Competition Watchdog to Probe UK Phone Directories

07 April 2005

The Office of Fair Trading this week referred Britain's telephone directory industry to its senior sibling, the Competition Commission.

The referral follows an investigation of the accounts of the UK's two leading brands Yellow Pages and Thomson. It discovered that despite price regulation (imposed in 1996) the virtual duopoly held by Yell Group and Thomson Directories still commands over 90% of the market.

Among other marketing practices, both publishers offer large discounts to entice new advertisers but hike their rates thereafter.

The OFT found the companies' return on sales (operating profit divided by revenue) was higher than expected, despite the mandatory capping of prices. In the case of Yell, ROS was 37% - higher than when the caps were renewed in 2001.

Concluded the junior watchdog: "This casts significant doubt on claims that competition in the market is increasing. Barriers to entry are significant. The two leading suppliers account for the large majority of advertising revenue and their [market] shares have not changed significantly over the past decade."

Hands aloft in injured innocence, Yell ceo John Condron insists: "In the ten years since the MMC [former regulator, the Monopolies and Mergers Commission] completed its first review, the classified advertising market has become increasingly dynamic and aggressively competitive."

And Thomson ceo Linda Pancratz harmonized to the same refrain: "We believe that the UK directories market is both dynamic and competitive."

But her belief is not corroborated by facts. Two new competitors, BT and Trinity Mirror, hardly Little League combatants, have managed to scrape less than 5% market share between them.

Competition Commission chairman Professor Paul Jeroski is expected to appoint a five-member panel to oversee the investigation by next week, while staff will start gathering information in the next few days from directory companies, their trade customers and the public.

The Commission says it aims to complete the investigation within fifteen months, well ahead of its mandatory two year span.

Data sourced from; additional content by WARC staff