On 30 November 2015, the Belgian Competition Authority (Belgische Mededingingsautoriteit/Autorité Belge de la Concurrence – the "BCA") decided to open an in-depth investigation into the acquisition by Kinepolis of four cinema complexes currently owned by Utopia NV. Kinepolis had notified the proposed acquisition to the BCA on 12 October 2015.
On 17 November 1997, the BCA (at the time Competition Council) had approved the concentration that created the Kinepolis group, subject to a number of conditions (the "1997 Decision"). These conditions prohibit exclusivity and priority provisions in the contractual relations of Kinepolis with cinematographic distributors. Furthermore, they require each acquisition or creation of a cinema complex by Kinepolis to be approved by the BCA.
Had the requirement of prior approval contained in the 1997 Decision not existed, the proposed concentration would not have been reviewed by the BCA, given that the Belgian turnover of Utopolis did not meet one of the statutory thresholds, i.e., a turnover in excess of EUR 40 million in the relevant financial year.
Kinepolis therefore argued that a different level of scrutiny should be applied, since the concentration would not normally have been subject to merger control. However, both the Prosecutor in Competition Matters (Auditeur/Auditeur – the "Prosecutor") and the Competition College (Mededingingscollege/ Collège de la Concurrence) rejected Kinepolis' position.
The decision of the Competition College to apply the standard procedure and level of scrutiny was based on three reasons. First, the 1997 Decision referred to the standard merger control procedure for matters such as procedural time limits and the concept of effective competition. Second, there are no indications in the 1997 Decision which would support a derogation from the standard procedure. Finally, the Competition College pointed out that such derogations would create a situation of legal uncertainty.
In the context of the phase I investigation, the Prosecutor concluded that the proposed acquisition would impede effective competition in the market for screening movies in cinemas, as well as in the upstream market for the distribution of such movies. The underlying economic analysis identified the following issues. First, the acquisition would lead to a strong increase of the market share of Kinepolis in several local markets for the screening of movies. Second, Kinepolis' current market shares in these markets are already significant. Third, the Prosecutor found that a Kinepolis cinema complex has a higher degree of attractiveness in comparison with those of competitors. In addition, the concentration would lead to higher market shares on the national market for the screening of movies and would increase the asymmetry between Kinepolis and its competitors as Kinepolis would acquire its second most important competitor.
According to the Prosecutor, the concentration would deprive the competitors of Kinepolis, or new entrants, of an important opportunity of consolidation. As a result, the Prosecutor proposed an in-depth investigation (phase II).
Kinepolis argued that the Prosecutor's draft decision does not sufficiently show a negative impact on competition. Kinepolis did not offer any remedies during the first phase of the investigation.
The decision of the Competition College is available at: http://economie.fgov.be/fr/binaries/BMA-2015-IO-69_PUB_tcm326-275537.pdf (in Dutch)
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