Nielsen reached an agreement with the Federal Trade Commission Friday (Sept. 19) that will permit it to acquire rival audience measurement company Arbitron, but at a price that goes beyond the dollars changing hands.
The FTC concluded that the two should not be allowed to team exclusively on a cross-platform ratings system because programmers and advertisers would likely have to pay more for the service than if the market was more competitive, so the deal comes with a bunch of conditions.
In order to secure FTC approval, Nielsen has agreed to license the Arbitron technology for cross-platform measurement to a third party for up to eight years.
Nielsen has to both sell and license certain Arbitron assets to an FTC-approved buyer. But Nielsen must do more than that. The FTC wants the new buyer to become a legitimate competitor in cross-platform, so Nielsen must provide technical assistance and cannot prevent the third party from hiring "key" Arbitron employees.
In December, Nielsen agreed to acquire Arbitron for $1.3 billion. The two companies were working together on personal people meter technology that would help measure outdoor, radio and other forms of cross platform media not captured by Nielsen's set top ratings devices.
"We are pleased to have the regulatory process behind us and are excited to be closing the Arbitron acquisition," David Calhoun, CEO, Nielsen, said in a statement. "We are looking forward to providing all of the benefits of the combined company to our new clients in the radio industry and their advertisers, driving incremental value for them as well as our shareholders
The FTC concluded that the deal would have reduced competition without the agreed-upon divestiture and licensing tof the assets and intellectual property necessary to develop cross platform audience measurement services for TV and online. But not everyone agreed. The vote was 2-1, with Republican Joshua Wright, who (Republican commissioner Maureen Ohlhausen recused.
The FTC concluded that without the divestiture of that intellectual property, it would likely cause "advertisers, ad agencies, and programmers to pay more for national syndicated cross-platform audience measurement services."
The combined company will have to its Divest Link Meter technology, but will get to share it on a royalty-free basis with that third party. For eight years, Nielsen/Arbitron must also license, royalty free, the encoding and PPM technology to develop cross-platform measurement services. It must make technical assistance available at cost to its competitor, as well as access to TV and radio data.
Nielsen must also open its books on "key" Arbitron employees for possible poaching by the third party, including providing information on current salary and bonuses and even making those employees available for interviews. And it cannot counter any offer made to woo the employee.
"Effective merger enforcement requires that we look carefully at likely competitive effects that may be just around the corner," said FTC Chairwoman Edith Ramirez in announcing the settlement. "In this matter, the evidence provided us with a strong reason to believe that absent a remedy, the deal was likely to harm emerging competition in the area of cross-platform audience measurement."
Commissioner Wright said it was the wrong decision because there was insufficient evidence that the combo would indeed reduce competition for TV/online ratings. "I dissented from the Commission's decision because the evidence is insufficient to provide reason to believe Nielsen's acquisition will substantially lessen competition in the future market for national syndicated cross-platform audience measurement services in violation of Section 7 of the Clayton Act," he said in a dissenting statement.
His issue was with the commission conditioning the deal on predictions about the future market, rather than on existing harms. "[T]here is no commercially available national syndicated cross-platform audience measurement service today," he said. "The Commission thus challenges the proposed transaction based upon what must be acknowledged as a novel theory-that is, that the merger will substantially lessen competition in a market that does not today exist."
He has no trouble with predictive judgments based on "fact-intensive analysis, he is less comfortable with one based on general economic theory, as he suggests this one was. "Although all merger review necessarily is forward looking, it is an exceedingly difficult task to predict the competitive effects of a transaction where there is insufficient evidence to reliably answer these basic questions upon which proper merger analysis is based."
The FTC actually filed a complaint in court against the merger and at the same time announced its settlement of that complaint, which means it will recommend that the court actually not block the merger--that is the way the process works. The court still must approve that recommendation, which is essentially pro forma. Outside parties have until Oct. 21 to comment on the settlement.--John Eggerton contributed to this story.