Regional Independent Media Limited and Gannett UK Limited/Johnston Press Plc/Guardian Media Group Plc: A report on the proposed transfers

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Summary

The CC was required to investigate and report on whether any of the proposed transfers of the newspaper titles and related assets of Regional Independent Media Holdings Limited (RIM), set out in the terms of reference (Appendix 1.1), to Gannett UK Limited (Gannett), to Johnston Press plc (Johnston) and to Guardian Media Group plc (GMG), may be expected to operate against the public interest.

RIM is the fifth largest publisher of regional and local newspapers in the UK by circulation/distribution, publishing 72 such newspapers plus two paid-for weekly titles jointly with Tindle Newspapers Limited, mainly in Yorkshire and Humberside and in the North-West. Gannett is the third largest publisher of regional and local newspaper titles in the UK, publishing 301 titles broadly spread across England and Wales. Johnston is the fourth largest publisher of regional and local newspaper titles in the UK, publishing 187 titles in Scotland, the North, Yorkshire and Humberside, East Midlands, East Anglia and the South East. GMG is the seventh largest publisher of regional and local newspaper titles in the UK, publishing 50 titles, mainly in the North-West and the South-East.

On 26 June 2000 Gannett announced that it had approached RIM and expressed an interest in making an offer to acquire the company, and was seeking the Secretary of State’s consent to the transfer of RIM’s newspapers and related assets. Johnston sought the Secretary of State’s consent on 30 June 2000, and GMG did so on 17 July 2000. Gannett and Johnston subsequently sought the Secretary of State’s consent to the transfer of an additional title, Blackpool Now, launched by RIM after the date of their initial applications but before that of GMG.

The regional and local newspaper industry has experienced a major wave of consolidation that has led to significant changes in ownership in recent years, with two of the potential acquirers of RIM, Gannett and Johnston, becoming major players in a relatively short period of time. On the basis of the evidence put to us, we reached the view that that there are grounds for expecting more consolidation in regional and local newspaper publishing. The benefits of concentration to owners appeared greatest where there was common ownership of titles across a number of geographically proximate local newspaper markets. We identified a number of potential dangers if such growth in concentration were allowed to go too far, and reached the view that in general it would be desirable for all local newspaper markets to be within easy geographical reach of at least two major publishers of local newspapers to enable them to use their existing infrastructure to support the launch of new titles into those markets.

If any of the potential bidders were to acquire RIM then its share of the total circulation and distribution of regional and local newspapers in the UK would rise by around 4.8 per cent. This would increase Gannett’s share to 19.0 per cent, Johnston’s to 13.3 per cent and GMG’s to 8.5 per cent. We did not think that the degree of national concentration among local and regional newspapers to which any of the proposed transfers would give rise is likely to operate against the public interest.

The two regions principally affected by the proposed transfers are Yorkshire and Humberside, and the North-West. If Gannett were to acquire RIM, this would result in it increasing its market share in Yorkshire and Humberside from 14.1 per cent to 45.7 per cent, and in the North-West from 29.2 per cent to 43.0 per cent. If Johnston were to acquire RIM this would result in it increasing its market share in Yorkshire and Humberside from 26.6 per cent to 58.2 per cent, and in the North-West from 0.2 per cent to 14.1 per cent. If GMG were to acquire RIM, this would result in its obtaining RIM’s previous market share in Yorkshire and Humberside of 31.6 per cent, and increasing its market share in the North-West from 27.2 per cent to 41.1 per cent. Any of the transfers would result in whichever group acquired RIM having a very substantial number of newspapers in geographically proximate local markets. We noted, however, that any of the transfers would leave at least three major publishers with 10 per cent or more of the market in each region. We considered carefully whether any of the proposed transfers might lead to unacceptable risks for competitors, to unacceptable market power in relation to advertisers or to a reduction in the drive to maintain and improve quality that comes from editorial competition and comparison between independently managed titles. We concluded that the levels of regional concentration and common ownership of clusters of geographically proximate local titles that would result from the proposed transfers were not such as may be expected to operate against the public interest.

At the local level, we reached the view that in the event of a transfer to Gannett the greatest potential impact would be in Burnley, Colne/Nelson, Chorley, Preston/Leyland, Atherton/Leigh, Lancaster/Morecambe, St Helens/Newton le Willows, and Blackpool/Lytham St Anne’s, all in Lancashire, and Richmond/Northallerton in Yorkshire. In the event of a transfer to Johnston, the areas of greatest potential impact would be in Morley and parts of Leeds. In the event of a transfer to GMG, we did not expect any significant impact on local competition in view of the very limited overlap between the titles of RIM and GMG. After weighing the advantages and disadvantages of the transfers to readers and advertisers in each of the above areas, we reached the view that they may be expected not to operate against the public interest in this regard.

When considering the public interest in a newspaper merger inquiry we are required to have particular regard to the need for accurate presentation of news and free expression of opinion. In doing so we have considered each potential bidder’s editorial practices and intended approach, and the risks arising from financial pressures. We found no evidence to cast doubt on the commitment of any of the potential bidders to editorial freedom or accurate reporting, nor anything that might lead us to conclude that the proposed transfers would lead to the loss of independence of local editors or remoteness from local communities. Whilst we considered that financial pressures have led, and will continue to lead, to a search for economies from which editorial functions are unlikely to be immune, we found no features particular to Gannett, Johnston or GMG, or to the way in which any purchase by them of RIM would be financed, that led us to conclude that such pressures would be likely to increase as a result of the proposed transfers. We concluded that none of the proposed transfers may be expected to operate against the public interest in relation to accurate presentation of news and free expression of opinion.

If any of the potential bidders were to acquire RIM, efficiencies would be sought through rationalizing central functions. While some limited job losses would be likely, primarily in head offices, we concluded that the proposed transfers may not be expected to operate against the public interest on the grounds of efficiency, employment, training, trade union recognition or the managerial capacity of any of the potential bidders to absorb RIM.

We therefore concluded that none of the proposed transfers may be expected to operate against the public interest.

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