Carlton/Granada merger to go ahead

ITV giants Carlton and Granada have been given approval to merge by Trade and Industry Secretary Patricia Hewitt, subject to certain advertising sales restrictions.

Hewitt accepted the conclusions of the Competition Commission and the advice of the Office of Fair Trading (OFT) that the merger of Carlton Communications and Granada "may be expected to operate against the public interest", and therefore decided that undertakings to remedy the adverse effects must be put in place before the merger can go ahead.

She has asked the OFT, in concert with the ITC and Ofcom, to seek to obtain by November 7 2003 undertakings from Carlton and Granada to implement a package of behavioural remedies recommended by the majority of the Competition Commission panel.

Hewitt said: "The Competition Commission have identified a number of specific adverse effects which may be expected to result from the merger. They conclude that the merger could be expected to operate against the public interest in relation both to the other Channel 3 regional licensees and to future competition for the sale of advertising airtime. I accept their arguments in respect of each of these detriments.

"The Competition Commission have recommended a number of specific behavioural remedies to address these issues. I am inviting the OFT to seek to obtain from Carlton and Granada undertakings to give effect to these remedies."

The remedies would include Carlton and Granada undertaking to agree to a package of measures to safeguard the other Channel 3 regional licensees in relation to both the ITV Network and their positions regarding the airtime sales arrangements currently in effect.

With regard to the adverse finding on the future competition for the sale of advertising airtime, the Secretary of State agreed with the opinion of four of the five members who carried out the Competition Commission inquiry that this can be satisfactorily addressed by the imposition of a system of contract rights renewals (the 'CRR remedy') and the appointment of an independent adjudicator to oversee the fair application of the mechanism for the period of the remedy.

In making this decision, Hewitt noted the concerns raised by the OFT regarding the effective implementation of the CRR remedy. She considered that the detailed undertakings would need to address these points before she could accept them. She also noted that undertakings needed to be in place for the industry's annual negotiating round, which usually takes place over November and December.

The Competition Commission found benefits in the proposed merger in terms of broadcasting, programming and the competition for viewers.

Hewitt said: "Subject to suitable undertakings being offered by Carlton and Granada so that the merger can go ahead, I am confident that the merged company will be able to compete more effectively with the BBC, Channels 4 and 5, and BSkyB. Technological and regulatory developments have changed the broadcasting landscape and the position of ITV has become increasingly difficult to maintain. A stronger ITV will be better able to invest in and provide programming of high quality, including regional programmes. Broadcasting as a whole will benefit. This outcome would be consistent with the de-regulatory reforms we have made in the Communication Act 2003 which removed the regulatory barriers to a single ITV."


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