MMC Report Could Curtail Capital’s Expansion Plans

Capital Radio’s plans for expansion suffered a setback yesterday when Margaret Beckett, President of the Board of Trade, published the Monopolies and Mergers report into its failed attempt to buy Virgin Radio (subscribers see Evans Snatches Virgin From Capital).

The MMC said that Capital would not have been allowed to take over Virgin unless it sold its Capital Gold AM licence. Based on data for the first six months of 1997, the merger would have resulted in Capital’s share of the London market increasing from 58% to 66% and its share of the national market increasing from 36% to 44%.

The MMC said that this dominance might be expected to diminish competition, especially in the London market. This would be characterised by a “reduction in the ability of advertisers to assemble effective packages which did not include the Capital and Virgin stations; a weakening of the ability of other stations to compete for revenue; and increased opportunities for Capital to adopt sales practices which might be expected to have detrimental effects on competitors.” The report also said that prices might also be expected to rise higher than they would in the absence of the merger.

Beckett said: “In the unlikely event that the merger between Capital Radio and Virgin Radio were to be reactivated, I should wish to consider further what action, if any, should be taken.”

The decision will mean that Capital will have to approach any subsequent merger deals with caution. For example, it might have to sell its AM licence if it wanted to make a successful bid for Melody FM , the London licence which is currently up for sale.

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