ITV merger hits hurdle

Regulator may force sale of ad sales biz

LONDON –- U.K. watchdog the Competition Commission warned that ITV’s major shareholders Granada and Carlton could be forced to sell off both airtime sales houses before its proposed merger is approved.

In a letter sent to the ITV giants Wednesday, the Commission said that if the deal went against public interest it could recommend “a divestment of both of the advertising sales houses that the merging parties currently operate, to be run, in future, as independent entities.”

Blighty’s advertisers are worried that the merged commercial network could end up controlling 50% of commercial TV viewing and 54% of national television ad coin, much higher than the 25-30% ad share limit the regulator tends to enforce.

They also fear combining Carlton and Granada’s airtime sales houses may lead to further consolidation at broadcasters Channel 4, Five and ITV breakfast TV franchise GMTV in a bid to compete for a greater slice of the ad pie.

Granada and Carlton have made it known that they are prepared to compromise by spinning off one sales company as a separate entity, run independently of ITV, but it’s unclear whether the pair would accept selling off both.

However, city analysts still believe a merger is the best option even if it means selling both sales houses rather than reverting back to the old situation of two rival media companies running a commercial network.

“They will have to make a call on whether, although they can’t get the sales houses through and they have to spin off both of them, that’s a better situation than calling the merger off, retaining the sales houses and beating each other up,” said Kingsley Wilson, a media analyst with Investec.

The commission has also not yet ruled out banning the merger entirely. In its letter it raised the possibility of further “structural behavioral” remedies to counteract the adverse effects on other interested parties such as advertisers and rival broadcasters.

The Commission is expected to hand its report to trade and industry secretary Patricia Hewitt on June 25 who will have four weeks to make her final decision.

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