Newsquest (London) Limited and Independent News & Media PLC: A report on the proposed transfers.

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Under the reference (see Appendix 1.1) dated 20 May 2003, we were required to investigate the transfer to Newsquest (London) Limited (Newsquest London) of 23 newspaper titles of Independent News & Media PLC (INM). Newsquest London is a subsidiary of Newsquest plc (Newsquest), in turn a wholly-owned subsidiary of Gannett UK Ltd (Gannett) and ultimately of the US company Gannett Co., Inc.. INM, an Irish company, is an international media and communications group. Newsquest publications circulate in most of Great Britain, including most of the London area. The 23 INM titles to be transferred all circulate in London and north-west Kent.

Local newspapers are a substantial and robust market, distinguished by a generally healthy profitability. In our view, it is appropriate to regard free and paid-for local newspapers in the context of this inquiry as constituting a relevant market with limited substitution between these local newspapers and other media. The effect of the transfers would be to increase Newsquest’s share of regional and local newspapers in the UK as a whole from 15.4 to 16.4 per cent. The transfers affect only weekly local newspapers, and would increase Newsquest’s share of weekly local newspapers in the UK from 20.2 to 22.5 per cent. We believe the structure of the local newspaper market in the UK could be of concern in future, particularly if further consolidation increases concentration and the degree of regional clustering, but the effects of the current transfers are insufficient to give cause for concern along these lines at the national level. The transfers would also increase Newsquest’s share of local newspapers in Greater London from 35 to 49 per cent, and the share of the two largest publishers, Trinity Mirror and Newsquest, from 79 to 93 per cent. However, only a minority of advertising in London local newspapers is aimed at a regional (ie cross London) rather than local market and this market is also served by the Evening Standard and Metro. Hence our concerns in this case are primarily on the effect of the transfers at a more local level.

Over the INM circulation area as a whole, Newsquest’s share of circulation would increase as a result of the transfers from 22 to 57 per cent: from 37 to 72 per cent south of the Thames and from 12 to 47 per cent north of the Thames. In some areas in south London and north-west Kent shares of over 50 per cent or even over 75 per cent would result. In more limited areas in north London, shares of between 50 and 75 per cent would result. Significant increases in concentration are likely to result in almost all areas of south-east London and north-west Kent to which the eight titles of INM’s Kentish Times Times and Express series are circulated/distributed. They would also result in a number of areas of north London (Hornsey, Muswell Hill and Wood Green) to which two titles—the Hornsey Journal series and North London Weekly Herald series—of INM’s North London Newspapers division are circulated.

In these local markets, the transfers would give rise to situations where multiple titles under the same ownership would have very large market shares. Assessing the current—and likely future—degree of competition in these areas leads us to expect that the transfers would reduce the options available to local advertisers with potentially adverse effects on advertising rates and quality of service. Newsquest would also have in each of the areas affected a very strong portfolio of two free and one paid-for newspaper, which would give significant cross-selling opportunities that might weaken the competitive position of smaller rivals or new entrants. We do not believe that in such circumstances competition from other newspapers or other media, or potential competition from new entrants, is likely to be sufficient to offset the effects of the loss of competition that we expect to result from the transfers.

We are also required under the Fair Trading Act 1973 to have particular regard to the need for accurate presentation of news and free expression of opinion. As in previous reports on Newsquest, we have seen nothing in the current case to suggest that the transfer to Newsquest (and thereby to Gannett) of the titles would put at risk editorial independence, the accurate presentation of news or the free expression of opinion. Newsquest told us that it wished to retain and develop the separate titles, and to do so it would need to continue or even enhance differences in editorial approach if the titles were to continue to attract readers; in our view the transfers would be unlikely for these reasons to put at risk the current editorial diversity of the titles. We also saw nothing in the financial appraisal of the transfers by Newsquest to suggest that it was intended or would need to bring about cost savings which would be to the detriment of its readers, or any reason to believe that the prospects for the titles or for employment of staff working on them would obviously be significantly worse under Newsquest’s ownership.

We concluded that the loss of competition from the ten transfers identified in paragraph 1.3 may be expected to result in higher advertising rates and/or reduced discounts to some or all advertisers in the areas affected, and in a reduction in the quality of service for some or all advertisers. We do not believe that any benefits from those transfers would be sufficient to offset the adverse effects on competition. We therefore find the transfer of those titles to be against the public interest. We did not find the transfer of the other 13 titles to be against the public interest.

In our view there are no conditions which could be attached to the transfers in order to prevent them from operating against the public interest. We believe that the transfer of the eight titles of the Kentish Times division and the assets necessary for their continuation should not be permitted.

However, we think there is a risk that the Hornsey Journal series and North London Weekly Herald series might cease to be viable if they were separated from the third title in INM’s North London Newspapers division—the Islington Gazette series. We have not found the transfer of the Islington Gazette series to be against the public interest. There is a risk that, were the Secretary of State for Trade and Industry (Secretary of State) not to allow the transfer of the Hornsey Journal series and North London Weekly Herald series, with the result that they became separated from the Islington Gazette series, the two newspapers might eventually go out of business. Such consequences would, in themselves, be adverse to the public interest and, were they to come about, could be worse than those arising from a transfer to Newsquest. The Secretary of State may wish to bear this in mind when considering whether to allow the transfer of the Hornsey Journal series and North London Weekly Herald series.

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