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
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
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
Note 1. See OFT publication: Mergers, Jurisdictional and procedural
guidance - paragraph 3.10
Note 2. The Transfer of Undertakings (Protection of Employment)