OFT head: Monopolies could damage news businesses

The commercial problems faced by regional newspaper companies could be increased if a single publisher acted as a monopoly in one area, the head of the Office of Fair Trading warned today.

John Fingleton, chief executive of the OFT, told a committee of MPs this morning that despite the newspaper industry facing many difficulties he was “not convinced” the way the merger regime operated was a particular problem for the sector.

In evidence to the Commons Culture Select Committee looking into the future of the local media, Fingleton said it was important the competitive process operated efficiently in the newspaper industry to serve the interests of advertisers and readers.

Despite newspaper publishers’ arguments that liberalisation of the mergers regime could help their businesses, Fingleton told the committee of MPs this wasn’t necessarily the case.

He said: “The issues concerning the newspaper industry are ones of declining demand.

“I’m not sure that in any industry facing declining demand that charging higher prices to consumers [readers and advertisers], through a monopoly, is necessarily going to cure the problem.

“In fact, it could augment the decline in demand and precipitate decline more rapidly.”

Committee chairman John Whittingdale told Fingleton that previous evidence to the committee from newspaper owners suggested that in many areas there will almost certainly be no competition as only one paper will exist.

There are many markets where monopolies existed on a local level particularly in rural areas, Fingleton said, but there was a distinction to be made between newspapers that became a local monopoly by forcing out a competitor through a better commercial operation and those that bought newspapers – and their customers – on the stock market.

Fingleton’s suggestion that the current merger regime was not hampering the newspaper industry comes a week after shadow culture spokesman Jeremy Hunt vowed to do away with “over-paternalistic” media governance rules.

In a speech to the Manchester Media Conference setting out Conservative plans for widespread deregulation of Britain’s ailing local media groups, Hunt said a “light-touch” approach was needed to keep up with the pace of change in the media market.

Fingleton said today that any changes to the merger regime for it to allow “anti-competitive outcomes” were a matter for parliament as he did not have the discretion to allow local monopolies.

He said in recent years the OFT had offered advice in six newspaper mergers, all of which eventually took place, and that in the last three years no newspaper groups had sought the confidential advice from the OFT on potential mergers.

Despite intense lobbying from newspaper groups, an OFT consultation on the local media ownership regime, earlier this year, found that the current system was “robust and flexible” and no legislative change was necessary.

The Digital Britain report – which formed the basis for the Digital Economy Bill due to go before parliament next year – ruled that only “modest changes” were needed to the current regime when it was published in the summer.

However, it concluded that Ofcom should be given a bigger role in deciding whether future mergers should go ahead by carrying out a “local media assessment” in each case.

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