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News release archive

2003

2003: April


13-03 30 April 2003

INQUIRY INTO THE PROPOSED MERGER OF
GRANADA PLC & CARLTON COMMUNICATIONS PLC:

Statement of Issues and Hypothetical Remedies

The Competition Commission has sent issues letters, to Granada and Carlton, as part of its inquiry into their proposed merger. The letters also list some hypothetical remedies.

Such letters are always sent before the Commission has reached any conclusions and are designed to highlight matters that have been identified for further consideration. This statement is being made public to give interested parties the opportunity to bring to the Commission's attention, in the next two weeks, any further points that they wish to raise. The Commission has reached no conclusions about whether any matters operate or may be expected to operate against the public interest and will not do so until after it has discussed these issues with the parties concerned.

The issues that the Commission intends to consider are:

a) The appropriate definition of the economic markets affected by the proposed merger, in particular:

  • whether television advertising - as opposed to ITV advertising, or all display advertising - is the relevant market, and whether its geographic extent is the UK or England and Wales;
  • whether the geographic market for programme production is the UK or whether it is part of a wider market;
  • whether the geographic market for studio facilities is regional or whether it is part of a wider market.

b) Whether the proposed merger is likely to affect competition in any of the markets identified, and, in particular:

  • whether Carlton and Granada currently compete for advertising revenue or share in London and in the regions; and, if so
  • whether the proposed merger can be expected substantially to lessen that competition;
  • whether, as a consequence, it is likely to lead ultimately to a significant rise in prices, or reduction in quality, or levels of service, for all - or at least some - advertisers and/or media buying agencies;
  • whether any practices - such as price discrimination, bundling airtime sold to media buying agencies and/or advertisers, or predatory pricing - may be expected to come into existence or be exacerbated as a result of the proposed merger; including
  • whether the merged entity will be able to manipulate station average prices - and/or the discounts offered from them - to its own advantage; or
  • whether the merged entity will end the station average price system and impose new arrangements for selling airtime that disadvantage media buying agencies and/or advertisers;
  • whether there are significant barriers to entry or expansion in the relevant markets;
  • whether there are identifiable trends in the development of the relevant markets that might affect competition in the future;
  • whether the increased influence that the merged company would have within the ITV network - as the owner of 11 of the 15 regional licences - might
    • be expected to restrict competition between in-house and independent production companies, or
    • whether the other ITV licensees will be adversely affected;
  • whether, as a result of the market conditions created by the proposed merger - taken together with existing sales practices, such as TV advertising share deals - the competitive position of other broadcasters, other ITV licensees and/or independent production companies, would be seriously weakened;
  • whether future competition for ITV licences is likely to be constrained;
  • whether the proposed merger could be expected to operate to the detriment of advertisers, media buying agencies, viewers, users of studio facilities, competitors and/or other participants in the broadcasting and advertising sectors, in any other way.

c) Whether any potentially unwelcome consequences of the proposed merger might be constrained sufficiently to avoid detriment to the public interest:

  • by advertisers or media buying agencies having or acquiring sufficient countervailing buyer power;
  • by their being able to use alternative TV channels to substitute for what the merging parties currently offer to advertisers; or
  • by any other developments that are likely to occur;
  • whether the merged group would be constrained from increasing prices by
  • the limits imposed on ITV advertising airtime, and/or
  • the current mechanism for pricing TV advertising.

d) Whether there are expected to be benefits from the proposed merger and, if so:

  • what are they likely to be;
  • to whom will they accrue; and
  • whether they can be achieved only as a result of the merger.

In the event of the Commission finding that the proposed acquisition was expected to operate against the public interest, amongst the remedies that might be considered to deal with the adverse effects identified are:

  • a complete ban on the proposed merger taking place;
    or, as an alternative
  • a divestment of both of the advertising sales houses that the merging parties currently operate, to be run, in future, as independent entities, and/or
  • adherence to a code of conduct designed to protect the position of the smaller ITV licensees and the independent production companies; together with
  • any other remedies - structural or behavioural - that might be advanced by the parties to the proposed merger, or by others, which might address possible adverse effects of the proposed merger on advertisers, media buying agencies, other ITV licensees, other broadcasters and independent programme producers.
 

Notes to Editors

 
  1. The reference was made by the Secretary of State for Trade and Industry, under sections 64, 69(2) and 75 of the Fair Trading Act 1973, on 11 March 2003 (see DTI news release P/2003/152).
  2. No conclusion will be reached about whether any matters operate or may be expected to operate against the public interest until the Competition Commission submits its report to the Secretary of State on 25 June 2003. It will subsequently be published.
  3. This inquiry is being undertaken by a group of five Commission members and is led by Professor Paul Geroski, one of the Commission's deputy chairmen. The other members are Sarah Brown, a former civil servant and non-executive member of the South West Kent Primary Care Trust, Diana Guy, a solicitor specialising in EU and competition law, Charles Henderson, a former civil servant and non-executive Chairman of TotalFinaElf Holdings UK, and Peter Moizer, Professor of Accounting at Leeds University Business School.
  4. Further information can be obtained from the Commission's website at www.competition-commission.org.uk
  5. Enquiries should be directed to Francis Royle, Press Officer (020 7271 0242).