Historical on-line database services: A report on the supply in the UK of services which provide access to databases containing archival business and financial information

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On 5 April 1993 we were asked to investigate and report on the supply in the UK of text retrieval services consisting in the provision of access to historical on-line databases containing archival business and financial information. The terms of reference (see Appendix 1.1) limit our inquiry to services providing access to databases which include works reproduced or summarized from daily and Sunday news-papers circu-lat-ing generally in the UK. We refer to the services covered by our terms of reference as `reference services'.

Users of on-line database services include librarians and other information specialists and also, increasingly, the individual researcher and business executive who will make use of the information them-selves. They retrieve information from the remote computer of a service provider (known as a `host') by means of telecommunica-tion links, normally from a personal computer or terminal in their own offices.

We find that two monopoly situations exist within the meaning of the Fair Trading Act 1973. One is in favour of the Financial Times group, which supplies nearly 40 per cent of the reference services under the name FT Profile. The other is in favour of Knight-Ridder Inc and its subsidi-aries which, as the result of a merger in 1993, supply two services (Data-Star and Dialog) amounting between them to around one-third of the reference services.

FT Profile is one of four main suppliers of the reference services, whose total value was £28 million in 1992. Financial Times Group Limited and its subsidiaries (collectively `the FT') argue that FT Profile competes in a much wider `market for information' which includes the traditional hard copy form as well as the electronic and is inter-na-tional in its geographical scope. On this view, historical on-line databases constitute one of many products in the market for business and financial informa-tion; others would include news-papers and journals, real-time services and various off-line products and services. While we accept that such a wide defini-tion may describe the arena within which the FT and other companies conduct their corporate strategies, in our view this arena comprises a number of separate markets which meet differ-ent user needs and within which the nature and levels of competi-tion vary. We regard historical on-line database services as one such market, and conclude that the reference services form a distinct segment within which it is appropriate to consider the practices of the FT.

The hosts providing the reference services compete in terms of the coverage of their data as well as price and other quality factors such as ease of use and the extent of back-up services. Their behaviour is also constrained by the threat of entry by new competi-tors such as existing suppliers of real-time services, suppliers of historical database services which do not currently include newspapers, and overseas suppliers which do not yet offer their services in the UK. Some of these are major international companies with large financial and technical resources. Moreover new forms of competition are likely to come on stream as a result of technological change. We conclude that the market is highly competitive.

So far as Knight-Ridder Inc and its subsidiaries are concerned, we received no complaints of anti-competitive behaviour. Because of the competitive nature of the market we conclude that their control over two of the main database services does not give cause for concern.

Two principal issues were raised with us concerning the prac-tices of the FT. The first concerns the FT's licensing practice. The publisher of a newspaper normally owns the copyright in its contents. Whereas other UK publishers are willing to license all the hosts to include articles from their newspapers, the FT does not gene-rally license hosts, other than its own FT Profile, to include copies of the Financial Times in their databases. Competing hosts argue that this practice gives FT Profile an unfair advantage.

The Financial Times enjoys a special position as a newspaper because of the stand-ing in which it is held. It is seen by users of business and financial information as an authoritative source. However, almost all the factual information it contains is also available else-where. In electronic form such information is available from the Stock Exchange's Regulatory News Service, the newswires of the press agencies and a variety of other sources. Moreover, as already indicated, in the competitive market for the reference services data coverage is only one of the elements of competi-tion among suppliers. While, therefore, we acknowledge that exclusive access to the Financial Times in electronic form confers an advantage on FT Profile, we do not regard this as an unassailable advantage by any means. We find no evidence that FT Profile is charging systemati-cally higher prices, nor is it making excessive profits, and we conclude that the FT's licensing practice is a legitimate competitive action which does not impair competition.

The second issue concerns FT Profile's terms and conditions for dealing with information brokers, who complain that FT Profile is exploit-ing its monopoly position by imposing a 10 per cent surcharge on them and by obliging them under a clause in the contract to agree to supply details of their clients on request.

Our finding that the market is competitive makes it unnecessary for us to judge whether FT Profile's surcharge to information brokers is justified by the additional service it claims to provide to them. Brokers who do not consider that FT Profile offers them value for money can switch their searches to other hosts. The FT says that it has never exercised its contractual right to require brokers to disclose details of their clients and we have received no evidence to the contrary. Moreover it has now given notice of a change to the clause which will restrict its application to cases where it is investigating a suspected breach of copyright. With this change, we consider that the clause is not open to objection.

Our overall conclusion is that this is a competitive market. Users can choose from a range of services which compete on price, data coverage, ease of use and other quality factors. We find no facts which operate or may be expected to operate against the public interest.

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