Published:
09-Jul-07
Australian Competition and Consumer Commission (ACCC) is expected to rule this month (July) on leading domestic rentailer Video Ezy's proposed acquisition of Blockbuster's Australian business. Pending regulatory approval, Video Ezy hopes to enter into a master franchise agreement with Blockbuster Entertainment for a 10-year term with the possibility of renewal for a further 10 years. ACCC is understood to have formed a preliminary opinion that the deal might have 'a detrimental impact' on competing rental chains. Although Video Ezy does not accept this, it has attempted to assuage concerns by issuing a court-enforceable undertaking in keeping with section 87B of the Australian Trade Practices Act 1974. The undertaking states that Video Ezy/Blockbuster will not purchase any new retail or rental DVD title release on an exclusive basis from any DVD distributor over a period of two years. Furthermore, it undertakes not to purchase any new-release DVD title subject to a rental window from any of the major distributors during this period. ACCC's decision was postponed from May 2007 to July to allow other market participants to comment on the undertaking.
Our take...
Undertaking is clearly intended to address industry concerns that the combined weight of the merged entity might enable it to secure exclusive deals and rental windows not available to smaller rivals. There is a precedent for this; in December 2006 Blockbuster's US division entered into an exclusive release deal with The Weinstein Company that has since been subject to legal challenges from the National Entertainment Buying Group and independent retailers. Video Ezy's undertaking not to buy product released with a rental window is more surprising. In 2001 Warner's attempt to introduce two-tier pricing for rental product on DVD without offering a rental window failed when a Federal Court judgment ruled it illegal. Since then most distributors have moved to a simultaneous (and flat priced) rental/retail release strategy, however Screen Digest understands that some companies have recently begun offering a rental window in return for a premium trade price. Video Ezy's undertaking may be intended to ensure that the combined group does not use its purchasing power to procure an exclusive rental window, rather than precluding it from buying any product released with an industry-wide rental window. This is not the first time Blockbuster has faced a competition enquiry; in 2005 it withdrew its bid to acquire US rival Hollywood Entertainment (HE) after the US Federal Trade Commission indicated that it was unlikely to approve the merger.
Australia,
