licensing of Intellectual Property call this area an innovation market. 21 But for this proposed acquisition, the Commission stated that Nielsen and Arbitron are the best-positioned firms to develop a product and enter this market as direct competitors. 22 Noting that merger analysis is forward-looking, the Commission expressed its concern regarding the merger of these actual potential entrants. 23 While concerns regarding actual potential entry have typically arisen in instances where a market is already operating, antitrust agencies have also recognized this concern in future markets. Commission concerns based on the potential elimination of future competition, though relatively uncommon, are not new. 24 However, typically when the Commission challenges an acquisition where the overlap occurs in an innovation market, the transaction occurs within the pharmaceutical industry. 25 For example, the Commission alleged in 2000 that the merger between Glaxo Wellcome and SmithKline Beecham would eliminate future competition between 18 Dissenting Statement of Commissioner Joshua D. Wright, In the Matter of Nielsen Holdings N.V. and Arbitron Inc. at 1, FTC File No [hereinafter Wright Dissent] available at (September 20, 2013) at U.S. Dep t of Justice & Fed. Trade Comm n, ANTITRUST GUIDELINES FOR THE LICENSING OF INTELLECTUAL PROPERTY (1995) available at The Guidelines state: An innovation market consists of the research and development directed to particular new or improved goods or processes, and the close substitutes for that research and development at 3 24 One author noted that, as of 2008, the FTC challenged ten proposed acquisitions based on overlaps in innovation markets. See Michael A. Carrier, Two Puzzles Resolved: Of the Schumpeter-Arrow Stalemate and Pharmaceutical Innovation Markets, 93 IOWA L. REV. 393, 429 (2008). 25 4

5 the companies herpes vaccines. 26 While both companies vaccines were still awaiting FDA approval, they would likely be the first vaccines to reach the market. 27 Eventually, the Commission cleared the merger, but required divestiture in a number of overlapping drug markets. 28 To remedy the likely anticompetitive effect of this transaction, the Commission required Nielsen to divest the assets causing the concern. Specifically, Nielsen agreed to sell and license assets related to Arbitron s cross-platform audience measurement services within three months to a buyer approved by the Commission. 29 Included in this package of assets is a perpetual, royalty-free license to data, which includes individual demographic data, needed to create a product that could compete with Nielsen s potential future product. 30 The Commission noted in its statement that it did not seek a remedy merely because it thought it might obtain one, but rather because the remedy sought was in the public interest and would obviate harm to competition. 31 COMMISSIONER WRIGHT S DISSENT Commissioner Wright dissented from the Commission s decision, stating that there was insufficient evidence to support the allegation that the merger would reduce competition in the future market. 32 In his dissent, Wright noted the unique challenges presented by a future market case, including the difficulty in defining the relevant product market, identifying the likely market participants, determining likely potential entrants, and quantifying the effects of the 26 ABA SECTION OF ANTITRUST LAW, MARKET DEFINITION IN ANTITRUST: THEORY AND CASE STUDIES 491 (2012) at See FTC Press Release, supra note See Analysis of Agreement to Aid Public Comment, supra note 10, at See Wright Dissent, supra note 18, at 1. 5

6 transaction. 33 Typically, Wright noted, merger investigations are fact-intensive; however, in the present transaction, the Commission has relied less on facts and more on theory. 34 Even if Nielsen and Arbitron are the best-positioned firms to enter the future market, Wright noted that the absence of evidence indicating that the proposed acquisition would substantially lessen competition motivated his dissent. 35 Notably, Wright stated that even defining a relevant market is difficult because the products that might comprise the market are in the early development stages. 36 Likely participants in this market cannot even describe the future market consistently. 37 Additionally, Wright observed that the Commission had no facts from which it could infer the product s attributes, the extent to which consumers could find a substitute, or other factors that may impose competitive constraints on the market. 38 In short, though the Commission suspected that the proposed transaction could adversely affect competition, it cannot support its suspicion with facts and should thus refrain from challenging the transaction. CONCLUSION Shortly after entering into a consent decree with the Commission, Nielsen completed its acquisition of Arbitron. 39 But despite Nielsen s agreement to divest certain assets, the Commission is left in disagreement regarding the implications of the remedy. Commissioners Ramirez and Brill stated that the consent decree eliminates an anticompetitive consequence of 33 at at at at at Ben Sisario, Nielsen Deal for Arbitron Is Complete, N.Y. TIMES, Sept. 30, 2013, 6

7 the transaction and is in the public interest. 40 Conversely, Commissioner Wright suggested that the transaction was competitively innocuous and further stated that imposing consent decrees without first proving harm to competition could make consumers worse off. 41 This settlement joins a growing body of soft law in the area of future markets. Despite a number of settlements with antitrust enforcement agencies, no substantial case has yet reached litigation. Going forward, counsel for companies who find themselves similarly situated to Nielsen and Arbitron should carefully consider the implications of any overlap in future markets. As the Commission has made clear in this recent decision, this analysis applies generally and extends beyond deals in the pharmaceutical industry See Wright Dissent, supra note 18, at 7. 7