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OFT considers investigation into David Montgomery's Local World OFT considers investigation into David Montgomery's Local World
(about 3 hours later)
The Office of Fair Trading is considering launching a surprise investigation into David Montgomery's Local World, in a critical test of whether the UK regulator has softened its hardline stance on mergers in the beleaguered regional newspaper industry.The Office of Fair Trading is considering launching a surprise investigation into David Montgomery's Local World, in a critical test of whether the UK regulator has softened its hardline stance on mergers in the beleaguered regional newspaper industry.
Local World was formed late last year as a joint venture bringing together Daily Mail & General Trust's Northcliffe Media and Iliffe News & Media, with more than 100 titles including the Leicester Mercury, Bristol Post and Cambridge News.Local World was formed late last year as a joint venture bringing together Daily Mail & General Trust's Northcliffe Media and Iliffe News & Media, with more than 100 titles including the Leicester Mercury, Bristol Post and Cambridge News.
"The OFT is considering whether this agreement has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002," the regulator said in a statement, "And if so, whether the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.""The OFT is considering whether this agreement has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002," the regulator said in a statement, "And if so, whether the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services."
The investigation will be considered a critical test of the OFT's attitude to what are seen as mergers crucial to the survival of the regional press industry.The investigation will be considered a critical test of the OFT's attitude to what are seen as mergers crucial to the survival of the regional press industry.
In 2011 the OFT was widely criticised for its decision to block Northcliffe Media's sale of seven titles in Kent to KM Group. Northcliffe was subsequently forced to close two of the titles.In 2011 the OFT was widely criticised for its decision to block Northcliffe Media's sale of seven titles in Kent to KM Group. Northcliffe was subsequently forced to close two of the titles.
There are signs that the OFT's tough stance may be thawing. Last year it cleared DMGT's acquisition of free Nottingham weekly The Topper.
It gave unconditional clearance despite DMGT already owning the Nottingham Post, and noting that the deal would mean the publisher would have a "high combined share of supply of local newspapers and local paper advertising space in Nottingham".
Former Mirror Group Newspapers chief executive Montgomery has labelled the venture as critical in marking a fightback in the ailing regional newspaper industry.Former Mirror Group Newspapers chief executive Montgomery has labelled the venture as critical in marking a fightback in the ailing regional newspaper industry.
The venture, which creates the UK's fourth-largest regional newspaper publisher, also includes Trinity Mirror as a 20% shareholder, although the publisher's local titles are not part of the deal. DMGT holds a 38.7% share of the venture, and Iliffe 21.3%.The venture, which creates the UK's fourth-largest regional newspaper publisher, also includes Trinity Mirror as a 20% shareholder, although the publisher's local titles are not part of the deal. DMGT holds a 38.7% share of the venture, and Iliffe 21.3%.
Local World will be assessed by the OFT on a number of metrics, including whether there is a "reasonable prospect" that the venture will create a substantial lessening of competition in the local newspaper market.Local World will be assessed by the OFT on a number of metrics, including whether there is a "reasonable prospect" that the venture will create a substantial lessening of competition in the local newspaper market.
The OFT will also need to assess whether it has jurisdiction to launch a full investigation. Factors include whether a proportion of Local World's total revenue considered relevant for assessment under competition rules exceeds £70m. And whether Local World exceeds a 25% share of supply in any particular market or region of the UK.The OFT will also need to assess whether it has jurisdiction to launch a full investigation. Factors include whether a proportion of Local World's total revenue considered relevant for assessment under competition rules exceeds £70m. And whether Local World exceeds a 25% share of supply in any particular market or region of the UK.
Local World says its total annual revenues are expected to exceed £270m. Northcliffe, the biggest partner, had revenues of £213m in the year to the end of September.Local World says its total annual revenues are expected to exceed £270m. Northcliffe, the biggest partner, had revenues of £213m in the year to the end of September.
"Local World's vision is to create a flourishing and competitive business which adds great value to the communities it serves," said Steve Auckland, chief executive of Local World. "We are confident of providing full reassurance on any issues the regulator may raise".
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