ANALYSIS OF AGREEMENT CONTAINING CONSENT ORDERS
The Federal Trade Commission ("Commission") has accepted, subject to final approval, an Agreement Containing Consent Orders ("Consent Agreement") from VNU N.V. ("VNU"), which is designed to remedy the anticompetitive effects resulting from VNU's acquisition of Nielsen Media Research, Inc. ("Nielsen"). Under the terms of the agreement, VNU will be required to divest its division, Competitive Media Reporting ("CMR"), which supplies advertising expenditure measurement services, to a Commission-approved buyer no later than six (6) months from the date VNU signed the Consent Agreement. If the sale of CMR is not made within six (6) months, the Commission may appoint a trustee to divest CMR.
The proposed Consent Agreement has been placed on the public record for thirty (30) days for reception of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the proposed Consent Agreement and the comments received, and will decide whether it should withdraw from the proposed Consent Agreement or make final the Decision & Order.
Pursuant to an August 16, 1999 cash tender offer, VNU agreed to acquire 100 percent of the issued and outstanding voting securities of Nielsen for approximately $2.5 billion. The Commission's Complaint alleges that the acquisition, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, in the market for advertising expenditure measurement services.
Nielsen, through its Monitor Plus division, and VNU, through its CMR division, are the only providers of advertising expenditure measurement services in the United States. Both companies track the occurrence of commercial advertisements across numerous media, including: national and local broadcast television; national and local syndication; national and local cable; national and local radio; national, local, trade and Sunday magazines; national and local newspapers; outdoor advertising; and the Internet. This information is typically integrated with other data, such as estimated advertising costs and television ratings, in order to create advertising expenditure measurement reports. Customers, such as advertising agencies, use these reports to create advertising strategies for their clients, to study the advertising strategies of their clients' competitors, and to monitor what their clients' competitors are spending on advertising. Monitor Plus and CMR are the only providers of advertising expenditure measurement services across multiple media in the United States.
The United States advertising expenditure measurement services market is highly concentrated, and the proposed acquisition would combine the only providers of these services. For many years, CMR was the only supplier of advertising expenditure measurement services. Monitor Plus's entry into this market in the mid-1990s and its subsequent head-to-head competition with CMR has provided customers with significant price savings and innovations, including better methods of tracking the occurrence of advertisements. By eliminating competition between the only two competitors in this highly concentrated market, the proposed acquisition would allow VNU to exercise market power unilaterally, thereby increasing the likelihood that purchasers of advertising expenditure measurement services would be forced to pay higher prices and that innovation in the advertising expenditure measurement services market would decrease.
Substantial barriers to new entry exist in the advertising expenditure measurement services market. A new entrant into this market would need to undertake the difficult, expensive, and time-consuming process of obtaining access to the technology required for television, cable, and radio advertising monitoring; developing or acquiring at least two years of historical advertising expenditure data; hiring employees to manually track advertising in print and outdoor media; establishing a track record for data quality, depth, and accuracy; developing software that would permit customers to access and manipulate data; creating a knowledgeable sales force; and forming a service and support network. In addition, entry into the advertising expenditure measurement market is made more unlikely because of long-term contracts that may reduce the amount of sales opportunities available to new entrants. Because of the difficulty of accomplishing these tasks, new entry into the advertising expenditure measurement services market could not be accomplished in a timely manner and is therefore unlikely to deter or counteract the anticompetitive effects resulting from the transaction.
The Consent Agreement effectively remedies the acquisition's anticompetitive effects in the advertising expenditure measurement services market by requiring VNU to divest its CMR Division. CMR is the dominant firm in the market, with an approximate market share of 70 percent. Pursuant to the Consent Agreement, VNU is required to divest CMR no later than six (6) months from the date VNU signed the Consent Agreement. In the event that VNU fails to divest CMR within this six-month time frame, the Commission may appoint a trustee to divest CMR. The Consent Agreement also ensures that the acquirer of CMR will continue to have access to Nielsen's television ratings data by extending the duration of CMR's contract with Nielsen for the supply of television ratings information.
In order to ensure that CMR remains a viable, independent competitor pending its divestiture, the Commission has issued an Order to Hold Separate. Under the Order to Hold Separate, the Commission may appoint an Independent Auditor to monitor VNU's compliance with its obligation to hold CMR separate and independent. In addition, in order to ensure that the acquirer of the divested assets has access to key employees currently involved in CMR's advertising expenditure measurement services business, the Order to Hold Separate requires VNU to provide financial incentives for these individuals to accept employment with the acquirer. The Order to Hold Separate also requires VNU to provide to the Commission a report of compliance with the divestiture provisions of the Order to Hold Separate within thirty (30) days following the date the Consent Agreement becomes final, and every thirty (30) days thereafter until VNU has completed the required divestiture.
The purpose of this analysis is to facilitate public comment on the Consent Agreement, and it is not intended to constitute an official interpretation of the Consent Agreement or to modify in any way its terms.