Merger plans between French TV banners TF1 Group and M6 Group are still on track despite concerns raised in a preliminary report by the French Competition Authority, which has been reviewing the case for over a year.

TF1, which is owned by Bouygues, and M6 Group, which is part of Bertelsmann-owned RTL Group, unveiled their merger plans to form a $4-billion European media powerhouse back in May 2021.

However, the listed companies said in a release on July 26 that the French Competition Authority’s investigation teams “consider that the deal raises a number of significant competition concerns (especially in relation to the advertising market).”

The banners added that although the report “in no way predicts the final decision of the authority’s board, the nature and extent of the remedies required in the report would mean that the merger plans would no longer be meaningful for the parties involved and they would therefore abandon them.”

But it’s still too early for alarm bells.

A well-informed source that’s close to the French TV outfits told Variety that it’s natural for TF1 and M6 to communicate on this report from the anti-trust board and inform shareholders because both companies are listed in the stock market. The source highlighted that the anti-trust board’s review process takes place in two phases, the second of which will issue a final decision following hearings with both parties.

They cited the example of Fnac and Darty, two major French retail chains whose merger had also raised concerns from the anti-trust authorities. However, that deal was ultimately approved under certain conditions, such as the divestment of several stores in and around Paris.

Reacting to the preliminary report from the anti-trust board, TF1 and M6 said they “do not intend to make any changes to their original plans,” and “will inform the authority of their response within the next three weeks.” The companies will have to present their arguments before the French competition authority’s board on Sept. 5 and 6.

Over at Enders Analysis, Francois Godard said he perceived TF1 and M6’s statements to be a “bargaining strategy” to apply pressure on the French Competition Authorities and have them greenlight the merger without too many conditions.

“M6 and TF1 have been arguing from the start that this merger was crucial to create a major French media group and face off the competition from global platforms, so here they’re alerting the market that if the regulators are setting the bar too high with conditions, they will not bend over,” said Godard.

The proposed merger would see Bouygues keeping a 30% stake in M6 Group, and RTL Group retaining 16% of the capital. Nicolas de Tavernost, the long-time CEO of M6 Groupe, would remain at the company as chairman, and Bouygues would have exclusive control over the merged company, acting in concert with RTL Group as a strategic shareholder.

If the deal is approved, TF1 Group, which is presided over by Gilles Pelisson (pictured) and M6 will also become the sole owners of Salto, the streaming service they launched with the French public broadcaster France Televisions in 2020.

Some industry players, especially producers, have been concerned over a potential merger between TF1 and M6 because they fear those companies, which have separate obligations to invest in French content, will bundle these obligations and no longer work with different commissioners. The other key issue is advertising as TF1 and M6 are likely aiming to centralize their sales force, which will give them greater leverage to lure advertisers.

That said, “looking at the scope of multi-billion-dollar mergers happening in the U.S. with Amazon and MGM, and WarnerMedia and Discovery, this deal which is worth €650 million should not present insurmountable challenges,” said an industry source close to the French TV groups.

TF1 will released its half-year financial results on July 28, followed by Bouygues on Aug. 2.

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