Media Merger May Hit Regulatory Obstacles
The ITV Network took a further step toward what many see as its inevitable consolidation today, as Carlton Communications and United News & Media (UNM) announced the terms of a £7.8 billion merger. The new group will become the largest commercial broadcaster in the country and by far the largest player in the ITV Network.
Between them Carlton and UNM own media businesses covering the television, cinema, business publishing, newspapers, TV production and internet industries. Whilst the merger will result in the divestment of a number of the companies’ interests – including US-based Technicolor, UAP Inc., VCG, certain assets of UNM’s Miller Freeman publishing business and Carlton’s Products division – it still raises a number of issues with the regulatory bodies.
Carlton owns the ITV franchises for London weekday television (Carlton Television), Central Television, Westcountry Television and also has 20% stakes in Meridian Broadcasting and ITV breakfast broadcaster GMTV. UNM owns the remainder of Meridian, Anglia Television, HTV and a 29% stake in Channel 5. As well as this United publishes the Express, Express On Sunday and Daily Star national newspapers.
In addition, both groups control a 20% stake in independent news network ITN. Under the restrictions of the Broadcasting Act, one of these holdings will have to be relinquished when the two companies merge in order that ITN remains independent.
The cross-ownership of television and newspaper interests in London by the merged company will be examined by the Independent Television Commission (ITC) under the terms of the Broadcasting Act. The two companies are confident that United’s newspaper interests combined with Carlton’s TV businesses will pass the Commission’s public interest test.
For its part, the ITC will first determine whether a public interest test should be conducted. If there is a test, the Commission will then decide whether the cross-media ownership of the combined group is for or against the public interest.
A spokesperson for the ITC said that whilst there are structural and ownership issues involved, it is ensuring that licence holders maintain the commitments set out in their licences which is particularly important. In terms of the ITV franchises, for example, the watchdog will be concerned that the output of regional programmes and content is maintained by the separate franchises under the new combined ownership.
No one ITV group is currently allowed to command more than 15% of national television viewing share. By Carlton and UNM calculations the merged company would take about 14.9% of viewing across the 15 million homes and 37 million people it reaches. The ITC will make its own calculation of this figure when deciding whether the merged group breaches the limit.
Control of television advertising revenue is also likely to be an issue for the regulators. The Office of Fair Trading is currently reviewing restrictions to the amount of advertising sales control which were undertaken by the companies in 1994 (see OFT Embarks On Case Which Could Change The Future Of Televised Football). As part of these restrictions Carlton agreed to ensure that it did not control more than 25% of total UK television advertising revenue. This has been maintained for the last five years and the OFT will now consider whether these undertakings should be removed. Carlton and UNM are consulting with the OFT, ITC and advertisers in order to address their concerns and have the restrictions lifted.
A spokesperson for the Office of Fair Trading said the air-time sales restrictions review is still underway and that it will be considered in the light of the Carlton/UNM merger. The OFT may also decide to conduct a formal and separate investigation into the proposed merger which, in turn, will take into account the issue of advertising sales restrictions.
It is also possible that the Department of Trade and Industry (DTI) will refer the deal to the Competition Commission (CC) for full investigation. The cable industry merger between NTL and Cable & Wireless Communications was turned over to the CC by trade and industry secretary Stephen Byers earlier this month (see Cable & Wireless Communications “Disappointed” By Stephen Byers Move).
Carlton Communications: 0171 663 6363 United News & Media: 0171 921 5000 Office Of Fair Trading: 0171 211 8000 Independent Television Commission: 0171 255 3000