Friends united at last
The Brightsolid / Friends Reunited merger should increase competition
A few weeks ago, The Sun newspaper ran
an article about Rio Ferdinand's heritage. Rio's great-great
grandfather had died for his country in the trenches of the Somme.
Rio had previously been unaware of this link but The Sun had
one ancestral line of Rio's back to Private James Foster and the North Yorkshire mining community that he hailed from.
It is not known how The Sun actually
went about researching Rio Ferdinand's family tree, but there is a
fair chance that much of the work was carried out online. Internet
family history research is a rapidly growing activity.
Coincidentally, the day
after The Sun had published its article about Rio's ancestor, the Competition Commission cleared Brightsolid's acquisition of the Friends Reunited group, which involved the merger of two of the larger online family history businesses in the UK.
The OFT's decision
Online family history - or online genealogy, as the CC preferred to call it - involves the investigation of ancestry and family history via the internet. Brightsolid provides online family history services primarily through its FindMyPast (FMP) website, while Friends Reunited owned and operated the GenesReunited (Genes) website.
Back in November 2009, the Office of Fair Trading had referred Brightsolid's proposed acquisition of Friends Reunited to the CC over concerns that it could lead to a substantial lessening of competition in relation to the supply of online
genealogy services in England and Wales.
In its decision, the OFT concluded that the merger gave rise to
competition concerns on the basis of unilateral effects. In
particular, the OFT considered that the merger represented "a
reduction from three to two of the largest full-service
providers of online genealogy services in England and Wales". In the OFT's view, the competitive constraint exerted by other providers of paid-for or free online genealogy services was not sufficient to allay these concerns.
Different services on offer
Although both FMP and Genes offered services that might broadly be categorised as "online genealogy", they were far from identical. Consumers wishing to research their family history online may do so in different ways and have a variety of different resources available to them, differences which were reflected in the parties' online offerings.
Family history websites provide services by way of access to relevant genealogical or contextual data and to social networking tools. Data may be broadly divided into "core" data - information from censuses and birth, marriage and death (BMD) registers that will often provide consumers with the names of ancestors within their family tree and the dates of key life events - and "non-core" or "specialised" data, from records that may be relevant to certain subsets of the population (such as military service records, occupational records or emigration passenger lists) but not to the population at large.
Social networking tools are online facilities that allow a consumer to interact with other users. In the context of online family history research, these tools typically allow users to share their family history research with others, for example by allowing a user to upload their family tree to the website in question and then to search for matches against the trees of other users. Sharing research in this way allows users both to expand their family trees and, potentially, to connect with previously unknown relatives.
Core data overlap
The online services offered by FMP and Genes only overlapped in respect of core data. FMP focused on providing both core and non-core data, while Genes provided social networking capability and core data. From the parties' perspective, FMP
and Genes appeared to be doing largely different things that would generally appeal to different types of customer. FMP did not see its data-focused offering as being of particular interest to people interested in Genes' social networking capability and vice versa. The limited overlap in respect of core data did not, in their view, make FMP and Genes close competitors.
However, when the OFT described FMP and Genes as "full service" providers of online genealogy services, it applied the term to the online retailing of the bulk of English and Welsh censuses and BMD records (ie to core data only) ostensibly because these had been described as the key data sets of most interest to end-users. The overlap in core data had been significant enough for the OFT to refer the merger to the CC.
In this context, the core data in question comprises the census records from 1841 to 1911 and BMD data from 1837 to 2004. Both parties supply BMD and census data as online retailers, although at the time of the reference Genes did not offer either the 1881 or the 1911 censuses. FMP offered all the relevant censuses, including the 1911 census records, which had only recently been released.
The 1911 census complicated the position, particularly given the timing of its release. All the other census records had been available online for some time, and could be accessed by consumers through other online retailers. However, the project to digitise the 1911 census had been subject to a competitive award process run by The National Archives (TNA), which hold the original documentary records. Brightsolid had been the successful bidder and had been responsible for the digitisation project. It also operated the 1911census.co.uk website (in association with TNA), where the 1911 census records were first made available online on a pay-per-view basis. In October 2009, shortly before the OFT referred the merger to the CC, the 1911 census records also became available to FMP customers under a new subscription package.
Brightsolid - initially through 1911census.co.uk and then through FMP as well - had therefore enjoyed a period of de facto exclusivity in respect of the 1911 census. While the digital images of the census records had been delivered by Brightsolid to TNA and were now available to other online retailers, at the time of the CC's merger inquiry the 1911 census was not available online from any of FMP's competitors.
