The Department of Trade and Industry has effectively ended the six year undertaking by ITV companies not to exceed 25% ownership of all TV net advertising revenue (NAR), by allowing the proposed mergers between Granada and either United News & Media or Carlton, or between United News & Media and Carlton to go ahead.
Stephen Byers, Secretary of State for Trade and Industry published the report into the merger proposals from the Competition Commission today. “The UK media scene has changed rapidly since the early 1990s.” he said, “It is important that we allow ITV to develop in a way which allows it to compete effectively in an increasingly diverse market.”
The commission found that although all three merger proposals would give rise to adverse effects in the market for TV advertising, concerns could be met if certain divestments took place soon after the completion of the merger.
Granada would only have to undertake the divestment required under the Broadcasting Act’s rules in order to make its proposal acceptable. However the report said that a merger between United News & Media and Carlton would operate against the public interest unless the divestment of the Meridian licence within six months from merger completion took place, on top of the divestment required by the Broadcasting Act.
With the 25% limit abolished, Byers has decided to protect smaller ITV franchises by inviting the Director General of Fair Trading to ensure that scope is provided for them to have a choice of sales house within six months of notification of their wish to change their sales house. The Secretary of State for Culture, Media and Sport, Chris Smith, announced that he will use his order-making powers to lessen restrictions on holding multiplex television licences and abolish the digital points system.
Concerns regarding the mergers were raised by markets including TV advertising and programme production. The Competition Commission decided that there would be concern if a merger were to result in one dominant ITV company which could become indispensable to advertisers and therefore raise advertising prices and distort the market. This would be deemed the case if the merged company had both a share of ITV NAR which was significantly higher than the next largest and if it owned more than two of the four leading licences- Carlton TV, Central TV, Meridian TV and LWT. In that case a dominant company without divestments would control nearly two thirds of ITV NAR.
The Commission was less concerned by the effect on the programme production market. While the merger would give the new company increased voting power in the ITV network, it was considered that the barriers to entry into programme production were much lower than in broadcasting, with the existence of 1,200 independent programme production companies being given as an example.
Department of Trade and Industry: 020 7215 5600
