TheChek News Flow

Europe’s largest media group sells RTL Nederland to smaller Belgian rival DPG Media in €1.1bn all-cash deal

Europe’s largest media company Bertelsmann is selling its Dutch TV operations for €1.1bn in a partial retreat from the European television market after antitrust watchdogs thwarted its attempts to create “national media champions” to rival global streaming services.

RTL Group, which is majority-owned by Bertelsmann, announced on Friday that Belgian media group DPG Media was acquiring its Dutch arm RTL Nederland in an all-cash deal. The division has €700mn in annual revenue and accounts for a tenth of RTL’s overall business.

DPG already owns the leading TV channel in Flemish-speaking Flanders, as well as French-language RTL Belgium, which it bought from RTL Group last year.

The sale of RTL Nederland comes after previous plans to merge the channel with domestic rival Talpa to create the leading TV network in the country was blocked by the Dutch competition authority earlier this year.

Thomas Rabe, chief executive of Bertelsmann and RTL Group, told the Financial Times that the sale to DPG was the “second-best option but still a very good one”, adding that he would have preferred the blocked deal with Talpa.

“We did fight for the merger a long time,” he said, adding competition authorities had an “outdated view” because they focused on market shares along national boundaries in Europe rather than taking a cross-country view. In-country consolidation was necessary as “size is required to be able to keep up with the competition with rivals from the United States and increasingly China, in particular with regard to streaming”, he said.

The sale of RTL Nederland values the Dutch operations roughly at a 50 per cent premium compared with RTL Group, according to data from S&P Global Market Intelligence.

RTL said it would generate a capital gain of €800mn for RTL Group that would be largely tax free. “We are getting a really good price,” said Rabe, adding that the bulk of the profit will be paid out to RTL’s shareholders through a higher dividend that could increase by €4 per share for 2024. In 2022, the company paid out €4 per share.

Bertelsmann, which holds a 76 per cent stake in RTL Group, was planning to reinvest its share in the profits into its business activities, he said.

Rabe indicated that the transaction could be a template for further divestments in other countries. “The same arguments that apply to the Netherlands also apply to other markets,” he said.

In 2022, Bertelsmann walked back from a planned merger of its French TV channel M6 with Bouygues-owned FT1 after regulators raised far-reaching concerns. But Rabe stressed that the German group was not currently in concrete talks about divestments in France or other countries.

The sale of RTL Nederland requires regulatory approval, but Rabe said he was confident that it would be granted by next summer as DPG Media — a company with €1.8bn in annual sales — currently has no TV operations in the Netherlands. “I cannot see any problem here,” said Rabe.

Christian Van Thillo, executive chair of DPG Media, said in a statement that the transaction would create “necessary scale to invest in the digital transformation of television”.

Regulator Ofgem proposes £16 annual bill surcharge to ensure suppliers are ‘resilient’

British households have built up record debts of £3bn with electricity and gas suppliers, according to figures released on Friday, highlighting the impact of the ongoing cost of living crisis with energy bills still relatively high. 

Industry regulator Ofgem said constrained household budgets had pushed the total amount owed to energy suppliers up by £400mn since mid-October.

As a result, Ofgem announced the launch of a consultation to help suppliers offset their higher debt costs by adding an extra charge to all household bills.

The proposals would add about £16 to the typical annual household bill from April, through adjustment to the price cap that limits the amount a supplier can charge per unit of energy. Ofgem said the move was necessary to ensure suppliers were “resilient” and able to help customers who needed support. 

“We know that cost of living pressure is hitting people hard and this is evident in the increase in energy debt reaching record levels,” said Tim Jarvis, director-general for markets at Ofgem. “However . . . we must take action to make sure suppliers can recover their reasonable costs, so the market remains resilient, and suppliers are offering consumers support in managing their debts.”

The cost of electricity and gas has fallen since last winter when record wholesale energy prices triggered by Russia’s full-scale invasion of Ukraine pushed the price cap as high as £4,059, prompting the government to step in to support households. 

