The Competition Council conditionally allows the owner of “Apollo Kino” to buy “Forum Cinemas Latvia” / Article

The Competition Council (CC) has allowed the Estonian-registered company MM Grupp, which represents several companies in Latvia, including SIA Apollo Kino, to acquire another Estonian-registered company, Forum Cinemas Latvia, which also operates in the film distribution and screening markets in Latvia, informed KP.

The CC has concluded that the merger would significantly restrict competition in these specific markets.

Therefore, in order to avoid possible risks to competition, the merger is permitted by the binding terms, with MM Grupp committing itself to transfer its Citadele cinema assets – employees and property, etc. – to an unrelated third party.

Given that Forum Cinemas Latvia and MM Grupp, representing SIA Apollo Kino, were the closest competitors in the film screening market in Riga before the merger, KP anticipates that the merger would create significant barriers to effective competition in that market – significantly reduce competitive pressure to the cinema “Apollo Kino”, previously created by its biggest competitor “Forum Cinemas Latvia” cinema “Citadele”.

In turn, with the announced desire of “MM Grupp” to open a cinema in the shopping center “Riga Plaza”, where the cinema “Multikino” was previously located, as well as with the planned opening of a new cinema in the shopping center “Domina Shopping”, it is expected that the only cinema independent of “MM Grupp” There would be Cinamon in Riga, which would not be able to exert effective competitive pressure on the merging parties. As a result, competition could be significantly negatively affected and, as a result, consumers, KP pointed out.

KP noted that “MM Grupp” also has a great influence in the film distribution market in the territory of Latvia. It is also influenced by MM Grupp’s significant market share (around 80%) in the cinema screening market in Riga. Following the merger, there is a risk that cinemas that are not part of the SIA “Apollo Kino” group will not be able to exert sufficient competitive pressure to achieve equal treatment in the application of the film distribution rules.

“It is the decision of Apollo Kino Ltd. to show a particular film that can be decisive for the film to be distributed in Latvia and to appear on the screens of independent cinemas. It can significantly affect the range of films to be shown in cinemas.

Given the significant influence of OÜ MM Grupp in the film distribution and screening markets, they will be highly concentrated within the same group of companies, which will significantly impede, restrict and distort competition in both markets.

When establishing that a dominant position may arise or strengthen as a result of a merger or competition may be significantly restricted in a particular market, the CC is entitled to determine binding rules, upon fulfillment of which it is possible to prevent the negative effects of the merger on competition. When evaluating the information provided by the companies and at the disposal of the CC, the CC considers it reasonable to support and establish binding rules. The binding rules provide that:

1. As a result of the merger, MM Grupp may acquire all shares in the share capital of Stockmann Centrs SIA owned by Forum Cinemas Latvia, which are not directly related to the film distribution or film screening business and which are separated from Forum Cinemas Latvia’s assets through reorganization.
2. the remaining part of Forum Cinemas Latvia’s business (cinema “Citadele” with its assets, employees and property, as well as the right to use the premises) “MM Grupp” undertakes to transfer control to a third party, which itself or its owners are not related to ” MM Group “. This will ensure that there is no increase in concentration in the cinema screening market and that the merger does not have negative effects on this market.

If within one calendar year “MM Grupp” fails to find a person to whom, after the approval of the CC, to transfer “Forum Cinemas Latvia” assets related to the operation of the cinema “Citadele”, a professional third party specializing in organizing such transactions must be involved in this process. complete the asset transfer process.

The transfer of the Citadele cinema company to a third party, as proposed in the binding rules, will effectively prevent the merger from having an impact on these markets, and the CC has therefore concluded that the merger is permissible.

The CC reminded that in order to prevent a significant reduction of competition as a result of a merger, mergers that meet the criteria set out in the Competition Law require a permit from the CC. Thus, the CP ensures state control over the concentration of markets so that no structural changes occur that result in consumers suffering in the long run, as they have limited options or have to purchase goods and services at an uncompetitive price.

CONTEXT:

The planned transaction was announced at the end of August last year. The US company AMC Entertainment Holdings, which includes Forum Cinemas, announced that the value of the proposed transaction is 65 million euros, reports LETA.

Forum Cinemas has one cinema in Latvia, three in Estonia and five in Lithuania. In the autumn of 2019, the Estonian company Forum Cinemas completed the addition of cinema operators of the same name in Latvia and Lithuania, and since then has been working in the Baltic States as a single company with its head office in Tallinn.

The Apollo network has ten cinemas in Estonia, one in Latvia and one in Lithuania.

Forum Cinemas is owned by the Finnish company Finnkino, which is owned by the British Odeon Cinemas Group, which in turn is owned by the US AMC Entertainment Holdings, whose largest owners are the Chinese Wanda Group (38%) and the US investment company Silver. Lake Partners “(28%).

MM Grupp, a holding company controlled by Estonian businessman Margus Linnamäe, owns a large portfolio of companies in the Baltic States. The information agency LETA is part of an international media group, the shareholder of which is “MM Grupp”.

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