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OFT to review classified directory advertising and opium derivatives undertakings

3 November 2004 - update

See statement announcing the launch of a market study into classified advertising directories.

128/04 18 August 2004

The OFT is to review undertakings given in relation to advertising in the Yellow Pages and undertakings given in relation to pricing information of opium derivatives.

The undertakings stem from reports by the Monopolies and Mergers Commission (MMC, now the Competition Commission) and were designed to remedy restrictions on competition.

The reviews are expected to be completed in the spring of 2005.

Classified directory advertising

In 1996 the MMC concluded that prices for advertising in Yellow Pages were higher than they would be if competition were effective and that the publication of local directories reduced competition. As a result, undertakings were given which cap the price for advertisements in printed Yellow Pages directories; restrict the areas in which the Yellow Pages can be distributed; and place obligations on the publisher, Yell Ltd, to provide information on its prices and make available its financial accounts.

Yell Ltd (formerly Castaim Ltd) acquired the classified directory business from BT in 2001.

The last review of the undertakings was in 2001. At that time the Secretary of State for Trade and Industry strengthened the price cap from RPI-2 to RPI-6 (see note 5) and asked the OFT to conduct another review in time for a revised price cap, if appropriate, to be in force on 1 January 2006.

Opium derivatives

In 1989, the MMC found that Macfarlan Smith Limited engaged in price discrimination in the supply of opium derivatives – used by pharmaceutical companies in a wide range of pain killers (analgesics) and cough medicines – and that it charged high prices for these products. The company gave undertakings in 1989 to make its list of maximum prices available to customers in order to protect its smaller customers from undue discrimination.

The MMC also recommended that Government departments work toward the creation of a single EU market in opium derivative products.

The undertakings were reviewed in 1997 and were unchanged.

NOTES

1. The OFT has a general duty to keep under review undertakings given under the Fair Trading Act 1973 and, from time to time, to consider whether by reason of any change in circumstance, the parties can be released from the undertakings or whether the undertakings need to be varied or superseded by new undertakings.

2. The reviews are undertaken under section 88 of the Fair Trading Act 1973 which remains in force by virtue of Schedule 24 of the Enterprise Act 2002. In addition, the OFT has powers under section 5 of the Enterprise Act 2002 to obtain and compile information about matters relating to the carrying out of its functions so that it can take informed decisions and carry out its other functions effectively.

3. The reviews implement Objective 5 (to carry out between two and four reviews) of the OFT's Annual Plan 2004-05 which was published on 30 March 2004 (see press release 60/04).

4. The classified directory undertakings resulted from the 1996 report of the Monopolies and Mergers Commission on Classified Directory Advertising Services, Cm 3171. Full details of the undertakings are given in the DTI 2001 press notice P/2001/307. The original undertakings and amended undertakings were given to the Secretary of State for Trade and Industry by BT. The business was then sold to Castaim Ltd, now Yell Ltd.

5. 'RPI-6' means that prices cannot rise by more than 6 percentage points below the rate of inflation (retail price index). As the rate of inflation has been low, prices have fallen in real terms.

6. Opium derivatives undertakings resulted from the 1989 report of the Monopolies and Mergers Commission on Opium Derivatives: a report on the matter of the existence or possible existence of a monopoly situation in relation to the supply in the United Kingdom of opium derivatives, Cm 630. Details of the undertakings given by Macfarlan Smith Ltd are in the DTI 1989 press notice P/89/273.

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