Lights, camera, no action: Bureau clears film distribution deal

Entertainment One Ltd. can wrap up its acquisition of Alliance Films Holdings Inc. after the Competition Bureau issued a “no action letter” on January 3, 2012, indicating that the Commissioner of Competition does not intend to challenge the deal.

Both eOne and Alliance are major competitors for the distribution of films in Canada with substantial market shares. The Bureau concluded that distribution of Canadian films was a distinct product market from distribution of non-Canadian films, as a result of government programs. Over 97% of Canadian box office revenues come from non-Canadian films. Since several major Hollywood studios distribute in Canada, there would be sufficient remaining competition in the market for distribution of non-Canadian firms post-merger, the Bureau found.

The Bureau thus focused on distribution of Canadian films. Government funding rules require the use of Canadian distributors, which restricts competition for distribution of Canadian films to Canadian distributors. Films distributed by eOne and Alliance account for the vast majority of revenues generated by Canadian film-makers, and eOne and Alliance face limited competition. Nevertheless, the Bureau concluded that government funding programs would constrain the ability of the merged entity to increase prices. Even if they could, the Bureau noted, the small size of the market for Canadian films means that any anti-competitive effects would be small.