Competition Bureau Statement On Acquisition Of Alliance Films

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Further to Michael's post pointing out that the Competition Bureau has issued a "No Action" letter in respect of the proposed acquisition of Alliance Films Holdings Inc. by Entertainment One Ltd., a merger of the two largest film distributors in Canada, the Competition Bureau has issued a statement of its own regarding its decision.  As the statement notes:

The Bureau found that eOne and Alliance were significant competitors for the distribution of films in Canada and that they hold substantial market share in the distribution of Canadian films. Additionally, the Bureau concluded that the distribution of Canadian films constitutes a distinct product market as a result of various government cultural initiatives and funding programs dedicated to developing and promoting a domestic film industry. However, the Bureau found that the policies in place affecting the promotion and distribution of Canadian films would make it unlikely that a substantial lessening or prevention of competition for the distribution of Canadian films would result from the proposed acquisition. Further, the Bureau found that for the distribution of non-Canadian films, a substantial lessening or prevention of competition was unlikely due to effective competition remaining in the market.

The statement goes on to note that, while the Bureau was "initially concerned that the merged entity would be in a position to implement more restrictive distribution terms to producers by increasing distribution fees and/or reducing the minimum guarantee [i.e., the advance paid by a distributor to a producer as consideration for the exploitation rights granted to the distributor]", the requirements of government funding programs (which many Canadian producers rely on in order to get their movies financed) would sufficiently constrain the ability of the merged entity to implement such terms.

Though the Competition Bureau elected not to require the parties to undertake remedial action in order to implement the acquisition, it is worth noting that the Bureau has published an Information Bulletin on Merger Remedies in Canada, which sets out the Bureau's policies on merger remedies.  As the Bulletin notes, the Bureau generally prefers "structural" remedies (such as the divesting of certain business segments) over "behavioural" remedies (such as obtaining undertakings from the merged parties to conduct their business in a certain manner or refrain from taking certain actions) in order to preserve competition.

Topics:  Acquisitions, Competition, Motion Picture Industry, No-Action Letters

Published In: Antitrust & Trade Regulation Updates, Art, Entertainment & Sports Updates, Mergers & Acquisitions Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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