SUMMARY OF TECHNICOLOR
LIMITED AND METROCOLOR LONDON LIMITED: A REPORT ON THE MERGER SITUATION
This inquiry concerns the proposed merger between Technicolor Limited
(Technicolor) and Metrocolor London Limited (Metrocolor) (see Appendix
1.1), both of which are engaged in the business of film processing for
cinema and television usage. Technicolor is part of the Technicolor group
of companies, owned by Carlton Communications Plc (Carlton). It has a
film processing laboratory in West Drayton near Heathrow. Metrocolor is
owned by the US firm Time Warner Entertainment Company LP (TWE) and has
a film processing laboratory in Highbury, north London.
The total value of film processing supplied to the UK in 1996 was 42.2
million. Film processing work may be divided into six sectors, of which
35mm feature release printing is by far the largest, with a value of 21.0
million in 1996. The other five sectors and their respective 1996 values
are commercials release printing (2.4 million), 35mm feature front-end
processing (8.4 million), commercials front-end processing (2.1 million),
sound services (2.3 million) and 16mm processing (6.0 million).
Technicolor and Metrocolor each have significant shares in all six sectors
and their combined shares, following the proposed merger, would range
from 41.6 per cent for 16mm processing to 76.5 per cent for commercials
release printing. Another significant player is Rank Film Laboratories
Limited (RFL) which has large shares in 35mm feature release printing
and 35mm feature front-end processing, and there are several smaller players
including Soho Images Ltd (Soho Images), Bucks Motion Picture Laboratories
Limited (Bucks), Colour Film Services Ltd (CFS) and Todd-AO Filmatic Limited
(Todd-AO).
We analyse the effects of the proposed merger on each of the six sectors
in turn and conclude that sufficient competition would remain in all of
them. As regards 35mm feature release printing, the customers here are
film distribution companies which have considerable buyer power. None
of them expressed any concern about the proposed merger. In addition to
the two main UK suppliers, RFL and Technicolor, there are laboratories
in mainland Europe capable of doing this work. As regards the five smaller
sectors, in each case there are other current players in the UK which
either already provide competition or have the equipment and expertise
to enable them to do so, and barriers to entry are low. Whilst, therefore,
some customers in these smaller sectors told us of concerns about the
proposed merger, we do not think such concerns are justified.
If the proposed merger goes ahead some [*] jobs will be lost. If it does
not, there is a strong possibility that the outcome will be the closure
of Metrocolor's Highbury laboratory with the loss of around 150 jobs.
We conclude that the proposed merger may be expected not to operate against
the public interest.
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