Case study: refusal to supply and

margin squeeze

1 Format of the case study

1.1 Below are details of a hypothetical case. We will break into two groups: one group will present
the case for the complainant; the other group will present the case for the defendant. You have
30 minutes to read the details of the case and discuss it in your group. Each group will then
have 10 minutes to present their case (remember to decide who will present your case!).
1.2 Please note that any similarity between this case study and real-world cases you may have
come across is purely intentional.

2 Background

2.1 Mountainland is a sparsely populated and mountainous country where the population mostly
live in deep valleys. Households receive a very poor television broadcast signal through their
roof-top aerials. Consequently, most households are connected to a cable-television network.
2.2 Cableco is a provider of cable television broadcast services in Mountainland. It provides
broadcasting services to independent television channels and also broadcasts its own
television channels through its cable network.
2.3 Cableco was created by the merger of CableNorth and Southern Cable. CableNorth and
Southern Cable were themselves the result of mergers between various local cable-television
companies. Each of these local companies operated under an exclusive licence to provide a
cable TV service in an individual municipality. Following these various mergers, Cableco is
now the only provider of cable TV services in Mountainland.
2.4 Satco is a provider of television services broadcast to satellite dishes on subscribers’ homes
in Mountainland. It launched its service in 2016.
2.5 Monotel is a provider of fixed-line telephone services in Mountainland. It has a legal obligation
to provide a fixed line service to every household that requests one. In the past Monotel was
prevented by law from using its network to provide television services, but this prohibition was
removed in 2016. Monotel launched a television broadcast service in 2018.

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2.6 Mediaco is a multinational media company that owns newspapers, magazine titles and
television channels in many different countries. In Mountainland it sells various magazines
including its popular monthly food magazine Cook.
2.7 In 2016 Mediaco decided to launch its first television channel in Mountainland. Its channel was
called Cooktv and was intended to be the first television channel in Mountainland devoted
solely to cookery programmes.
2.8 Mediaco approached Cableco in May 2015 asking it to broadcast Cooktv. Cableco refused to
carry Cooktv and in November 2016 launched its own channel Foodtv, which became the first
channel devoted only to cookery programmes broadcast in Mountainland.

3 Procedure

3.1 In January 2017 Mediaco made a complaint to the Mountainland Competition Commission
(MCC). After the MCC launched an initial investigation, Cableco agreed to broadcast Cooktv,
at which point Mediaco dropped its complaint and the MCC ended its investigation into the
complaint. In May 2017 Cableco started to broadcast Cooktv.
3.2 In June 2020 Mediaco made a second complaint to the MCC alleging that, although Cableco
now carries Cooktv, the terms of carriage amount to a margin squeeze.

3.3 The MCC has conducted an initial investigation into the margin squeeze allegations and
provided the attached information to a confidentiality ring of both parties’ legal and economic
advisers. It has now invited both parties’ advisers to meet the MCC to present their cases. The
MCC would be particularly interested in the parties’ views on any further information the MCC
should gather or issues it should investigate.

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 Annex

A Information provided to the parties’ advisers

Table 1: Subscriber numbers as a percentage of all households

Year** Cableco Satco Monotel Other*

2010 95.4 - - 4.6
2011 95.8 - - 4.2
2012 95.6 - - 4.4
2013 95.9 - - 4.1
2014 96.0 - - 4.0
2015 96.1 - - 3.9
2016 95.9 - - 4.1
2017 95.3 0.7 - 4.0
2018 93.7 1.8 0.6 3.9
2019 90.7 4.2 1.4 3.7
2020 88.0 6.2 2.2 3.6
Notes: * Other includes households using terrestrial television and households with no television
** Data is for year end, except 2020 which is as at 31 July 2020

Figure 1: Survey data on hours spent watching television by platform

30

25

20
Cable, satelite and
Hours terrestrial services
per
week 15 Internet catch-up
services
Internet live TV
10

0
2016 2017 2018 2019

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 Table 2: Subscriber numbers of Foodtv and Cooktv

Year Foodtv Cooktv

2016 23,000 -
2017 121,000 68,000
2018 162,000 141,000
2019 189,000 179,000
20120 215,000 218,000
Notes: Data is for year end, except 2020 which is as at 31 July 2020

Table 3: Cableco’s carriage charges to TV channels

Channel Charge per subscriber per month (€)

Channel1 2.0
Channel2 2.0
Three 1.7
News24 1.0
Global news 0.8
Sport1 2.0
Sport2 1.8
Sport3 1.8
Wow! 0.8
Kidzone 0.7
Cartoon time 0.5
Cooktv 1.5
Notes: Excludes Cableco-owned channels

Table 4: Cooktv profit and loss account (€,000)

2017 2018 2019

Revenues (A) 1,550 4,510 6,750
Costs
Production 1,480 1,580 1,710
Marketing 1,240 1,110 1,080
Sales 550 980 1,620
Carriage fees to Cableco 510 1,890 2,880
Overheads 540 600 620
Total costs (B) 4,320 6,160 7,910
EBITDA* (C=A-B) -2,770 -1,650 -1,160
Depreciation (D) 830 810 790
Interest (E) 695 790 840
Profit before tax (C-D-E) -4,295 -3,250 -2,790
Notes: *Earnings before interest, tax and depreciation

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 Table 5: Foodtv profit and loss account (€,000)

2017 2018 2019

Revenues (A) 2,740 4,020 5,450
Costs
Production 1,290 1,310 1,410
Marketing 1,440 1,050 890
Sales 440 890 1,490
Overheads 320 410 520
Total costs (B) 3,490 3,660 4,310
EBITDA* (A-B) -750 360 1,040
Notes: * Earnings before interest, tax and depreciation

Table 6: Extract from Foodtv business plan at launch (€,000)

2019 2020 2021

Revenues (A) 6,250 8,125 10,000
Costs
Production 1,500 1,500 1,500
Marketing 750 750 750
Sales 1,500 1,750 2,000
Overheads 500 500 500
Total costs (B) 4,250 4,500 4,250
EBITDA* (A-B) 2,000 3,625 5,250
Subscriber numbers 250,000 325,000 400,000
Notes: * Earnings before interest, tax and depreciation

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