But the ending of those subsidies has left many households still struggling to pay their energy bills. Although wholesale gas and electricity prices have fallen they remain above pre-crisis levels. This is reflected in the energy price cap, which had dropped to £1,834 but is still much higher than pre-energy crisis levels when it was usually below £1,100.

The proposed surcharge is designed to avoid a repeat of the market rout in late 2021 and early 2022 when 30 suppliers collapsed as wholesale energy prices surged and the price cap prevented them from passing on the extra costs to consumers.

At the time, Ofgem allowed the remaining suppliers to recoup the cost of bailing out the millions of customers of those failed companies by adding £82 to each household bill.

Gillian Cooper, director of energy at consumer group Citizens Advice, urged the government to do more to support struggling households. “Without action we’ll remain stuck in a cycle where rising levels of energy debt slowly pushes up the price cap and leads to higher bills for all,” she said.

The cooperation was unveiled during an all-day LVMH event that also revealed a partnership support program with its suppliers.

PARIS — The luxury world is recognizing that when it comes to sustainability, cooperation is better than competition.

In a groundbreaking tie-up of two of the world’s largest luxury groups, LVMH Moët Hennessy Louis Vuitton on Thursday revealed it will cooperate with Chanel to harmonize corporate and social responsibility reporting and audit schedules at the supplier level. It will also directly support its suppliers through a partnership program titled Life 360 Business Partners, and will launch LVMH Circularity, which will reuse unsold products from across group houses in new projects, among other initiatives.

The initiatives were revealed as LVMH held a full-circle day of sustainability under its Life 360 banner, bringing together brand presidents and creative directors at the UNESCO headquarters in Paris, hosted by the group’s head of image and environment, Antoine Arnault.

LVMH chief Bernard Arnault also acknowledged LVMH and Chanel working together. “The environmental challenge redefines the usual rules of competition,” the chairman and chief executive officer said. Arnault said that competition should be on design and creativity, and businesses can share information.

“I believe it is our duty to know how to rise above the usual patterns. This is why we have chosen to invite certain competitors today,” he added. “Progress of any kind is crucial. We must join forces.”

During the day, the French luxury group discussed its wins, such as meeting its 10 percent energy reduction target at its stores, and where it is facing challenges such as removing fossil fuel-based plastic from its packaging.

The partnership program with suppliers will include financial support and coinvestment, as well as education and other initiatives to bring the suppliers on board as partners, hopefully making any mandatory changes positive rather than penalizing.

“The name of the game from now on for us is going to be Scope 3,” Arnault told WWD, about extending its sustainability reach further afield. Scope 3 is the supplier level.

“It’s the part of our mission that we control the least by definition; however, we are going to try to help our suppliers and our partners be more active on this topic — to train them, and to invest with them in their transition,” he said. Antoine Arnault acknowledged that companies at this level often face big financial challenges to overhaul their businesses.

“However, we cannot compromise,” he added.

Compliance mechanisms will be stringent but supported with training. “It’s quite tough, but we hope they see it as something helpful and that will help them in their transition,” he added, using the example of vintners trying to transition away from pesticides and herbicides but grappling with lower yields at harvest. “We are going to help them transition also financially and find ways to be more helpful toward our common suppliers,” he said.

To that end, LVMH will be cooperating with Chanel at the supplier level.

Antoine Arnault said the two groups have the same vision of luxury and “strongly believe that we will need to work together to move faster.”

Mindful of regulatory and antitrust constraints, the groups will coordinate as much as possible on things like sourcing and vetting of suppliers. While the agreement is in its early days, they have several ideas on the table. Audits are one example Arnault shared. The groups hope to create a collective audit system so that suppliers do not have to repeat their work multiple times.

“We basically just started addressing it, but I know that it is really going to be helpful to have partners we work with.”

Chanel SAS president Bruno Pavlovsky spoke on video about building the alliance between the groups that often source from the same suppliers.

