China clears Focus Media deal with price and exclusivity curbs

China has approved Focus Media's acquisition of a stake in rival Xinchao Media with conditions aimed at preventing higher advertising prices and opening access to elevator advertising sites, marking the country's first conditional merger approval in the advertising industry.

The State Administration for Market Regulation outlined the decision on Saturday, saying the deal could strengthen Focus Media's dominant position and give the combined business greater bargaining power over advertisers.

Focus Media controls more than half of China's elevator advertising market, while Xinchao ranks second, the regulator said. The business places advertising on screens and posters in elevators and nearby residential and office buildings.

The regulator warned that the acquisition could allow the combined company to raise prices, reduce service quality or impose unreasonable commercial terms, harming advertisers and consumers.

However, it said the continued shift of advertising spending online, along with competition from other forms of outdoor advertising, would partly limit those risks.

Under the conditions, the companies must relinquish rights under existing exclusivity clauses covering advertising locations and refrain from adding exclusivity or automatic renewal provisions when signing or renewing agreements.

They must also honor existing customer contracts, maintain service standards and provide elevator advertising services on fair, reasonable and non-discriminatory terms. Restrictions on prices will prevent the combined business from using its stronger market position to increase advertising charges.

The companies must also strengthen their antitrust compliance systems and regularly report on their implementation of the commitments.

The regulator said the conditions would effectively reduce the deal's adverse impact on competition, allowing the acquisition to proceed.