SUMMARY OF MIRROR GROUP PLC AND MIDLAND
INDEPENDENT NEWSPAPERS PLC: A REPORT ON THE PROPOSED TRANSFER TO MIRROR
GROUP PLC OF THE NEWSPAPERS OF MIDLAND INDEPENDENT NEWSPAPERS PLC
We were asked by the Secretary of State for Trade and Industry, on 10
July 1997, to investigate and report on whether the proposed transfer
to Mirror Group plc (Mirror Group) of the newspapers published by Midland
Independent Newspapers plc (MIN) and listed in our terms of reference
(see Appendix 1.1) may be expected to operate against the public interest.
MIN publishes 38 regional or local newspapers: one morning daily newspaper,
two evening dailies, one Sunday newspaper, five other paid-for weeklies,
28 free weeklies and one free monthly. It also publishes two weekly sports-orientated
newspapers, the Sports Argus and The Pink which it regards as final Saturday
editions of its evening newspapers, the Birmingham Evening Mail and the
Coventry Evening Telegraph. MIN's morning daily, The Birmingham Post,
and its two evening dailies circulate mainly in the area around Birmingham
and Coventry. MIN's Sunday newspaper circulates over a wider area of
the West Midlands, and its other weeklies are published in a range of
Midlands locations as far east as Peterborough and as far north as Derby.
MIN publishes no national newspapers.
MIN was formed in 1991 in a management buyout. It has since acquired
further titles and diversified into other activities, including exhibition
organization and non-print media, but was outbid in recent attempts to
acquire other newspaper businesses and itself became the subject of bid
speculation.
Mirror Group was acquired from Reed International plc by companies controlled
by the late Robert Maxwell and his family. Following Robert Maxwell's
death in 1991 the management of the company was restructured and shares
held by the Maxwell family companies were sold. Mirror Group now has
a range of institutional shareholders and interests in newspapers, magazines
and television. It publishes a number of newspapers circulating UK-wide
including The Mirror and Sunday Mirror and two large circulation Scottish
titles, the Daily Record and Sunday Mail. It also publishes newspapers
in Northern Ireland and has a major shareholding in the publishers of
The Independent and Independent on Sunday. Mirror Group publishes no
regional or local newspapers in England or Wales.
MIN and Mirror Group saw a merger as an attractive option for both sides
providing economies of scale and other operational efficiencies and giving
MIN access to finance for investment and expansion. They announced on
4 July 1997 that they had agreed terms for Mirror Group to make an offer
for the MIN business valuing it at 297 million.
Measured by shares of circulation and distribution, Mirror Group is
the second largest publisher of newspapers in the UK and the transfer
would not change that position. Nor would it change the present level
of concentration in the ownership of national newspapers.
Mirror Group's ranking among publishers of regional and local newspapers
depends substantially on the classification of its major Scottish titles
which share some of the characteristics of national newspapers. If they
were to be regarded as national titles, Mirror Group would continue to
be a relatively small publisher of regional and local newspapers with
the proposed transfer raising its overall share to around 7 per cent.
If the Scottish titles were counted as regional newspapers, the transfer
would make Mirror Group the largest publisher of regional and local newspapers
in the UK with a 13.3 per cent share. However, Mirror Group's regional
and local newspapers would provide relatively dispersed coverage of the
UK, being confined to Scotland, Northern Ireland and the Midlands of
England; and there would be a strong commercial imperative on Mirror
Group to continue to offer editorial content and opinion reflecting the
distinct interests of the communities in each of these areas. In our
view, common ownership of the newspapers serving these areas would not
represent a serious risk to diversity of opinion in the UK as a whole
and we do not therefore consider that the proposed transfer would lead
to a degree of concentration at national level which would adversely
affect the public interest.
In the region served by MIN's newspapers, the transfers would have no
effect on concentration in ownership of either national newspapers or
regional and local newspapers taken separately. We have, however, considered
the effect of bringing MIN's newspapers into common ownership with the
regional editions of Mirror Group's national titles.
Mirror Group's share of newspaper circulation and distribution in the
region would rise from around 12 per cent to 29 per cent; and in MIN's
core area around Birmingham and Coventry, the combined group would have
a 48 per cent share of the daily newspaper market. However, the differences
between the regional editions of Mirror Group's newspapers and MIN's
titles in terms of readership profiles, times of publication and the
level of regional or local content are such that we believe the degree
of competition between them to be, overall, very limited; and where such
competition exists, it would not in our view be in Mirror Group's commercial
interest to alter the position by changing the editorial or commercial
policy of the titles concerned. We are therefore satisfied that the transfers
would not have an adverse effect on competition and choice as far as
either readers or advertisers are concerned.
We have also considered the concerns of MIN's competitors that the combined
group would be in a strong position to use low cover prices or advertising
rates to weaken them. We accept that the transfer is likely to lead to
economies of scale and other efficiencies which could result in more
competitive cover prices or advertising rates. But we have no evidence
to lead us to believe that the combined group would be more likely to
use cover prices or advertising rates deliberately to undermine competitors
than is the case for MIN or Mirror Group at present. Nor are we persuaded
that any price cuts resulting from cost savings are likely to be such
as to pose a threat to the existence of effective competition.
As to diversity of opinion, we have no reason to doubt Mirror Group's
commitment to the continued publication of regional and local newspapers
in the Midlands region; and we believe it would not be in Mirror Group's
commercial interests to impose the opinions of its national newspapers
on those published by MIN. Moreover, even if this were to happen, diversity
of opinion in the area in which MIN's newspapers are published would
continue to be served by the newspapers of a significant number of independent
publishers of national, regional and local newspapers in and around the
area.
Mirror Group told us that its general approach to the editorial policy
of its regional and local newspapers was to agree a commercial brief
for each newspaper but to give editors freedom to maintain and develop
the local character of their titles provided that their profile and content
reflected and were in keeping with the views of the communities they
served. Mirror Group already controls newspapers covering a wide spectrum
of opinion and we received no evidence to cast doubt on the editorial
independence of these newspapers. We took account of journalists' concerns
about Mirror Group's plans to use new technology to change the way they
operate but we saw nothing exceptional in these plans and found that
MIN was, in any event, thinking along similar lines independently of
the proposed transfer. We do not believe that the transfer would threaten
the accurate presentation of news or free expression of opinion.
Nor do we believe that the consequences of the proposed transfer for
efficiency and employment would be against the public interest. We have
taken into account concerns expressed to us about the distribution policies
of national newspapers but we do not believe that the present transaction
would change the situation one way or the other and we do not expect
it to operate against the public interest in so far as it had an impact
on retail newsagents.
We have also taken note of the fact that funding of the transfer could
raise Mirror Group's gearing to 117 per cent but, having regard to the
arrangements which Mirror Group has put in place for this purpose, we
are satisfied that this does not give cause for concern.
We conclude therefore that the proposed transfer may be expected not
to operate against the public interest.
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