The Dutch competition authorities today approved the planned merger between the Netherlands operations of Truvo (Gouden Gids) and European Directories (DeTelefoongids). This approval clears the way for the merger to move ahead.
According to an announcement from Howrey LLP, the firm that represented Truvo in the deal, the regulators were initially wary of the deal, based on the view that allowing two direct competitors to merge reduced competition, which was bad for consumers and advertisers.
However, the commission was apparently swayed by evidence that the two publishers were less competitive than they appeared.
” Despite the apparent similarity between the Gouden Gids and De Telefoongids directories, the NMa found that they do not exert significant competitive pressure on one another. Market evidence, including surveys and past customer behaviour, clearly shows that very few advertisers switch between the two directories (e.g. in response to a price increase). They rather switch to online media or even stop advertising in directories altogether without switching to an alternative. Therefore, even if in terms of product characteristics, Gouden Gids and De Telefoongids look similar, they are not each other’s prime competitors.”
The regulators also recognized the significance of online advertising in deciding whether to approve the deal.
“Whilst it finds that not all businesses currently see online platforms as an alternative to directories, it notes that users are switching away from traditional directories to online search in significant numbers. The NMa finds that this must in time influence where businesses spend their advertising budgets, and that this will constrain the merged entity post-merger – another implication of the two-sidedness of the market.”
By “two-sidedness” the regulators meant the virtuous circle of usage driving content and content driving usage. The regulators seemed to conclude that Truvo and European Directories would encounter significant challenges with migration going forward and would handle those challenges more effectively as one company rather than two.