Carlton Communications and Granada’s proposed £2.6 billion merger has been referred to the Competition Commission on the grounds that it could potentially lead to a “substantial lessening of competition” in the market for television airtime sales.
Trade and industry secretary, Patricia Hewitt, today confirmed the decision, which will end hopes that a lengthy investigation of the deal to form a single ITV could be avoided (see
Full Scrutiny Of ITV Merger Looks Inevitable).
The main area of concern is that a single ITV company would control around 54% of the television advertising market. Carlton and Granada have vowed to create a separate advertising sales house in an attempt to side-step this problem, but this has failed to assuage fears that the deal could potentially distort competition in the market for airtime sales.
“The proposed merger of Carlton and Granada raises competition concerns principally relating to the sale of TV advertising. The merger would greatly increase concentration in TV advertising, leaving one firm with more than half of national TV advertising revenue. The case requires further examination by the Competition Commission to assess whether this increase in concentration is likely to lead to a substantial lessening of competition,” says Hewitt.
The director general of fair trading, who referred the merger to the Competition Commission, also concluded that the merger raises secondary competition questions in relation to potential competition for ITV licences in Northern England.
The news will come as a blow to Carlton and Granada, which claim that the deal is vital if the companies are to compete against an increasingly commercial BBC and the growing number of cable and satellite channels (see Carlton/Granada Move Closer To £2.6bn Single ITV Company).
The Commission will now consider the views of those affected by the proposed merger, before announcing its findings on 25 June this year.
