INQUIRY INTO THE PROPOSED MERGER OF GRANADA PLC & CARLTON COMMUNICATIONS PLC

Further Statement of Hypothetical Remedies

Introduction

1. On 19 May the Competition Commission issued a statement listing a number of hypothetical remedies for comment, against the possibility that, at the completion of its investigation, the Commission considered that the proposed merger was likely to be against the public interest.

2. The hypothetical remedies in question were:

a complete ban on the proposed merger taking place; or, as an alternative
a divestment of both of the advertising sales houses that the merging parties currently operate, to be run, in future, as independent entities, and/or
adherence to a code of conduct designed to protect the position of the independent production companies, and/or
undertakings to protect the position of the smaller ITV licensees –in relation both to their position within ITV and to the selling of their airtime.
a variation on (b) that might include a mechanism whereby the need for their ownership to be separate from the merged entity would be reviewed by Ofcom and/or the OFT after, say, five years, in order to assess whether the market conditions which had justified the original proposal were still current; and
the prohibition of contracts that committed a share of an advertiser’s or a media buyer’s annual expenditure for TV advertising – the so-called ‘share deals’.

3. Since then, the Group of Commission Members charged with undertaking this inquiry have continued to receive evidence on these and other issues, and have held hearings with the parties to the proposed merger, and with others.

4. During this time, some additional remedies have been proposed, and the Group has decided to consult more widely on two of them. They are:

a requirement that a minimum proportion of ITV’s airtime should have to be auctioned off each year, separately from the annual deal round, in the form of standardised contracts that could be traded in a secondary market; and
a mechanism for rolling forward ‘share for discount’ agreements with Carlton and Granada, so that existing customers would be able to renew their current contracts on the same overall terms, with the additional right to be able to reduce their share of broadcast in line with any year–on-year fall in ITV’s share of commercial impacts, without a reduction in the level of discount they receive. There would also be a commitment, on the part of Carlton and Granada, to maintain the key features of the current arrangements for selling airtime.

5. The purpose of this further statement is to invite comments on the likely effectiveness, costs and practicability of the remedies that have been set out, particularly (g) and (h). It should be clearly understood that the basis on which all of these possible remedies are being raised is entirely hypothetical. It does not imply that the Commission has reached any conclusion on whether the proposed merger is likely to be against the public interest. It is being published now to give interested parties as much time as possible to comment on the possible remedies that the Commission may consider, consistent with maintaining the completion date for this inquiry, which has today been extended to 26 August 2003.

Responses

6. Comments are invited on the hypothetical remedies described in this statement. It would be helpful if responses could be sent to the Inquiry Secretary, Tim Oyler, at the Competition Commission, New Court, 48 Carey Street, London, WC2A 2JT (telephone 020 7271 0421; fax 020 7271 0203, e-mail tim.oyler@competition-commission.gsi.gov.uk) by Wednesday, 25 June.

Notes to Editors

The reference was made by the Secretary of State for Trade and Industry, under sections 64, 69(2) and 75 of the Fair Trading Act 1973, on 11 March 2003 (see DTI news release P/2003/152).
No conclusion will be reached about whether any matters operate or may be expected to operate against the public interest until the Competition Commission submits its report to the Secretary of State on 26 August 2003. It will subsequently be published.
This inquiry is being undertaken by a group of five Commission members and is led by Professor Paul Geroski, one of the Commission’s deputy chairmen. The other members are Sarah Brown, a former civil servant and non-executive member of the South West Kent Primary Care Trust, Diana Guy, a solicitor specialising in EU and competition law, Charles Henderson, a former civil servant and non-executive Chairman of Total Holdings UK, and Peter Moizer, Professor of Accounting at Leeds University Business School.
Further information can be obtained from the Commission's website at www.competition-commission.org.uk
Enquiries should be directed to Francis Royle, Press Officer (020 7271 0242).