Anticipated acquisition by IPC Media Ltd of Horse Deals Ltd

Affected market: Equestrian magazines

No. ME/2501/06

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 16 August 2006. Full text of decision published 1 September 2006.

Please note that square brackets indicate figures or text which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.

PARTIES

IPC Media Ltd (IPC) is a UK consumer magazines publisher owned by Time Inc., the publishing division of Time Warner Inc. One of IPC's six business divisions called IPC Country & Leisure Media publishes a large range of specialist consumer interest magazines including, and of most relevance to this merger assessment, the equestrian magazines: Horse & Hound, Horse and Eventing.

Horse Deals Ltd (Horse Deals) is a private company that publishes a monthly advertising only equestrian magazine in the UK called Horse Deals, which was established in 2001. It also maintains an associated website, horsedeals.co.uk. Horse Deals' UK turnover in the year ending 31 December 2004 was just under [ ] million. 

TRANSACTION

IPC agreed to purchase the entire issued share capital of Horse Deals on 10 May 2006.

The parties notified the OFT of the transaction on 21 June 2006. The OFT's administrative deadline is 16 August 2006.

JURISDICTION

As a result of this transaction IPC and Horse Deals will cease to be distinct. The parties overlap in the supply of equestrian magazines in the UK, for which their combined share of supply based on paid for circulation exceeds 25 per cent. The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is therefore met. Accordingly, the OFT believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

THIRD PARTY VIEWS

A range of third parties were contacted including advertising customers, advertising agencies and competitors. Some third parties have raised concerns about the loss of competition between the parties.

ASSESSMENT

The parties are closest competitors in the supply of classified and display advertising space in equestrian magazines, in particular such advertising space suitable for advertising horses for sale. This is a two-sided market in which publishers seek to meet the needs of readers and advertisers. In terms of advertisers (and those seeking advertising content) the market may be segmented between classified advertising (for example, horses for sale) and the advertising (both display and classified) of other equestrian products and services.

For the advertising of horses for sale in equestrian magazines however, the OFT considers the parties to be close competitors. Evidence received by the OFT indicates that customers of Horse & Hound and Horse Deals have benefited from the competition between them, whether in terms of lower prices or better quality service or both. [ ] support such contentions: Horse Deals was clearly seen by IPC as a significant competitor to Horse & Hound and IPC sought to respond to that competition. The OFT does not believe there will be sufficient remaining competition post merger to constrain the parties from exercising market power by raising advertising prices, lowering the quality of service or lowering levels of innovation. In light of third party comments and evidence of difficulties faced by previous and recent entrants, the OFT does not believe that new entry would be sufficient, likely and timely and that the prospect would constrain the parties so as to remove the competition concerns outlined above post merger.

National Horsemart Weekly, which entered in April 2006, is a similar magazine to Horse Deals. However, customers currently consider it a much less viable option for horses for sale advertising than Horse Deals. The OFT considers it is plausible that National Horsemart Weekly will become a more effective competitor over time. However, given the lack of supporting evidence from customers and from the parties at this stage, the time taken for Horse Deals to develop and the failure of other equestrian magazines previously entering the market, the OFT is unable to rely on this recent entry to remove its concerns. Accordingly, the OFT does not believe it can rely on this entrant or entrance of other rivals as being timely, likely and sufficient such as to alleviate the concerns raised by the elimination of demonstrable close competition between the parties since Horse Deals established itself as a success. Nor do lesser constraints posed by the internet or other existing titles alter the conclusion that the merger at least raises a realistic prospect of a substantial lessening of competition.

Consequently, the OFT believes that it may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

UNDERTAKINGS IN LIEU

Where the duty to make a reference under section 22(1) of the Act applies, pursuant to section 73(2) of the Act the OFT may, instead of making such a reference, accept from the parties concerned undertakings as it considers appropriate for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned or any adverse effect which has or may be expected to result from it.

The OFT has therefore considered whether there might be undertakings in lieu of reference which would address the competition concerns outlined above. The OFT's guidance states that in order to accept undertakings in lieu of reference 'the OFT must be confident that the competition concerns identified can be resolved by means of undertakings without the need for further investigation. Undertakings in lieu of reference are therefore appropriate only where the competition concerns raised by the merger and the remedies proposed to address them are clear cut, and those remedies are capable of ready implementation' .

IPC offered undertakings in lieu of a reference to the Competition Commission to [ ]. However, the OFT does not believe that [ ] would provide sufficient competitive constraint to the parties post merger so as remove the competition concerns identified by the OFT. [ ]. The OFT therefore does not believe the undertaking is sufficiently clear-cut to address the competition concerns outlined above.

DECISION

This merger will therefore be referred to the Competition Commission under section 33(1) of the Act.

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