ACCC accepts undertakings from Hoyts, Greater Union and Village on cinema advertising

16 December 2002

The Australian Competition and Consumer Commission has accepted court-enforceable undertakings from Hoyts, Greater Union, Village and Val Morgan and its associated entities, in relation to cinema advertising.

The undertakings address the ACCC's competition concerns regarding the proposed acquisition of Val Morgan by a joint venture owned and operated by Hoyts, Greater Union and Village. Greater Union, Hoyts and Village are Australia's leading cinema exhibitors, controlling approximately 75 per cent of cinema revenue in Australia.

The undertakings provide that:

  • two of the acquiring exhibitors will divest their stake in Val Morgan within 18 months of the acquisition
  • the undertakings will remain in effect until such time as any advertising contracts existing between Val Morgan and the divesting exhibitors cease to remain in force. Such contracts are, in any case, limited in the undertakings to 12 months in duration
  • Val Morgan will honour existing contracts with independent cinema exhibitors and offer them new cinema advertising contracts when existing contracts expire
  • Val Morgan will guarantee minimum contractual terms to be offered to independent cinema exhibitors. The undertakings also incorporate procedures and checks to ensure the independent exhibitors are dealt with fairly.

"The undertakings should ensure that, in addition to preserving cinema screen advertising in Australia, competition will remain in the cinema industry", ACCC Chairman, Professor Allan Fels, said. "Without the acquisition it was likely that Val Morgan would have been placed into administration, and that this important source of revenue for cinema exhibitors would disappear".

Despite being Australia's only national provider of cinema advertising, Val Morgan was on the point of financial collapse which would have had a significant impact on the continued provision of advertising to cinemas. Recently it has suffered large operating losses, mostly due to high cinema rents and lower than expected advertising revenue.

In reaching its view the ACCC consulted extensively with independent cinema exhibitors and relevant industry representative bodies.

"The ACCC's market inquiries revealed that there was concern about the major cinema exhibitors acquiring Val Morgan and increasing the vertical integration of the major cinema exhibitors. This could allow them to treat independent exhibitors unfairly with respect to screen advertising, potentially threatening the viability of a number of independent cinemas. However market inquiries also indicated, that if these competition concerns were overcome, the transaction should be allowed to proceed to keep cinema advertising available".

Following this consultation, the ACCC expressed concern about the proposed transaction and the original form of undertakings offered to it. In response, the acquiring exhibitors offered significant concessions to resolve these competition concerns.

These undertakings ensure that the structural issues surrounding the acquisition are overcome within a timeframe that minimises the ACCC's competition concerns, while allowing sufficient time for the acquiring exhibitors to return the Val Morgan business to viability. In addition, the undertakings protect industry players from any potential anti-competitive bias otherwise arising from the acquisition.

The undertakings will appear on the ACCC's public register in due course.

Release number: 
MR 326/02
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