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Cofece fines 51.5 million pesos to AT&T and Warner Bros Discovery for concentration

The Federal Economic Competition Commission (Cofece) fined AT&T and Warner Bros. Discovery 51,573,920 pesos for failing to notify a merger in terms of the Federal Economic Competition Law.

The sanction, explains Cofece in a statement, is related to an international operation in which the acquisition by Discovery of the AT&T business known as Warnermedia, including the Mexican business, was originally proposed, as well as the purchase by the shareholders from AT&T of 71% of the shares of the company resulting from the transaction, which would be renamed Warner Bros. Discovery.

However, before Cofece issued its authorization, the companies separated only part of Warnermedia’s business in Mexico, which created, at least for a time, market structures and legal relationships that were not considered in the originally notified operation. and that for this reason they could not be analyzed preventively by Cofece.

On August 26, the Federal Telecommunications Institute (IFT) approved the concentration of Warner Media, owned by AT&T, and Discovery to create a new streaming content giant. The merger of both companies includes business and operations, and tangible and intangible assets -Mexican subsidiaries of Warner Media-, as well as the direct distribution to the consumer of HBO Max in Mexico.

“Derived from the acts to transfer the international business of Warnermedia, including arrangements to separate only part of the Mexican business, the concentration, in its new terms, exceeded the thresholds established in article 86, section II of the LFCE, for which it had to be notified to Cofece, which did not happen, which prevented this authority from analyzing the operation in accordance with the provisions of the Law,” Cofece said in a statement.

The merger between the entertainment giants various foreign subsidiaries with effects and material links in Mexico, since they receive income and sales originating in the national territory.

When the IFT reported the authorization of the merger between the two streaming giants, it warned that for the resolution it identified that Warner Media participates by being in the market for the provision and licensing of audiovisual content for pay TV in the children’s programming category, through the channels of Cartoon Network and Cartoonito (formerly owned by Warner Media), as well as Discovery Kids (formerly owned by Discovery), this could represent a risk to competition.

However, the telecommunications regulatory body assured that both companies voluntarily submitted a proposal to “remedy any risk to competition”, and that it considers attending to and negotiating all requests for access to Warner Media’s restricted channels that perform any pay TV service operator.

Cofece has initiated a verification procedure (file VCN-005-2022) and once the matter has been resolved and the parties have been notified, the sanctioned economic agents have the right to go to the Federal Judiciary to review the legality of the Cofece action.

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