CADE's General Superintendence concludes opinion on Disney/Fox merger

In an order published on December 3rd, the General-Superintendence of the Administrative Council for Economic Defense (CADE, in its acronym in Portuguese) submitted the Twenty-First Century Fox acquisition by The Walt Disney Company to the assessment of the autarchy's Tribunal.

The companies perform in the movies distribution business, in the distribution and licensing of TV content, and in the license of products and programming for cable TV.

After reviewing information obtained through the merger instruction, the General Superintendence from CADE concluded that the merger of the companies in the cable TV sports channels market – including ESPN and Fox Sports – raises competition concerns.

Currently, only one premium competitor is capable of competing with those channels. There is no forecast of newcomers in this segment in the next years. Furthermore, ESPN and Fox Sports are the closest competitors in the distribution of international sports content.

The conclusion of the opinion was that the operation would result in a significant increase of market concentration on cable TV sports channels, with high market power exercised by Disney. Therefore, the CADE´s General Superintendence understood that there is a potential for quality and diversity reduction in the available sports content. In addition, the cost increase could be passed to the consumers.

Regarding the other analyzed markets, no competition preoccupation was verified. According to the Technical Note, in each of the other markets, there are relevant competitors able to compete with the company that would result from the merger.

The process now follows to the CADE´s Tribunal. The court is responsible for the final decision of approval, disapproval or for the recommendation of adoption eventual measures to avoid any identified problem. The decisions of the court might be applied unilaterally or upon agreements with the parties.

The operation was notified on June 26 of 2018 and the legal deadline for the decision is 240 days, renewable for 90 more days.