On 25 March 2019, the Belgian Competition Authority (Belgische Mededingingsautoriteit / Autorité belge de la Concurrence - "BCA") decided to partially lift specific merger commitments imposed on Kinepolis. It is the most recent development in a legal saga that has mesmerised the Belgian cinema sector for more than twenty years.
The case started in November 1997, when the former Belgian Competition Council (later replaced by the BCA) cleared the concentration between the Claeys and Bert cinema groups to establish the Kinepolis group. The decision was conditional on several commitments, imposed for an indefinite period of time, including the obligation on Kinepolis to obtain the prior approval from the BCA concerning any form of growth, including organic growth (the obligation thus caught any increase in the number of screens or seats operated by Kinepolis).
In 2010, following a four-year legal battle, Kinepolis succeeded in having the commitments partially lifted (See Van Bael & Bellis on Belgian Business Law, Volume 2010, No. 4, pp. 3-4, available at www.vbb.com). Subsequently, nearly twenty years after the initial decision to clear the concentration, Kinepolis tried on 31 March 2017 to have the remaining commitments removed. After analysing the necessity of the remaining commitments which were aimed at preventing a restriction of competition in the prevailing market structure at the time, the BCA decided on 31 May 2017 to lift the restriction on organic growth, subject to a two-year transition period, while leaving the other commitments in place. These were conditions preventing Kinepolis from: (i) growing through acquisition without prior approval from the BCA; (ii) obtaining exclusive or priority rights to distribute films; and (iii) concluding programming agreements with independent cinema owners (See Van Bael & Bellis on Belgian Business Law, Volume 2017, No. 5, pp. 7-8, available at www.vbb.com).
This decision was appealed by two competing cinema companies, Euroscoop and I-Magix. On 28 February 2018, the Brussels Court of Appeal (the "Court") found that the Competition College – the BCA's decision-making body – had insufficiently justified entirely lifting the commitment preventing Kinepolis from growing organically, while the College of Competition Prosecutors – the BCA's investigatory arm – had proposed to lift the commitment for small organic growth only. According to the Court, the Competition College had also insufficiently reasoned its decision to create a two-year transition period (See Van Bael & Bellis on Belgian Business Law, Volume 2018, No. 3, pp. 4-5, available at www.vbb.com).
Following the Court's annulment of the 31 May 2017 decision, the BCA reopened the case and adopted a new decision on 26 April 2018. This decision was again appealed by competing cinema company Euroscoop. In its judgment of 21 November 2018, the Court annulled the BCA's decision of 26 April 2018 on procedural grounds. The Court held that the BCA should have adhered to the full procedural framework of the Code of Economic Law to take a new decision instead of limiting itself to taking an amending decision as it had done on 26 April 2018 (See Van Bael & Bellis on Belgian Business Law, Volume 2018, No. 12, pp. 5-6, available at www.vbb.com).
On 28 January 2019, Kinepolis once again tried to have the remaining commitments removed. In its latest decision adopted on 25 March 2019, after an ab initio examination of Kinepolis' renewed request, the Competition College decided to partially lift the commitment preventing Kinepolis from growing organically to the extent it concerns the establishment of new cinema complexes. The Competition College held that a new Kinepolis cinema complex with maximum seven movie theatre halls and 1,125 seats would have pro-competitive effects and a limited anti-competitive impact. In order to prevent any circumvention of the imposed limits concerning maximum seats and movie theatre halls, the BCA added that Kinepolis would be prevented from (i) establishing any new cinema complex within a 10 km range of its other cinema complexes; and (ii) expanding such new cinema complexes exceeding the above thresholds without the prior approval of the BCA.
Kinepolis issued a press release (available here) and expressed dissatisfaction with the latest partial lifting of the organic growth commitment, which is more limited than the BCA's 2018 decision that was annulled on procedural grounds. The legal saga might not be over yet as Kinepolis, and possibly other parties, are considering an appeal.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.