“These are collective challenges as all luxury brands are supplied with leather, cotton, silk and cashmere. Only defined alliances will allow us to help the upstream transform,” he said. Businesses and brands will continue to work within their own creative ecosystems.

“There is also an economic challenge. Right now, cotton from regenerative agriculture which meets all the correct criteria will cost more than bottom-of-the-range cotton, so collectively we need to accept that that is the case. I believe that it is clearly by creating alliances and working together on a defined subject that we will be able to make progress,” he added.

Onstage, Chanel supply chain and ecological transition director Eric Dupont said the privately held luxury house came to the decision to work together with LVMH due to the urgency of the climate crisis. “The stakes are higher than one brand or group,” he said. The alliance will see the groups work together on best practices, particularly on leather, and how to define standards for the suppliers.

At the end of the day, LVMH chief Bernard Arnault took to the stage to reiterate the company’s conviction that climate can be a business decision.

“Action for climate and biodiversity will only be effective if it is seen as a real industrial strategy. The reduction in greenhouse gas emissions cannot be improvised. The protection of biodiversity cannot be improvised. The shift in the agricultural model means that regenerative agriculture cannot be improvised. All these objectives can only be achieved through thoughtful, documented strategies,” he said.

Bernard Arnault also acknowledged LVMH and Chanel working together. “The environmental challenge redefines the usual rules of competition,” he said. Arnault said that competition should be on design and creativity, and businesses can share information.

“I believe it is our duty to know how to rise above the usual patterns. This is why we have chosen to invite certain competitors today,” he added. “Progress of any kind is crucial. We must join forces.”

Much of the day was focused on how luxury players can work together, even from sectors as diverse as spirits to fashion.

The French Fédération de la Haute Couture et de la Mode executive president Pascal Morand said the organization has been working intensively behind the scenes to foster collaboration between the houses.

“The main problem of the fashion industry itself is a volumetric problem,” he said, highlighting that the garment industry turns out about 130 billion pieces a year. Morand has also been working with the European Parliament on crafting some rules that will regulate the fashion industry, including the Eco-design for Sustainable Products Regulation.

Morand said the current proposals are focused on durability and functionality and ignore other factors, including fabric composition, as well as brand value. As a result, there is a paradox in the industry where sometimes luxury products are poorly rated on that scale, or vice versa, he said. “It’s not a case of bad intentions, but it’s a complex system,” of the hard metrics that are proposed.

Changing this system for the long term requires a combination of global governance and legislative solutions, alongside the private sector. At this stage, cooperation is needed to get accurate data and granularity needed to transform the industry.

“This is why we do work with each other…in search of rigor,” he said.

If the day was a music festival, the rock star was of course a McCartney, with Stella taking the stage in conversation with Arnault. The designer and animal advocate started her line in 2001.

“I’m the grandma of sustainability here,” she joked of her 20-year-plus advocacy of sustainability. McCartney has never used animal products in her designs, even when she was an outlier in the industry.

Things have changed. “The next generation of people we’re all going to employ, they will want to work in businesses like this,” she said.

“The biggest impact we have in a positive way on the environment is not using animal products. Agriculture is massively damaging to the planet,” she said, adding that working with animals as products can also be damaging to the people that handle the labor. “It can be very harmful to human welfare. I think that should be in the conversation also.”

McCartney discussed her work with LVMH’s Veuve Clicquot to create grape leather and cork soles for shoes, as well as her championing of Mirim, a plastic-free mushroom-based leather, which is poised to scale up.

“Scalability is the only real answer, because everyone in here — we have businesses to run, right? It’s the only way to swap out bad business. Innovation is really exciting,” she said.

McCartney had also been present at COP28 in Dubai. “You can lose a little bit of hope in that room; here I have a little more hope,” she said about bringing the various stakeholders together at the daylong conference. She encouraged the LVMH employees to be innovative to tackle issues from new positions. “You have to cooperate to solve this problem. Every day at work you need to think outside of the box.”

One example was creating new hangers, said Patou artistic director Guillaume Henry.

