Magazines merger could face in-depth investigation
The CMA has found that the completed acquisition by Immediate Media Company Bristol Limited of a number of magazines from Future Publishing Limited could give rise to a substantial lessening of competition.
Immediate Media Company Bristol Limited (Immediate) and Future Publishing Limited (Future) both publish specialist print magazines across a wide range of subjects, including many dedicated to specialist areas such as craft. Immediate has acquired Future’s portfolio of 19 titles in craft, genealogy and cycling magazines. This included a number of successful titles such as ‘Mollie Makes’ which sold over 150,000 copies in 2013 and ‘Simply Knitting’ which sold over 250,000 copies in 2013.
The Competition and Markets Authority (CMA) found that readers, tending to be predominantly women with an average age of about 50, purchase magazines in those crafts they are interested in and do not consider titles in other craft areas to be alternative purchases, hence the CMA considered each craft market to be separate. The CMA also found that readers of craft and genealogy magazines and advertisers do not consider websites as alternatives to magazines as they do not provide enough similar content to print magazines.
The CMA found that the merger may lead to competition concerns in publishing magazines in 2 specialist areas. In needlecraft the CMA found that the merger will lead to a near-monopoly with Immediate and Future producing all the significant titles in the market including ‘World of Cross Stitching’, ‘Cross Stitcher’ and ‘Cross Stitch Crazy’. In genealogy the CMA found that Immediate and Future produce ‘Who Do You Think You Are?’ and ‘Your Family Tree’ which are 2 of the 3 significant titles in the market. All major and specialist magazine publishers stated they would not enter these magazine segments so entry is highly unlikely to protect readers and advertisers in these markets.
The CMA has therefore found that the merger may lead to higher cover prices or a reduction in choice or quality for readers and advertisers in needlecraft and genealogy magazines.
This merger will be referred for a phase 2 investigation unless Immediate offers acceptable solutions to address the competition concerns in a clear-cut manner.
Sheldon Mills, Senior Director of Mergers and decision maker in this case said:
These magazines are very specialist but they are much valued by their loyal and enthusiastic readership. Publishers in these segments derive the majority of their revenues from the cover price and this merger may increase the incentive to significantly raise that price or reduce the quality of these magazines titles - to the detriment of those readers.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the Competition Commission and the competition and certain consumer functions of the Office of Fair Trading, as amended by the Enterprise and Regulatory Reform Act 2013.
- The Reference Test – under the Enterprise Act 2002 (the Act) the CMA has a duty to make a reference to phase 2 if the CMA believes that it is or may be the case that a relevant merger situation has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and 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.
- Under the Act a relevant merger situation is created if 2 or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million (‘the turnover test’) or as a result of the transaction, in relation to the supply of goods or services of any description, a 25% share of supply in the UK (or a substantial part thereof) is created or enhanced (‘the share of supply test’).
- The CMA considered overlaps in craft, genealogy and cycling and triathlon magazines. The CMA did not find that the merger raised substantial competition concerns in relation to the general craft, paper craft, knitting and crochet, cycling and triathlon magazines.
- The CMA considered potential entry in the market which could have offset the competition concerns. Publishers of specialist magazines in these areas tend to publish a range of titles and have the capacity to expand into other types of titles. However in magazine segments where demand is falling, then the incentive to enter is reduced. Publishers uniformly told the CMA that they will not enter either the needlecraft or the genealogy magazine markets.
- The CMA considers that it is under a duty to refer the merger for a phase 2 investigation under section 22(1) of the Act. However, the duty to refer is not exercised pursuant to section 22(3)(b) whilst the CMA is considering whether to accept undertakings under section 73 of the Act in lieu of a reference. Pursuant to section 73A(1) of the Act, Immediate Media has until 30 October 2014 to offer an undertaking to the CMA that might be accepted by the CMA under section 73(2) of the Act. If no undertaking is offered or accepted, then the CMA will refer this merger pursuant to sections 22(1) and 34ZA(2) of the Act.
- All the CMA’s functions in phase 2 merger inquiries are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision makers on phase 2 inquiries.
- The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business. The membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
- The inquiry group may extend the 24-week period within which it is required to publish its report by no more than 8 weeks if it considers that there are special reasons why the report cannot be published within that period.
- The text of this decision will be placed on the case page as soon as is reasonably practicable.
- Enquiries should be directed to Siobhan.Allen@cma.gsi.gov.uk or by ringing 020 3738 6798.
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