UK’s Carlton Plays ‘Dysfunctional’ ITV Merger Card

23 May 2003

With smoke signals from the Competition Commission looking less than propitious for its planned merger with Granada, Britain's Carlton Communications is feigning a Zen-like calm about the final outcome.

Having this week unveiled a fiscal turnround to a first-half pretax profit of £26.4 million [WAMN: 21-May-03], Carlton’s mercurial chairman Michael Green declared in his statement that the merger was “on schedule” – a curious description in the light of the latest demands made by the Commission [WAMN: 20-May-03].

Before blessing the union, the regulator invited the happy couple to accept one of two “entirely hypothetical” options to lessen the merger’s anticompetitive impact. These are ...

(1) Drop plans to meld Carlton and Granada’s respective sales organizations (currently in notional competition) and the matter would be reviewed after five years, either by the Office of Fair Trading or new media regulator Ofcom.

(2) Alternatively: cease to offer override discounts to advertisers (and agencies) in return for committing a predetermined percentage of their annual ad budget to ITV.

Earlier this month Green blustered to The Observer newspaper that if the former condition were imposed, the merger would be abandoned – a refrain he reprised Wednesay in an interview with Reuters.

“On the face of it, that appears to be a worse position than what we’re in [sic]. We've explained to them [the Commission] that we’re dysfunctional because we’re two companies running one business – I think we’d be more dysfunctional [if barred from integrating the sales units],” he claimed.

Dysfunctional the two companies may be but between them they command over fifty per cent of the UK’s TV advertising market. What worries advertisers and agencies is the stranglehold ITV would enjoy should it ever become ‘functional’.

Data sourced from: BBC Online Business News (UK); additional content by WARC staff