CRA advised AEG (owner/operator of The O2 Arena and other live entertainment venues in the UK, Europe and across the world) through the Competition Commission’s investigation of its acquisition of the lease to operate Wembley Arena. The deal was initially viewed by the OFT as a two-to-one merger in a segment defined as “large indoor entertainment venues” in London. CRA was retained by AEG following the referral to the CC.
We developed evidence that showed that the acquisition was unlikely to harm competition and indeed was likely to benefit customers, given AEG’s proposed changes to Wembley Arena’s business model. The available evidence we assembled showed that Wembley Arena and The O2 Arena are highly differentiated and appeal to different types of customers. The evidence also showed that in the small number of events where promoters and artists had switched between the two venues, this had not been on grounds of price competition. We also showed that there was no systematic evidence that the O2 Arena charged higher rental fees for events where it did not face direct competition from other venues, nor that it charged lower fees for events in the capacity bracket where it overlapped with the Wembley Arena. Finally we developed a modified GUPPI analysis and showed that, as AEG’s business model is predicated on filling the venue in order to make money on complementary activities at the entertainment complex, the shift of Wembley Arena to this business model following the acquisition of the lease was likely to result in downward price pressure rather than upward price pressure.
The Competition Commission’s Final Report, published on the 2nd of September, reached the conclusion that, based on the extent of competition between Wembley and The O2 Arena and AEG’s business model, the merger was unlikely to result in a price rise.
The CRA team advising AEG included Cristina Caffarra, Matthew Bennett, Pierre Régibeau, Ian Small, Matt Tavantzis and Margarida Soares.