He took to the stage with Dior Men’s and Fendi women’s creative director Kim Jones and Dior perfume creation director Francis Kurkdjian to discuss the various efforts at each of their houses.

Henry said when he realized that getting a garment from factory to store took three hangers, the brand reduced it to one with a new design. He also noted that the brand’s core line of white shirts and black blazers, called Essentiels, is still its bestseller.

Jones discussed Dior Men’s collaboration with Parley for the Oceans that has resulted in two collections that are made from recovered ocean plastic as another example. Its denim capsule collection released in September is made with 100 percent regenerative cotton.

He’s taking on other collections and incorporating alternative materials as much as possible. “With 22 collections a year it is a challenge, but we are getting to the point where we can do that,” he said.

Kurkdjian said one of the biggest challenges for the industry is going to be changing consumers’ perceptions that quantity, heft and volume equals luxury. Kurkdjian noted the industry has spent decades telling the customer one thing, and now has to work to change that perception.

“Nowadays the challenge is to help the client discover that light and sustainable is precious, more than just big and gigantic. It’s a mindset,” he said.

Many of the brand executives acknowledged that transportation is one of their biggest carbon challenges, and they are working to find solutions including more shipping by ocean or rail instead of air freight or trucks.

Packaging is another challenge, both at the brand and the group level, with eliminating plastic a major roadblock. The group will also examine its advertising and media practices, including how photo shoots are conducted.

Speaking from the stage, Arnault was direct: “Things are not getting better, and businesses cannot continue to thrive in a world overheating,” he said.

Arnault added the group is willing to acknowledge that while it is making progress on its goals, there is still a long way to go. “But what I can tell you is that everybody inside LVMH is mobilized that we are conscious that we have a huge responsibility as the leader of the sector, and that we’re taking this into our hands,” he said. “Let’s also be at the same time realistic and honest, our goal is still to continue to grow. And we will continue within that constraint in a way to produce in the best possible way.”

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US tech giant promises Janet Jackson’s former husband extra protection after false ads used his image on Facebook

US social media giant Meta has been forced to apologise publicly to Qatari billionaire Wissam al Mana and promise extra protection after his image was used in crypto scam advertisements on Facebook. 

Al Mana, a prominent businessman in the region and former husband of pop star Janet Jackson, was featured in advertisements published on Facebook in 2019 to entice people to sign up to crypto schemes in the Middle East.

Al Mana has pursued Meta in courts in Dublin over the past three years, alleging that the ads caused reputational harm, distress and embarrassment.

In a Dublin court on Friday, Meta admitted that “throughout 2019, several false, misleading and defamatory advertisements were published on Facebook by malicious third parties, featuring the image of Mr Wissam Al Mana, without his knowledge or consent”. 

Meta added: “Meta accepts and regrets that the publication of these fake advertisements by malicious third parties has caused Mr Al Mana reputational harm, distress and embarrassment. Meta apologises sincerely and unreservedly to Mr Al Mana for this.”

Crypto ventures — both legitimate and fraudulent — often use social media platforms to lure in new customers promising quick returns and using celebrity endorsements. 

The case is relatively unusual: the high costs involved in carrying out multiyear legal proceedings against the tech giant normally act as a deterrent.

However, politicians and other public figures have also issued proceedings in Ireland against social media groups, including a claim by Micheál Martin, Ireland’s foreign minister, over the use of his name and image to promote cryptocurrency scams featured by Google. In 2019, Meta settled a defamation claim brought in England by Martin Lewis by making a £3mn donation to an anti-scam charity and launching new tools for users to report fake ads.

While groups such as Meta normally move quickly to remove the fraudulent ads, a person close to the Al Mana case said that there was not enough being done to ensure that the scammers do not simply start again.

Meta reviews and approves adverts before they appear on Facebook but scammers can use false identities to try to circumvent the checks, according to industry experts. The names given as being behind the Al Mana adverts have not responded to or got involved in the case, leading to doubts about their validity. 

