24 August 2016
On 23 August, the FCCA conditionally approved a transaction in which Otava Group will acquire actual control of Kirjavälitys Oy. The conditions set by the FCCA for the transaction are that Kirjavälitys – under Otava Group's control – will not discriminate against Otava's competitors on the retail and wholesale markets for comprehensive school learning materials and that Kirjavälitys will not disclose confidential information on Otava's competitors to Otava.
Otava Group operates on the Finnish market for the publication and selling of books, periodicals and learning materials, etc. Kirjavälitys is a service company owned by Finnish publishers and bookshops, which provides logistics and purchasing services and electronic services for the book trade Kirjavälitys acts as a distributor of Otava's and its competitors' products in a range of markets.
On account of the acquisition, Otava Group's holding in Kirjavälitys will rise from 40.2 per cent to nearly 50 per cent. Due to the acquisition, Otava will gain actual control of Kirjavälitys.
Concentrated learning material markets
When investigating the acquisition, the FCCA investigated Kirjavälitys's importance to Otava's competitors. The FCCA finds that the acquisition will have negative effects on the retail and wholesale markets for comprehensive school learning materials, and points out that the markets are highly concentrated in Finland. Learning material publishers competing with Otava Group are dependent on Kirjavälitys, whose market share in the wholesale of comprehensive schools' learning materials is approximately 80 to 90 per cent.
Otava Group's control of Kirjavälitys would enable the hindrance of competitors' operations through negotiations on the terms and conditions of distribution and ordering, which are conducted on an annual basis. Kirjavälitys could also offer learning materials by Otava Group's competitors to municipalities and schools on less favourable terms than Otava's materials, thereby tipping the scales in favour of Otava's products.
Furthermore, through its wholesaler and logistics services, Kirjavälitys learns what products are being bought, and on what terms, from Otava Group's competitors. If Otava Group obtained confidential information on its competitors through Kirjavälitys, this would create the preconditions for asymmetrical benefiting from such information and the related coordination of operations.
Use of behavioural commitments is exceptional
To eliminate the negative effects of the acquisition, the FCCA required that Otava make commitments to safeguard the position of Otava's competitors on the retail and wholesale market for learning materials. While under Otava's control, Kirjavälitys must be unbiased and undiscriminating in its conduct with respect to all publishers of learning material. This means, for example, that the terms and conditions of distribution agreements must be fundamentally similar in content. In addition, Kirjavälitys must not place publishers in an unequal position when offering materials to schools and comprehensive schools. Further, Kirjavälitys must not disclose non-public information on competitive learning material publishers to representatives of Otava Group, and Otava's representatives must not participate in the everyday management of Kirjavälitys.
The application of behavioural commitments to acquisition decisions is exceptional because monitoring compliance with such commitments is often difficult. However, the FCCA holds that, given the operations and characteristics of the textbook market for comprehensive schools, monitoring of the behavioural commitments should be fairly unproblematic in comparison with many other markets. Furthermore, an independent party will be allocated to monitor compliance.
The commitments will remain valid for three years from the approval of the acquisition. The FCCA believes that, in the long run, other textbook publishers will be able to develop alternatives to Kirjavälitys's services for providing textbooks to end customers, i.e. municipalities and schools.
The FCCA's decision includes numerous trade secrets of the parties involved. For this reason, the decision cannot be published until after the trade secrets have been removed, i.e. after around two weeks.
Further information: Research Officer Pontus Ranta, tel. +358 29 505 3747.