Reed Elsevier Plc and Harcourt General, Inc: A report
on the proposed merger
Text of a letter received from Stephen Barr, Managing Director of
Sage Publications Ltd about the inquiry into the merger of Reed Elsevier
Plc and Harcourt General, Inc
I write to ask if you could correct an error in the published report
of this Inquiry. The error in question is on page 58 of the full report,
in table 4.1 relating to point 4.30. The footnote to this table states:
RE told us that Taylor & Francis had since acquired Gordon &
Breach and Sage.
This may be a correct statement of what the inquiry was told by RE, but
it is not a correct statement with respect to Sage, which remains an independent
company and has not been acquired by Taylor & Francis. This report
is likely to be read by a significant proportion of those involved at
a senior level in the STM business and it is highly undesirable for Sage
that this misrepresentation should remain in the report.
20 August 2001
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On 21 February 2001 the Secretary of State for Trade and Industry referred
to the Competition Commission (CC) for investigation and report under
the merger provisions of the Fair Trading Act 1973 the proposed acquisition
of Harcourt General, Inc (Harcourt) by Reed Elsevier plc (RE). Here and
elsewhere in this report 'Harcourt' and 'RE' are used to refer to the
company and its subsidiaries, unless the context requires otherwise. Our
terms of reference are at Appendix 1.1. We are required to report by 28
The CC began this inquiry with a Group of four members under the chairmanship
of Arthur Pryor, but ill health forced Mr Pryor to resign after seven
weeks. The remaining three members, Anthony Clothier, Dame Helena Shovelton
and David Stark, completed the inquiry with Mr Clothier in the chair.
RE is an international company, jointly owned by Reed International
PLC and Elsevier NV. Its principal activities include: publishing a variety
of academic, legal, business, consumer, accountancy and tax titles; organizing
exhibitions and seminars; producing materials for the study of English;
and providing services for the travel industry.
Harcourt is a US holding company for a group of publishers that provide
a range of titles and other products and services in the fields of education,
training and assessment.
The proposed transaction, which is due to be completed later this year,
will involve RE ac-quiring Harcourt and immediately selling on some of
its businesses to The Thomson Corporation (Thomson). RE will retain Harcourt's
science, technical and medical (STM) group, its education group and elements
from its corporate and professional services group. Thomson will acquire
the rest of that group and Harcourt's higher education group.
We began our task by analysing the operations of RE and Harcourt and
concluded that the only parts of their businesses with the potential to
give rise to competition concerns were their sales of STM journals-in
both print and electronic formats-in the UK.
We then proceeded to examine the STM journal market in detail. Although
we looked at a number of aspects-some of which seemed to us to present
unusual character-istics-we identified only three that raised potential
public interest concerns:
(a) arrangements for providing customers with access to electronic versions
of STM journals;
(b) arrangements under which other access mechanisms would be able to
establish links with RE's and Harcourt's electronic platforms; and
(c) the pricing of annual subscriptions to STM journals.
Two members of the Group, Mr Clothier and Dame Helena Shovelton, concluded
that, while these aspects of the proposed merger did raise concerns, they
did not have an expectation that it would operate against the public interest.
As they form a majority of the Group constituted to consider this reference
their conclusion is to be regarded as the CC's conclusion in this inquiry.
The third member, Mr Stark, whose minority position is set out in a
supplementary note to Chapter 2, concluded that the proposed merger might
be expected to operate against the public interest.
The Group then went on to record two final points. The first is that
the current VAT regime for journals-which accords print versions a zero
rating, but subjects contracts to receive journals electronically to the
standard rate of 17.5 per cent-threatens to retard further progress in
electronic delivery and dissemination of knowledge.
The second is that the inquiry has brought to light a number of features
of the market for STM journals that are unusual and may benefit from further
examination. Although they lie beyond the CC's terms of reference on the
present occasion, if the Director General of Fair Trading believes that
there are matters giving rise to wider concerns and are not being resolved,
then he may wish to consider whether a wider review is necessary.
Summary and Conclusions
||Supplementary note by Mr J D S Stark
Background and evidence
||The companies and the proposed merger
||The relevant markets and the effects of the proposed
||Views of the main parties
||Views of other parties
||List of signatories
|(The numbering of the appendices indicates
the chapters to which they relate)
||The reference and background
||Elsevier Science: management accounts, 2000
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