The 1911 census had proved to be particularly popular with consumers. As well as being the most recently released census, the 1911 records were also far more extensive than those that had survived from any of the 19th century censuses, meaning that the number of digital images available to view online was far greater than for any of the earlier censuses. This is unlikely to have helped the merging parties. While it is not possible to know precisely what third party comment the OFT may have received during its review of the merger, it seems probable that Brightsolid's temporary position as the only online provider of such a popular census product may well have encouraged third party competitors to comment unfavourably.
Ancestry the market leader
Of course, Genes and FMP were not the only providers of online genealogy services, or even of core data relating to England and Wales. Perhaps the largest online retailer was Ancestry.co.uk (Ancestry), which might genuinely have been
considered a full-service provider as it provided core data, noncore data and social networking capability, although at the time of the reference it did not have access to the 1911 census records.
One of the difficulties facing the CC was how to place this information in its proper context. The obvious starting point was to consider market definition and the market shares of the merging parties and their competitors, but these are only tools and they are not always as useful as one might imagine. There are many providers of online genealogy services, some providing services for free and others on a paid-for basis. Providers of paid-for services may do so on a subscription and/or pay-per-view basis, and will sometimes offer free services as well. Being an online market, consumers can be expected to choose providers based on the data and/or services that they offer, rather than their geographic location. Overseas customers with UK ancestors may well use a UK website to conduct their research. Similarly, UK customers may use a website that is based outside the UK if it still offers a means of building their family tree.
The CC adopted a broad definition of the relevant market comprising all online genealogy services so as to take account of the possible interrelationship between the core data, non-core data and social networking elements. But in considering the competitive effects within that broad market, it also had regard to the differentiation between Genes' and FMP's offerings.
As the CC discovered, no single measure of market share provided a reliable indication of possible market power. This is understandable. Among other things, value measures cannot take full account of providers of free services; measures of site traffic cannot adequately distinguish between visits that actually involved the supply of data or services and those that did not; and shares of image downloads ignore providers that make the same information available only as an on-screen transcription. However, what the different measures did present when taken together was a relatively consistent picture that Ancestry was the market leader and was likely to remain so despite the merger.
CC's customer survey
While the market share information was useful for assessing the position of the merged firm relative to Ancestry, it could shed little light on the extent of the competitive constraint between FMP and Genes that would be lost as a result of the merger, or on the significance of other online providers. Fortunately, where the market shares failed to provide clarity, the CC's customer survey succeeded.
The parties had maintained throughout that the online retail
activities of the merging businesses were essentially
complementary: FMP primarily seeking to provide consumers with
access to comprehensive and authoritative data, including
specialised data, while Genes was primarily focused on social networking. In this context, the overlap in respect of core data was only limited. This view was at odds with some of the comments made by third parties, such as the contention (cited
in the OFT's decision) that a website without census records is comparable to "a car with only three wheels".
The CC found that the results of its customer survey were
consistent with the parties' argument that FMP and Genes
complemented each other and were not close competitors. It also
provided evidence that Ancestry represented a significant
constraint in the market, being the most likely alternative website for customers who intended to switch from either FMP or Genes. Websites providing free services also figured as sufficiently significant alternatives in the survey results to indicate that they may also operate as a competitive constraint. Moreover, the survey evidence confirmed that consumers tend to make use of a number of different family history websites and suggested that they would have little difficulty switching between sites in response to a price increase.
All of this supported the parties' arguments that there was little direct competition between them and that any constraint that might be lost as a result of the merger would be outweighed by those that remain in the market, not least Ancestry.
As the CC pointed out in its final report, survey results do have to be considered in the light of other available information. In reaching its decision to clear the merger, the CC considered much more than has been covered above. Nonetheless, in a case where it appeared difficult to obtain a clear picture of the competitive landscape by using other tools, the survey evidence provided valuable corroboration of the parties' views.
This is perhaps a little surprising in a market characterised by a large number of providers offering differentiated services - one might have expected the survey evidence to be too "noisy" to support any particular conclusion - but welcome nonetheless. If Ancestry was the closest alternative to each of FMP and Genes before the merger, then perhaps the merged entity will prove to be a stronger source of competition to Ancestry in the future. The CC recognised this potential benefit of the transaction but did not have to place any reliance on it to reach its decision. If the merger does benefit amateur family historians in the future, some of them will have themselves to thank for providing the survey evidence that helped to see it cleared.
04 May 2010
Author: Malcolm Walton
Source: Competition Law Insight