71/09    16 June 2009

The OFT has today published its report on the local and regional media merger regime in the UK, as part of the Government's Digital Britain review.

Download the Review of the local and regional media merger regime - final report (pdf 594 kb).

The OFT report, which focuses on local and regional newspapers, recognises that this industry is facing long-term structural changes. Advertising revenues are in steady decline as advertisers who would traditionally use the local press increasingly use the internet to place adverts for houses, jobs and cars. The recent economic climate has also hit advertising revenues generally.

However, the review says that the current merger regime, which is broadly the same for newspapers as for other industries, is well placed to take into account developments such as competition from the internet because it is evidence-based and capable of reflecting market realities.

The regime is also flexible in that it can take account of valid 'failing firm' arguments, as well as efficiencies and any other benefits to customers brought about through a merger.

The OFT has therefore recommended that no legislative changes are needed to the media merger regime. The OFT proposes that it will formally seek Ofcom's view in future newspaper merger cases, given its specific sector knowledge in the UK.

The report provides comment on the types of evidence which can assist the OFT in its merger assessments, and background on previous merger decisions in the media sector. However, it warns that the OFT's statutory duties prevent it from prejudging the outcome of hypothetical mergers - and says there would be limited value gained from a piece of 'blue skies' work, carried out with any particular merger in mind, given that the conditions of competition will vary by case and by local area.

The OFT review also notes concerns about the potential impact on local press from local authority publications, and recommends the Government review this area further and consider whether intervention, regulation or guidance would be appropriate.

John Fingleton, OFT Chief Executive, said:

'Competition between publishers is important, not just for providing quality, cost effective content to readers, but also to ensure that the most efficient, customer focused, dynamic players take advantage of the structural and cyclical challenges that lie ahead.

'The current merger regime came into force in 2003, and we are confident that it is fit for the needs of the media sector in the twenty first century. If there are significant transactions that publishers or others are keen to pursue, we will review them on their merits, taking into account the impact on customers and the realities of the marketplace.'

NOTES

1. In January 2009, the Government invited the OFT to carry out an exploratory review into the local and regional press sector to see whether changes to the current merger regime were required. See press release 14/09. As part of this review, the OFT invited submissions from interested parties, and held meetings with representative groups including publishers, advertisers and journalists. Recommendations following this review were forwarded to the Government last month, and form part of the Digital Britain Report published today. 

2. The primary focus of this review has been on local and regional print news media. However, the OFT expects that many of its recommendations are also broadly applicable to commercial radio, and potentially other media.

3. Whilst the OFT consults Ofcom when considering transactions in the broadcast and telecommunications markets, it has not specifically sought views from Ofcom in considering newspaper transactions. However, it recognises that Ofcom has expertise and knowledge of this sector, and intends to consult with it on future media mergers involving newspaper publishing and/or commercial radio or television broadcasting.

4. There are further Media Ownership Rules (under the Communications Act 2003) which govern the ownership of television, radio and newspapers in the UK. Ofcom is required to review these rules every three years, and is expected to complete its current review by the autumn.

5. The OFT recently restated its approach to cases where merging parties seek to persuade the OFT that their merger which raises competition concerns should be cleared on 'failing firm' grounds, or reasons similar to it. See press release 146-08.