SUMMARY OF DAILY MAIL AND GENERAL
TRUST PLC AND T BAILEY FORMAN LIMITED: A REPORT ON THE PROPOSED
TRANSFER OF SEVEN LOCAL NEWSPAPERS PUBLISHED IN NOTTINGHAM
On 14 June 1994 the Secretary
of State for Trade and Industry asked the MMC to investigate and report
on whether the proposed transfer to Daily Mail and General Trust plc (DMGT)
of any of the newspapers published by T Bailey Forman Limited
(TBF) may be expected to operate against the public interest (see Appendix 1.1).
TBF publishes Nottingham's only daily newspaper, the
Nottingham Evening Post (the NEP), two weekly paid-for newspapers
(the Long Eaton Advertiser and the Stapleford & Sandiacre
News), two weekly free newspapers (the Weekly Post & Recorder
(Nottingham) and the Weekly Post & Free Press Recorder (with
separate editions for Mansfield and Ashfield)) and, during the football
season, the Football Post on Saturdays. All of the newspapers circulate
in or around Nottingham.
TBF is a profitable private company owned by Forman Hardy
Holdings Limited (FHH). The Forman Hardy family has been associated
with the NEP since its foundation in 1878. However, FHH does not
feel able to provide the continued investment needed to finance the modernization
of TBF's printing presses and maintain its profitability for the long
term. It therefore decided to sell TBF and its sister company, Huthwaite
Printing Company Limited (Huthwaite). Following a bidding process, DMGT
was selected as the proposed purchaser.
DMGT is a major publisher of national and local newspapers.
Through its subsidiary Associated Newspapers Ltd it publishes the Daily
Mail, The Mail on Sunday and the Evening Standard. Its
separate subsidiary Northcliffe Newspapers Group Ltd (Northcliffe) is
responsible for DMGT's interests in local newspapers and TBF is expected
to be absorbed into Northcliffe if the merger proceeds. Northcliffe is
the second largest publisher of local newspapers in the UK, with interests
in several parts of the country. Northcliffe already has very significant
newspaper interests in the Midlands and Humberside. If this merger were
to take place it would have a monopoly of the daily newspapers published
in Derbyshire, Leicestershire, Nottinghamshire, Lincolnshire, Humberside
and the northern part of Staffordshire. This represents a very significant
area across the centre of England which covers some 8,000 square miles
and includes a population of about 4.75 million. It would be the largest
contiguous grouping of regional newspapers anywhere in the UK.
There is very little overlap between the circulation
areas of TBF's newspapers and those of Northcliffe. Thus the direct effect
of the proposed merger is not to reduce competition within an area but
rather to add Nottinghamshire to the adjacent areas in which Northcliffe
already has a strong presence, so increasing the concentration of ownership
in this region of the country. This is particularly important in relation
to the three counties of Nottinghamshire, Derbyshire and Leicestershire
(the East Midlands triangle), with a population of 2.75 million and covering
an area of some 2,800 square miles.
There are two concerns which arise from this increase
in regional concentration of ownership. The first relates to the consequences
for free expression of opinion, and in particular for diversity of opinion
in the press. We believe the regional press plays an important role in
formulating opinion on regional and local issues. Diversity in the expression
of this opinion is therefore important for the public interest. Our views
on this matter are in line with those of successive Royal Commissions.
It has been argued that Northcliffe's policy of editorial
freedom means that the present degree of diversity will continue irrespective
of the increasing concentration of ownership. We consider, however, that
there are risks from this transaction which we would expect to have serious
consequences for diversity. One risk is that editors in the Northcliffe
group will adopt similar positions on some issues as a result of close
contact with each other and the uniform standards set by the group. This
would be accentuated in the East Midlands triangle because of the degree
of operational integration that is likely between the NEP and the
other East Midlands dailies, this integration being necessary to achieve
the profit improvement to justify the high cost of acquisition. Another
risk is that Northcliffe's policy of editorial freedom will change at
some time in the future, perhaps following a change of proprietor or of
senior executives. We have concluded, therefore, that if the newspapers
in Nottingham came into the same ownership as those in Derby and Leicester
there would be substantially greater risks to diversity of opinion in
the East Midlands than at present.
Local newspapers face growing competition from other
media, such as local radio and television, but we do not believe the competing
media as yet offer a level of comment and opinion on local and regional
issues which rivals the influence of a local daily newspaper.
The second concern arising from the increase in regional
concentration is that Northcliffe would use the very considerable market
power it would acquire. If the merger took place, its market share for
sales of local newspapers in the three counties of the East Midlands triangle
would increase from 36 to 58 per cent. Such a dominant market
position could result in competing weekly publications being forced to
close or to reduce their editorial expenditure. This could lead to a further
reduction in the already limited diversity of published opinion or a decline
in editorial standards. Any closure of a newspaper would also result in
reduced choice for advertisers and possibly, in time, higher costs.
Although some immediate benefits would accrue to the
readers of TBF's titles from the capital investment that would follow
the merger, we consider that these would be outweighed by the adverse
consequences to which we have referred. In any event many of the benefits
would apply whichever large group bought TBF's business. We therefore
conclude that the proposed transfer of the newspapers to DMGT may be expected
to operate against the public interest.
We considered whether any conditions could be attached
to the Secretary of State's consent to the proposed transfers to prevent
them operating against the public interest. Since diversity of opinion
can only be adequately protected if the NEP is not in the same
ownership as the daily evening newspapers in Derby and Leicester, any
condition would have to involve divestment of one or both of these titles.
DMGT rejected this out of hand and so we have not been able to examine
fully whether such a divestment would be an effective remedy.
For the reasons given in paragraphs 1.10 and 1.11 we
recommend that the Secretary of State should not give his consent to the
proposed transfers.
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