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    Monday, 30 April 2007

    BSkyB's ITV share acquisition sees referral to Competition Commission

    Both the Office of Fair Trading (OFT) and Ofcom have concluded that the acquisition of shares by BSkyB in ITV should be referred to the Competition Commission for further investigation. A referral to the Commission will now take place. The only query is whether it will be asked to look at the wider public interest issues alongside the competition questions.

    Under the Enterprise Act 2002, it is normally for the OFT alone to make an initial assessment of the ramifications of a proposed or completed merger situation on competition in relevant markets. After the Secretary of State (for trade and industry) intervenes in a media industry merger, however, the OFT must report to him. Ofcom must also advise him on whether wider public interest problems of quality, diversity or pluralism have arisen (Ofcom will often conduct a separate assessment of whether the licence of any party to the merger should be amended on a change of control). It is then for the Secretary of State to decide whether the merger should be referred to the Commission. The Secretary of State is obliged to follow the OFT's view on the competition question, but can reject Ofcom's perspective on the public interest issues (and refer or not refer contrary to the advice received). This is the first time that this mechanism, introduced by amendment to the Enterprise Act through the Communications Act 2003, has been deployed.

    The statement published by the OFT is thin on detail, and we must wait for publication of its advice (normally a few weeks after the decision is announced) before gaining an insight into the specific markets in which it believes problems have arisen. For the meantime, the OFT concluded that BSkyB had obtained a 'material influence' over ITV; that a substantial lessening of competition may be expected, and that a straightforward remedy had not been found.

    On the first question, it is worth noting that a 17.9% holding without board representation is a comparatively low figure for a finding of influence. On the second question, the OFT indicated that the partial ownership link raises significant competition concerns, especially as we approach digital switchover, as it means that ITV is no longer fully independent. It also suggested that the number of consumers potentially affected - tens of millions - supported the need for further consideration.

    Ofcom's published statement is equally lacking in detail. In a five sentence release, it indicated that "there are public interest issues, in relation to sufficient plurality of news provision for both cross media and television news in the UK". It has undertaken to publish its full advice by the time the Secretary of State announces his decision on referral. This is scheduled to happen on 26 May.

    I'm due to flesh out my intuitions on the utility of the public interest adjunct to the merger control regime in a seminar at Queens University, Belfast next week and will post a summary of those reflections on here. For the meantime, the title - 'An Affective Disorder?: Public Interest Intervention in Media Mergers' - should offer an inkling of my perspective.


    Andrew Scott said...

    On 24 May, the Secretary of State duly forwarded the case to the Competition Commission on both the competition and public interest grounds. The advice offered by the OFT and Ofcom is available on the DTI page.

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