In 2024, the German Federal Cartel Office (“FCO”) blocked two projects by RTL for alleged adverse effects on competition and consumers. The first project concerned the video advertising market for children and the second, the general market for video advertising.

Merger between RTL and Paramount

The first case relates to the children’s TV advertising market. According to the press release of 17 September 2024, RTL intended to take over the linear children's TV service Nickelodeon in Germany from Paramount. After the FCO informed RTL and Paramount that it intended to prohibit the planned merger due to the specific situation in the children's sector, the corresponding notification was withdrawn. 

RTL is part of the Bertelsmann group and is active in the children's sector under the brands Super RTL and TOGGO (plus), under which it provides various children's programmes, particularly on linear TV but also online on RTL+. Paramount is active in the children's sector in Germany in the ‘classic’ way with the TV programme Nickelodeon and increasingly online with its Paramount+ offering and children's channels on its free ad-supported streaming TV (“FAST“) channel platform Pluto TV.

The FCO’s concerns related mainly to advertising markets. According to the FCO’s findings, the children’s TV advertising market should be distinguished from other advertising markets. With specific demand from advertisers for video advertising space aimed at reaching children aged three to 13 in a targeted and safe way, and only a very limited number of companies offering such advertising space, RTL is by far the leading provider in Germany. Apart from RTL, only Paramount and one other player are significantly active on the market. Therefore, the merger would essentially reduce the number of competitors in the market from three to two.

Although there is a strong migration away from linear TV, especially among children, streaming services, such as Netflix, do not currently play a role in the children's advertising market. The same applies to social media services, which do not (yet) specifically target children due to their age limits and therefore do not offer advertising space specifically aimed at children. Alphabet/Google with its YouTube Kids offering is still particularly active in the online sector. However, even if YouTube Kids were included in the analysis due to changing viewing habits, RTL (through the Super RTL brand) remained dominant according to the FCO’s findings, adding further market share by way of the proposed acquisition of Nickelodeon.

Marketing cooperation by RTL and RTL2

In the second case, RTL intended to market both the RTL and RTL2 TV advertising spaces from one hand. RTL is a subsidiary of the Bertelsmann group, which, through the Ad Alliance, is a major player in television but also in other media advertising markets. Contrary to what the name suggests, RTL2 is not a subsidiary of RTL or Bertelsmann, but a joint venture between RTL and other shareholders from the media sector. This means that any joint marketing initiative between the two is a cooperation between competitors within the meaning of Article 101 of the Treaty on the Functioning of the European Union (“TFEU“) and Section 1 of the German Act against Restraints of Competition (“ARC“).

According to its press release from 18 December 2024, following an 18-month in-depth review, the FCO found that RTL and RTL2 are close competitors and that the intended cooperation would limit competition in the field, adverse to consumer interests given the considerable reach of the two, individually and jointly. The FCO also held that RTL2 is currently still an important alternative to the two leading providers of TV advertising space, one of which is RTL. As these anti-competitive effects were not offset by sufficient efficiencies, in particular cost savings, the FCO decided to block the project. 

In its assessment, the FCO took full account of the current shift in the media sector towards the use of digital media. However, the FCO did not provide a clear market definition for video advertising markets. It states that video advertising in the digital sector has so far had less impact than advertising on linear TV. Therefore, the video advertising spaces online and on linear TV are only comparable to a limited extent. While video advertising on streaming services such as Netflix is fairly comparable, their offerings are currently primarily paid and only additionally financed by advertising. In addition, these advertising offers do not yet have such a significant market weight that would threaten RTL Group's strong position in the near future. As there is a wide range of advertising offers on YouTube, the comparability of these advertising offers with advertising on linear TV would have to be assessed on a case-by-case basis. The FCO also found that video advertising on social media serves completely different purposes than TV advertising.

Conclusion

The two decisions are yet again an example of the FCO’s tendency to define markets narrowly. While the FCO conceded that the world of media is changing drastically, it maintained its position according to which streaming services do not yet pose a significant competitive threat to countervail RTL’s market position on the traditional (linear) video advertising markets. Only time will tell how long this argument can be upheld. 

For more information, please contact Stephan Waldheim or Gitty Narymany Shandy. 

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