Affected market: Radio advertising services
Found not to qualify.
1. On the basis of the information available to it, the Office of Fair Trading has decided that the completed acquisition by Buzz Asia Limited (Buzz Asia) of the broadcast licence previously operated as 'Club Asia' does not qualify for investigation under the mergers provisions of the Enterprise Act 2002 (the Act). This is on the basis that this broadcast licence does not, on its own, nor when considered together with the other assets passing in this particular case, constitute an enterprise.
2. Buzz Asia, a subsidiary of the Litt Corporation, is a commercial radio station now licensed to broadcast, on 963am and 972am frequencies programming content aimed at young (15 to 24-year old) people in London with South Asian heritage. Broadcasting licence AL175-2, the subject of the acquisition, was previously allocated to Club Asia London Limited (Club Asia) prior to that company going into administration on 11 August 2009. As the previous operator of that licence, Club Asia was the erstwhile broadcaster of radio content tailored for the same young London community now targeted by Buzz Asia.
3. Buzz Asia acquired the licence from Club Asia's administrators on 23 October 2009, the Office of Communications (Ofcom) having granted consent to such a transfer. Seven days after Buzz Asia acquired the broadcasting licence, its affiliate, Sunrise Radio Limited, also acquired from the administrators some office furniture and equipment - a full schedule of which was provided to the OFT.
4. The OFT considers that intangible assets such as intellectual property rights (of which a broadcast licence is a category) are unlikely, on their own, to constitute an enterprise unless it is possible to identify turnover directly related to the transferred intangible assets that will also transfer to the buyer. [see note 1] In interpreting these principles, the OFT will have regard to the following specific considerations:
(a) The transfer of 'customer records' is likely to be important in assessing whether an enterprise has been transferred.
(b) The application of TUPE [see note 2] regulations would be regarded as a strong factor in favour of a finding that the business transferred constitutes an enterprise.
(c) The OFT would normally (although not inevitably) expect a transfer of an enterprise to be accompanied by some payment for the goodwill obtained by the purchases. The presence of a price premium being paid over the value of the land and assets being transferred would be indicative of goodwill being transferred.
5. A third party argued to the OFT that, in substance, the transfer of the broadcasting licence enabled Buzz Asia to derive turnover from the transferred licence through the generation of advertising revenues. However, whilst the licence may be necessary to generate such revenue, in isolation it is far from sufficient. The right (or even the obligation pursuant to the licence) to broadcast radio content to young Londoners of South Asian heritage on the frequency previously used by Club Asia does not in itself generate turnover. An acquirer will require, amongst other things, premises, equipment and personnel to run the service and generate advertising business. For this reason, the OFT considers that the transfer of the licence exclusively in itself cannot be regarded as an enterprise.
6. The OFT considered whether, in line with paragraph 4 above, there were additional factors that meant that an enterprise transferred in this case. However, the evidence before the OFT does not support a proposition that there are any components within the total assets acquired by Buzz Asia that, individually or collectively, when considered alongside the broadcasting licence it has acquired, points to an acquisition of an enterprise.
7. Buzz Asia submits that such physical assets as were acquired from the administrators have been stored for use as spares or for resale and have not been used in the implementation of Buzz Asia's broadcasting business. In fact, in order for Buzz Asia to be able to meet with Ofcom's requirement for there to be no interruption to the broadcasting services delivered on licence AL175-2, it was essential for Buzz Asia to be completely set up and operational at its premises in Southall prior to the transfer of the licence and the shut-down of Club Asia's studios in Barking.
8. Comments from Club Asia's administrators, Mazars, also support Buzz Asia's submissions that (a) no customer records were transferred with the licence, (b) that there was no application of TUPE regulations given that redundancy notices were issued to staff at Club Asia after it went into administration (Buzz Asia was launched using free-lance personnel and embarked on the process of recruiting staff subsequent to the licence transfer), and (c) no other goodwill in the form of client lists, advertising contracts or trading name (which was retained, for re-use, by Club Asia) was transferred with the licence.
9. On the basis of the above, the OFT does not, therefore, believe that it is or may be the case that a relevant merger situation has been created.
Note 1. See OFT publication: Mergers, Jurisdictional and procedural
guidance - paragraph 3.10
Note 2. The Transfer of Undertakings (Protection of Employment) Regulations 2006