United/Carlton Merger Requires Change In Legislation, Says ITC

The Independent Television Commission (ITC) has said that a merger between United News & Media and Carlton Communications would require a change in the law. The Commission asked for views related to the deal earlier this year (see ITC Seeks Views On Carlton/UNM Merger), and today published its findings.

The Commission said that some change in the regulations surrounding broadcasting is necessary and that consolidation of ITV is inevitable. The changes required to accept the proposed merger are radical but the Commission believes there may be a case for modifying the rules.

Under current regulations the deal between the two media companies would break rules regarding the amount of advertising market share one organization is permitted to own. A single company cannot be responsible for more than 25% of total television advertising. The ITC said that the proposed merger would mean increasing this limit to “something nearer to 40%”, a radical change at this point in time. “We are not opposed to some increase, but that would be a major change by any standards,” the ITC report said.

The Commission said that there was no “convincing case” for such a change at present. Its report said that a relaxation of the rules to this extent would mean that the three ITV sales houses would be reduced to two, and smaller groups owning ITV franchises would lose out. However, it was not against changes in the current law.

The other central issue in the proposed merger is the audience share limit. Currently one company can control just 15%; the merged group would hold no more than 14.9%, but this would increase if both groups exercised their shares in Channel 5 and GMTV. Thus one or both of the groups “would have to sell down their holdings in television services such that the 15% is not breached.”

Either Carlton or UNM would also have to sell their stakes in ITN, as a holding of more than 20% is not permitted.

The two groups agreed to merge at the end of last year (see Carlton/UNM Merged Group Plans For The Future). The deal has been referred to the Competition Commission, which is due to report on 16 May (see Carlton-United Merger Deal Referred To Competition Commission).

Independent Television Commission: 020 7306 7743