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2003

2003: May


16/03 19 May 2003

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

Statement of Hypothetical Remedies

Introduction

On 29 April the Competition Commission wrote to Carlton and Granada indicating the issues which it wished to raise as part of its inquiry into their proposed merger. These issues were summarised in a statement that was made public on the following day. On Friday 16 May, the Commission sent further letters to Carlton and Granada inviting them to comment on possible remedies that could be recommended if, at the completion of the Commission’s investigation, it considered that the proposed merger was likely to be against the public interest.

This statement summarises the points on which views are being sought. In particular, comments are invited on the likely effectiveness, costs and practicability of the remedies that have been set out. It should be clearly understood that the basis on which the points listed below are being raised is entirely hypothetical. It does not imply that the Commission has reached any conclusion on whether the proposed merger is likely to be against the public interest. It is being published now to give interested parties as much time as possible to comment on the possible remedies that the Commission may consider, consistent with maintaining the schedule for the inquiry.

Hypothetical remedies on which views are sought

The Commission invites views on the following possible remedies, which were mentioned in the letter of 29 April:

a) a complete ban on the proposed merger taking place;
or, as an alternative
b) 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
c) adherence to a code of conduct designed to protect the position of the independent production companies, and/or
d) undertakings to protect the position of the smaller ITV licensees –in relation both to their position within ITV and to the selling of their airtime.

In addition, we also invite views on two additional possible remedies, mentioned in the letter of 16 May:

e) a variation on the proposal for divesting the two sales houses, that might include a mechanism whereby the need for their ownership to be separate from the merged entity would be reviewed by Ofcom and/or the OFT after, say, five years, in order to assess whether the market conditions which had justified the original proposal were still current; and
f) whether any adverse effects, which the merger might create, could be addressed by prohibiting contracts that committed a share of an advertiser’s or a media buyer’s annual expenditure for TV advertising – the so-called ‘share deals’.

Responses

Comments are invited on the hypothetical remedies described in this statement. It would be helpful if responses could be sent to the Inquiry Secretary, Tim Oyler, at the Competition Commission, New Court, 48 Carey Street, London, WC2A 2JT (telephone 020 7271 0421; fax 020 7271 0203, e-mail tim.oyler@competition-commission.gsi.gov.uk) by Friday, 30 May.

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).