Avenir Havas Media SA and Brunton Curtis Outdoor Advertising Ltd: A report on the acquisition by Avenir Havas Media SA of Brunton Curtis Outdoor Advertising Ltd

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Summary

On 3 July 1991, the Secretary of State for Trade and Industry asked us (see Appendix 1.1) to investigate and report on the acquisition by Havas SA (Havas), through Avenir Havas Media SA (Avenir), of Brunton Curtis Outdoor Advertising Ltd (Brunton Curtis).

Mills & Allen Ltd (Mills & Allen), a wholly-owned subsidiary of Avenir, in turn a subsidiary of Havas, acquired Brunton Curtis in April 1991. Before the merger, Mills & Allen was already the leading supplier of roadside poster advertising services in the United Kingdom, with a market share (including a number of sales agreements with other companies) of some 22.1 per cent. Brunton Curtis was also a poster contractor, with a market share of some 5.3 per cent. Other main suppliers were More O'Ferrall PLC (19.8 per cent), Maiden Outdoor Advertising Ltd (Maiden) (13.6 per cent) and Allam & Co Ltd (9.2 per cent), the remaining 30 per cent share being accounted for by a large number of generally small firms. As a result of the merger Mills & Allen has acquired a number of panels which it sold pursuant to undertakings given following a 1987 report of the MMC on another merger. We have examined the industry afresh and assessed the effects of the present merger on the market in the light of current circumstances.

Roadside posters account for less than 5 per cent of display advertising expenditure in the United Kingdom. We considered the extent to which roadside posters could be regarded as a distinct market. While there is some substitutability between roadside posters and other advertising media, we believe that this is insufficient to offset the effects of any loss of competition between poster contractors.

We also considered whether it was valid to distinguish the effects of the merger on the different panel sizes. Different sizes of poster tend to address somewhat different audiences, smaller posters (particularly 4-sheets) being aimed mainly at pedestrians, larger posters (48-sheets and above) mainly at motorists and passengers. Since our 1987 report, a new 6-sheet panel, positioned on bus shelters and with back illumination, has been introduced, which has been marketed to attract advertisers from the larger 48-sheet panels. In our view, however, while there is a degree of overlap between roadside panels of different sizes and some complementarily in their use, neither the 6-sheet nor the 4-sheet panels can be regarded as providing effective competition to 48-sheet and larger panels.

The merger increases Mills & Allen's share of 48-sheet and larger roadside panels to some 33.8 per cent (significantly larger than the second largest supplier of such panels, Maiden with 19 per cent), with a more pronounced effect in a number of regions. We regard as well-founded the concern of a number of parties from whom we heard that the merger, by enhancing the ability of Mills & Allen to sell panels in packages, is likely to operate to the disadvantage of users, and to weaken the position of other poster contractors. Although new poster contractors enter the industry quite frequently in a small way, there are significant barriers to growth, in particular planning regulations which limit the number of new panels that can be erected, and the threat of potential entry will not, in our view, act as a constraint upon the behaviour of existing contractors. We believe, therefore, that the effect of the merger is to reduce competition and choice in the supply of 48-sheet and larger roadside panels, and this may be expected to lead in time to higher prices than would be achieved in a more competitive situation. Although the improvements to service and standards that Avenir has introduced into the industry are to be welcomed, we do not believe that there are sufficient benefits resulting from the merger to offset the adverse effects we have identified. We conclude that the merger may be expected to operate against the public interest.

Some parties giving evidence to us suggested that the merger should be allowed to stand provided Avenir gave various undertakings as to future behaviour; and the wider suggestion was made to us that a framework for self-regulation of the industry should be developed. We do not believe that such measures would remedy the adverse effects. Nor, since our concern is as much with Mills & Allen's national position following the merger as with its position in particular regions, do we believe that divestment of panels in certain regions only would be appropriate. We therefore recommend that Avenir and Mills & Allen should be required to procure the divestment of all the 48-sheet and larger panels which were owned or otherwise under the control of Brunton Curtis at the date of its acquisition by Mills & Allen.

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