Anticipated acquisition by Johnston Press plc of eight newspaper titles and assets from Archant Limited

Affected market: Local newspapers

No. ME/2880/07

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 given on 17 April 2007. Full text of decision published 23 April 2007.

PARTIES

Johnston Press plc (Johnston), a UK listed company, is a publisher of local and regional newspapers and non-newspaper publications across the UK and in Ireland. It currently publishes over 300 newspapers, over 40 of which are Scottish local titles, some with associated internet sites. In addition, it also operates 11 printing centres.

Archant Limited (Archant) is a UK regional media company active in the publication of local and regional newspapers and magazines, contract printing and internet communications.

TRANSACTION

On 19 January 2007, Johnston announced that it had agreed to acquire Archant's eight Scottish local newspaper titles (the Titles) (comprising three weekly paid-for titles [see note 1] and five free weekly titles [see note 2]), together with various associated assets [see note 3] (the Business), for a consideration of £11.205 million. The OFT believes that the combination of assets and goodwill passing comprises an 'enterprise' for the purposes of section 23(1) of the Enterprise Act 2002 (the Act). In the financial year ended 31 December 2006, the turnover of the Business amounted to £6.95 million.

The administrative deadline is 17 April 2007.

JURISDICTION

As a result of this transaction Johnston and the Business will cease to be distinct. The OFT believes that the share of supply test in section 23 of the Act is met with regard to the supply of local weekly newspapers in a substantial part of the UK. The City of Glasgow, forming part of the total circulation area of the parties' overlapping titles [see note 4], is in itself a substantial part of the UK. It is also noted in passing that, on the basis of the figures supplied by the parties, the share of supply test would also appear to be met for the whole of Scotland in respect of local weekly newspapers whether including Scottish national titles and/or regional newspapers. The OFT therefore 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 [see note 5]. 

THIRD PARTY VIEWS

The OFT received a small number of third party views in it investigation, most of which were positive about the transaction. One third party response was concerned about the effect of the merger on non-competition issues.

ASSESSMENT

The parties overlap in the publication of local weekly newspapers in Scotland, from which revenues are received from advertisers and in relation to which the impact of this transaction has been considered.

At the narrowest level of product and geographic scope, the OFT considers that local weekly newspapers can be considered by reference to the JICREG areas in which the circulation footprint of the Titles and Johnston titles overlap. However, the OFT has not deemed it necessary to conclude on exact product or geographic frames of reference in relation to its assessment of this transaction as the competitive analysis is unchanged whatever definitions are used.

Johnston does not have any local weekly titles in the JICREG areas where the majority of the Titles circulate, however, there are overlaps with two of Archant's free newspapers (Bearsden, Milngavie and Glasgow East News and Lanarkshire Extra Group) which circulate around the north and east of Glasgow. The OFT, therefore, carried out a competition assessment in relation to each overlapping JICREG circulation area in respect of these two newspaper titles using rules of thumb applied by the CC in previous local newspaper investigations.

The core area of Bearsden, Milngavie and Glasgow East News is North Glasgow. The evidence provided to the OFT indicates that in this area (in which three of Johnston's titles also circulate) there is sufficient competitive constraint imposed by other newspapers including Trinity Mirror's The Glaswegian (which appears to be the title's closest constraint as it overlaps across its entire circulation footprint). In the other JICREG areas in which Bearsden, Milngavie and Glasgow East News overlaps with Johnston titles (Milngavie and Bearsden), there are a number of alternative titles in circulation which would again mitigate any attempt by Johnston to raise advertising rates from the levels they would have been absent the transaction. No third party concerns were received by the OFT in relation to these areas.

Lanarkshire Extra Group circulates in eight JICREG areas in the West of Scotland, in relation to five of which there is an overlap with a Johnston local weekly newspaper title. In two areas (Uddingston Bothwell and Wishaw) the increment to the combined share of circulation is small (less than 5 per cent). In the other three areas (Carluke, Bellshill and Motherwell) Johnston will have high shares (around 90 per cent), and the increments are fairly large (35-40 per cent). However, none of these areas individually account for more than 25 per cent of the total circulation of Lanarkshire Extra Group. Taken in conjunction with existing effective competitive constraints from other newspapers in these areas, including Trinity Mirror's Hamilton Advertiser (which overlaps in all eight JICREG areas in which Lanarkshire Extra Group is distributed), and a lack of third party concerns, the OFT believes that the loss of any competitive constraint in these areas as a result of this transaction will not be significant.

Consequently, the OFT does not believe that it is or 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.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

NOTES 

1. Buchan Observer, Fraserbugh Herald and Ellon Times.
2. Ayrshire Extra, Lanarkshire Extra Group, Paisley and Renfrewshire Extra, Glasgow Southside and Eastwood Extra, and Bearsden, Milngavie and Glasgow Extra.
3. Johnston has informed the OFT that these include: a printing press at Peterhead; two freehold properties at Peterhead and Ellon; four leasehold property interests; the benefit of commercial contracts; various fixed assets; goodwill; and other items (such as the stock, records, debts and intellectual property associated with the Titles).
4. Paragraph 3 of the OFT's decision regarding the anticipated acquisition by Johnston Press plc of Thorne and District Gazette and associated titles (May 2005).
5. Johnston contested jurisdiction on the basis that the OFT must posit some nexus between a finding on share of supply in relation to a substantial part of the UK and the geographic areas affected by the transaction and, in this case, it considered that none of the areas deemed to be affected and giving rise to a share of supply in excess of 25 per cent are of a sufficient size, character and importance to merit analysis under the Act. As noted in its decision regarding the completed acquisition by Vue Entertainment Holdings (UK) Limited of A3 Cinema Limited including its subsdiary, Ster Century (UK) Limited (September 2005), the OFT does not accept that a nexus is required by the Act between the areas in which the share of supply test is met and 'any market or markets in the United Kingdom for goods or services' (for the purposes of section 33(1) of the Act) in relation to which a relevant merger situation can result in a substantial lessening of competition.

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