CARLTON / GRANADA GET GO-AHEAD FOR MERGER

The Competition Commission today welcomed Trade and Industry Secretary Patricia Hewitt’s decision to accept, in full, its recommendations that the proposed merger between Carlton and Granada be allowed to proceed.

Paul Geroski, Chairman of the inquiry, said:

“I am pleased that the Secretary of State has accepted our report and recommendations in full.

“The merger should benefit both viewers—through better programme quality and choice—and independent producers. Advertisers will also benefit from a stronger more competitive ITV and I believe that the remedies we have recommended will give them the protection they need from the likely consequences of merging the two sales houses.”

After a thorough investigation, the Commission found that the proposed merger would be expected to operate against the public interest in two areas:

(a) its impact on Channel TV, SMG and Ulster TV in relation to networking arrangements and the sale of their advertising airtime; and
(b) the sale of Carlton’s and Granada’s advertising airtime and, in particular, the share for discount deals struck with advertisers and media buyers.

But, after wide consultation and an unusually large number of hearings with interested parties, we concluded that the expected adverse effects of the merger could be remedied if:

(a) Carlton and Granada agree a package of safeguards proposed by the ITC and also give an undertaking that the other ITV regional licensees should have the option to roll-over existing airtime sales contracts; and
(b) adopt the contracts rights renewal (CRR) remedy which provides ITV advertisers with a fall-back option, enabling them to renew the terms of their 2003 contracts without change (automatically adjusted, should viewing figures fall). An independent adjudicator, selected by the ITC and Ofcom, would deal with any issues that arise from implementing this remedy.

Several parties suggested to us that the merger should be blocked. But as we believed that its adverse effects could be satisfactorily remedied, our unanimous view was that blocking the merger outright would be disproportionate.

Finally, during the course of the inquiry other features relating to the sale of airtime caused us concern but, as they lay beyond our terms of reference, we believed that either the OFT or ITC/Ofcom should consider a review of the wider market for the sale of advertising airtime to see how the present system might be changed so as to operate more effectively and competitively.

Notes to editors

1. The proposed acquisition of Granada plc and Carlton Communications plc was referred to the Competition Commission under the Fair Trading Act 1973 by the Trade and Industry Secretary, Patricia Hewitt, on 11 March 2003.
2. Copies of the report are available from The Stationery Office, price £26.40. The report will also be available on the CC web site:
http://www.competition-commission.org.uk
3. This inquiry was undertaken by a Group of five Commission members 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 specializing in EC and competition law; Charles Henderson, a former civil servant and non-executive Chairman of TotalFinaElf Holdings UK; and Peter Moizer, Professor of Accounting at Leeds University Business School.
4. Further information will be provided on the Commission’s web site:
http://www.competition-commission.org.uk
5. Enquiries should be directed to: Francis Royle, Press Officer, tel: 020 7271 0242