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Commercial Radio Merger’s Impact on Competition

Communications MastIn a ruling of significance to the business community, and the media in particular, Britain’s largest commercial radio operator has failed to overturn a Competition Commission order that it must divest itself of a number of its stations to ensure that advertisers get a fair deal.

The Commission launched an inquiry after Global Radio Holdings Limited acquired GMG Radio Holdings Limited – Britain’s third largest commercial radio operator, which has since been renamed Real and Smooth Limited – from Guardian Media Group plc in June 2012.

The Commission found that the interests of listeners were largely protected from the effect of the merger and that there would be little impact on large-scale ‘contract’ advertising which made up about 60 per cent of the companies’ revenue. However, it went on to rule that the resulting ‘loss of rivalry’ could have an effect on advertisers buying airtime on a campaign-by-campaign basis in seven areas of the country.

Noting the great difficulty any fresh competitors would face in attempting to enter the relevant markets, the Commission found that the merger had the potential to cause a ‘substantial lessening of competition’ in the seven areas. It ruled that requiring Global to divest itself of certain radio stations was the most effective and least costly or intrusive means of remedying the potential harm to competition.

In dismissing Global’s appeal, the Competition Appeal Tribunal rejected arguments that the Commission had applied too low a threshold when considering whether the merger could result in a ‘substantial lessening of competition’. The word ‘substantial’ did not necessarily impart the same meaning as ‘large’, ‘considerable’ or ‘weighty’.

Global’s arguments that the Commission had over-estimated the potential impact of the merger on Greater Manchester and the North West, and that divesting itself of a number of radio stations in that region was not reasonably required, were also rejected.