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Investigations

Inquiry reports

1994

 


Daily Mail and General Trust PLC and Bailey Forman Limited: A report on the proposed transfer of seven local newspapers published in Nottingham

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Summary



On 14 June 1994 the Secretary of State for Trade and Industry asked the MMC to investigate and report on whether the proposed transfer to Daily Mail and General Trust plc (DMGT) of any of the newspapers published by T Bailey Forman Limited (TBF) may be expected to operate against the public interest (see Appendix 1.1).

TBF publishes Nottingham's only daily newspaper, the Nottingham Evening Post (the NEP), two weekly paid-for newspapers (the Long Eaton Advertiser and the Stapleford & Sandiacre News), two weekly free newspapers (the Weekly Post & Recorder (Nottingham) and the Weekly Post & Free Press Recorder (with separate editions for Mansfield and Ashfield)) and, during the football season, the Football Post on Saturdays. All of the newspapers circulate in or around Nottingham.

TBF is a profitable private company owned by Forman Hardy Holdings Limited (FHH). The Forman Hardy family has been associated with the NEP since its foundation in 1878. However, FHH does not feel able to provide the continued investment needed to finance the modernization of TBF's printing presses and maintain its profitability for the long term. It therefore decided to sell TBF and its sister company, Huthwaite Printing Company Limited (Huthwaite). Following a bidding process, DMGT was selected as the proposed purchaser.

DMGT is a major publisher of national and local newspapers. Through its subsidiary Associated Newspapers Ltd it publishes the Daily Mail, The Mail on Sunday and the Evening Standard. Its separate subsidiary Northcliffe Newspapers Group Ltd (Northcliffe) is responsible for DMGT's interests in local newspapers and TBF is expected to be absorbed into Northcliffe if the merger proceeds. Northcliffe is the second largest publisher of local newspapers in the UK, with interests in several parts of the country. Northcliffe already has very significant newspaper interests in the Midlands and Humberside. If this merger were to take place it would have a monopoly of the daily newspapers published in Derbyshire, Leicestershire, Nottinghamshire, Lincolnshire, Humberside and the northern part of Staffordshire. This represents a very significant area across the centre of England which covers some 8,000 square miles and includes a population of about 4.75 million. It would be the largest contiguous grouping of regional newspapers anywhere in the UK.

There is very little overlap between the circulation areas of TBF's newspapers and those of Northcliffe. Thus the direct effect of the proposed merger is not to reduce competition within an area but rather to add Nottinghamshire to the adjacent areas in which Northcliffe already has a strong presence, so increasing the concentration of ownership in this region of the country. This is particularly important in relation to the three counties of Nottinghamshire, Derbyshire and Leicestershire (the East Midlands triangle), with a population of 2.75 million and covering an area of some 2,800 square miles.

There are two concerns which arise from this increase in regional concentration of ownership. The first relates to the consequences for free expression of opinion, and in particular for diversity of opinion in the press. We believe the regional press plays an important role in formulating opinion on regional and local issues. Diversity in the expression of this opinion is therefore important for the public interest. Our views on this matter are in line with those of successive Royal Commissions.

It has been argued that Northcliffe's policy of editorial freedom means that the present degree of diversity will continue irrespective of the increasing concentration of ownership. We consider, however, that there are risks from this transaction which we would expect to have serious consequences for diversity. One risk is that editors in the Northcliffe group will adopt similar positions on some issues as a result of close contact with each other and the uniform standards set by the group. This would be accentuated in the East Midlands triangle because of the degree of operational integration that is likely between the NEP and the other East Midlands dailies, this integration being necessary to achieve the profit improvement to justify the high cost of acquisition. Another risk is that Northcliffe's policy of editorial freedom will change at some time in the future, perhaps following a change of proprietor or of senior executives. We have concluded, therefore, that if the newspapers in Nottingham came into the same ownership as those in Derby and Leicester there would be substantially greater risks to diversity of opinion in the East Midlands than at present.

Local newspapers face growing competition from other media, such as local radio and television, but we do not believe the competing media as yet offer a level of comment and opinion on local and regional issues which rivals the influence of a local daily newspaper.

The second concern arising from the increase in regional concentration is that Northcliffe would use the very considerable market power it would acquire. If the merger took place, its market share for sales of local newspapers in the three counties of the East Midlands triangle would increase from 36 to 58 per cent. Such a dominant market position could result in competing weekly publications being forced to close or to reduce their editorial expenditure. This could lead to a further reduction in the already limited diversity of published opinion or a decline in editorial standards. Any closure of a newspaper would also result in reduced choice for advertisers and possibly, in time, higher costs.

Although some immediate benefits would accrue to the readers of TBF's titles from the capital investment that would follow the merger, we consider that these would be outweighed by the adverse consequences to which we have referred. In any event many of the benefits would apply whichever large group bought TBF's business. We therefore conclude that the proposed transfer of the newspapers to DMGT may be expected to operate against the public interest.

We considered whether any conditions could be attached to the Secretary of State's consent to the proposed transfers to prevent them operating against the public interest. Since diversity of opinion can only be adequately protected if the NEP is not in the same ownership as the daily evening newspapers in Derby and Leicester, any condition would have to involve divestment of one or both of these titles. DMGT rejected this out of hand and so we have not been able to examine fully whether such a divestment would be an effective remedy.

For the reasons given in paragraphs 1.10 and 1.11 we recommend that the Secretary of State should not give his consent to the proposed transfers.








Full text



Contents

Part I

Summary and Conclusions

Chapter 1 Summary
Chapter 2 Conclusions

Part II

Background and evidence

Chapter 3 Background to the proposed transfers
Chapter 4 The market for local and regional newspapers
Chapter 5 Views of the main parties
Chapter 6 Views of other parties
  List of signatories

Appendices

 
(The numbering of the appendices indicates the chapters to which they relate)
1.1 The reference and conduct of the inquiry
3.1 Organization charts for the DMGT and FHH groups
3.2 Newspapers published by TBF, DMGT and Northcliffe
3.3 TBF: summarized balance sheets and profit and loss accounts, 1989 to 1993
3.4 Huthwaite: summarized balance sheets and profit and loss accounts, 1989 to 1993
3.5 FHH: summarized consolidated balance sheets and profit and loss accounts, 1989 to 1993
3.6 TBF: revenue and operating profit of principal titles for 1993
3.7 The history of the involvement of DMGT and Northcliife in the newspaper industry
3.8 DMGT: summarized consolidated balance sheets and profit and loss accounts, 1989 to 1993
4.1 Travel times between cities in the Midlands
4.2 Overlap between Northcliffe and TBF titles in the rural area to the North of Loughborough
4.3 Overlap between Northcliffe and TBF titles on Nottinghamshire/Derbyshire border



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