The Competition Commission has sent letters to Carlton and Granada indicating that they may have to sell their advertising sales houses if their proposed £2.6 billion merger is to go ahead.
The letters, which are part of the Commission’s enquiry into the creation of a single ITV, contain a number of “hypothetical” remedies that could come about if the merger is found to be against the public interest.
One of the remedies is that Carlton and Granada sell their sales houses so that they may be run as independent entities. Another suggests “adherence to a code of conduct” designed to protect the smaller ITV licences and the third proposes a complete ban on the merger going ahead.
The issue of Carlton and Granada’s sales houses has been the main area of contention since the merger was announced last year. Advertisers and agencies are concerned that the creation of a single ITV company, which would control around 54% of the television advertising market, could distort competition in the market for airtime sales (see ITV Merger Must Clear Regulatory Hurdles).
Carlton and Granada have vowed to create a separate advertising sales house in an attempt to side-step the problem, but this has failed to calm fears that the merger could lead to increased prices for advertisers and media buying agencies.
The Competition Commission says that the letters are designed to highlight matters that have been identified for further consideration, but emphasises that no conclusion as to whether the proposed merger will operate against the public interest has been made.
However, over the coming weeks the Commission will consider a number of key issues, the first of which will be how broad a market should be used for the assessment of Carlton and Granada’s position. For example, should all television advertising, rather than just ITV advertising, be the measure of the companies’ reach or should the whole display advertising market be considered instead?
It will also examine whether Carlton and Granada currently compete for advertising revenue or share in London and whether or not the merger would “substantially lessen” that competition.
The Commission will also asses whether any practices, such as price discrimination, bundling airtime, or predatory pricing may come into existence or be exacerbated as a result of the merger.
Other areas of concern include whether the merged entity will be able to manipulate station average prices to its own advantage and whether a single ITV will end the station average pricing system and impose new arrangements for selling airtime that could disadvantage advertisers and media buying agencies.
The Competition Commission will submit its report to the secretary of state for Trade and Industry on 25 June.