As a result of the case, Meta has agreed that it will use “robust measures” to tackle such advertisements in the future. Irish law firm Ronan Daly Jermyn were instructed to act on the case in Dublin. The terms of settlement have been kept confidential.

Al Mana is a well known businessman in the Gulf, helping manage his family-owned group in Qatar and holds the exclusive rights to the distribution of multiple luxury brands, including Harvey Nichols, Alexander McQueen and Hermès. 

Al Mana issued proceedings against Meta in Dublin in February 2020, but the outcome of the case was only heard in court on Friday. Irish defamation laws are seen as more friendly than the US.

As part of his case, Al Mana’s legal team said that Facebook removed the initial set of fake ads but did not implement effective measures to prevent more from appearing. Further fake adverts then appeared later in 2019, and Meta again removed these.

Meta declined to comment about the litigation.

Job cuts and fall in new orders add to fears of looming downturn, but high selling prices point to persistent inflation

Business activity in the eurozone declined at a steeper rate than expected this month, according to a closely watched survey, dealing another blow to the region’s struggling economy.

The flash S&P Global composite purchasing managers’ index, a measure of activity at companies across the bloc, fell to a two-month low of 47, down from 47.6 a month earlier, after contraction of activity in both the services and manufacturing sectors.

The result was further below the 50 mark that separates contraction from expansion and lower than the 48 reading forecast by economists in an earlier Reuters poll. S&P Global said the survey showed eurozone business activity had declined in the fourth quarter at the fastest pace for a three-month period since the pandemic hit in early 2020. 

Executives across the bloc added to fears of a looming downturn by reporting falling new orders, shrinking backlogs of outstanding work and job cuts. However, companies still reported their selling prices rose at a faster pace, pointing to persistent inflation.

The findings, combined with a sharp cut to 2024 German growth forecasts by the country’s central bank, pointed to further weakness in the eurozone economy, which shrank 0.1 per cent in the third quarter after stagnating for much of this year. High inflation, rising borrowing costs and declining global trade have been weighing on activity.

The survey also supported the ECB’s caution on how quickly inflation will continue to fall as rapid wage growth pushes up price pressures in the labour-intensive services sector.

The findings “point to a deepening recession and easing labour market but not yet to a decisive turnaround in inflationary pressures”, said Andrew Kenningham, an economist at consultancy Capital Economics. “However, we expect that to change in the coming months as the recession drags on.”

Services companies reported the fastest increase in their selling prices since July despite a cooling of input cost inflation, S&P said. This offset an eighth consecutive drop in goods prices by manufacturers, which was the smallest drop since May.

“Even though input prices increased at a modestly slower rate, companies were able to raise output prices even more than in previous months,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which sponsors the survey. “This suggests that businesses were successful in transferring a portion of the cost increases to customers.”

Another contraction in eurozone gross domestic product in the fourth quarter would raise questions about whether the European Central Bank was too optimistic in the growth forecasts it published on Thursday after it kept interest rates on hold. The ECB forecast the bloc would return to slight growth of 0.1 per cent in the fourth quarter.

Germany’s central bank added to the impression of a stagnant eurozone economy on Friday by cutting its growth forecast for next year from 1.2 per cent to 0.4 per cent, while predicting a slightly less deep contraction than initially feared of 0.1 per cent this year.

“The recovery has been postponed by around three quarters,” the Bundesbank said on Friday, blaming its gloomier outlook on “weaker than expected foreign demand in industry”, while adding that “private consumption is hesitant and higher financing costs are dampening investments”.

German inflation would slow from 8.7 per cent last year to 6.1 per cent this year and 2.7 per cent next year, the Bundesbank said, adding that it expected a “significant jump” in December as energy prices will be higher than a year ago when the government paid most households’ gas bills. 

It also warned that inflation in Europe’s largest economy would remain above the ECB’s 2 per cent target for several years, forecasting 2.5 per cent in 2025 and 2.2 per cent in 2026.

“Inflation in Germany is on the decline, but it is still too early to give the all-clear,” said Bundesbank president Joachim Nagel.