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OFT reports to Secretary of State on BSkyB's acquisition in ITV

68/07    27 April 2007

The OFT today reported to the Secretary of State on the completed acquisition by British Sky Broadcasting Group plc (BSkyB) of a 17.9 per cent stake in ITV plc (ITV). The OFT believes that the test for a merger reference to the Competition Commission is met on competition grounds.
 
The report confirms the OFT's 12 January 2007 statement on merger jurisdiction. This includes the belief to the required standard that BSkyB has the ability 'materially to influence the policy' of ITV within the meaning of the Enterprise Act 2002.

Following full first-phase review, the OFT's three key findings, to the requisite standard of belief, are that:

• a relevant merger situation has been created
• this situation has resulted, or may be expected to result, in a substantial lessening of competition within a market or markets in the UK, and
• clear cut remedies sufficient to resolve the OFT's competition concerns were not offered.

The Secretary of State must announce his decision on or before the statutory deadline of 26 May 2007. The OFT's report will also be made public no later than the same date and until such time the OFT will not release further details.

John Fingleton, Chief Executive of the OFT, said

'We have been asked by the Secretary of State to report on the competition issues raised by this transaction. We have concluded that this partial ownership link between two key players raises significant competition concerns. Sky's shareholding means that ITV is no longer fully independent, and this may alter the future competitive landscape, especially as we approach digital switchover. Given the high stakes for tens of millions of UK consumers, we believe these risks to competition merit further examination.'

NOTES

1. On 26 February 2007 the Secretary of State intervened in the case by issuing a Public Interest Intervention Notice (the Notice) requiring the OFT to investigate and report on whether it believes that it is or may be the case that a relevant merger situation has been created 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 Secretary of State also required Ofcom to report separately on the effect of the media public interest consideration mentioned in the Notice. The Secretary of State requested the OFT and Ofcom to report to him by 27 April 2007.

2. The OFT's report to the Secretary of State on jurisdictional and competition issues is binding and therefore any anti-competitive outcome identified by the OFT shall be treated as being adverse to the public interest unless it is justified by one or more than one relevant public interest consideration. A reference to the Competition Commission may be made by the Secretary of State if he believes that it is or may be the case that (i) a relevant merger situation has been created; (ii) 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; and (iii) combined with one or more than one relevant public interest consideration operates or may be expected to operate against the public interest; or (iv) although the creation of that situation has not resulted, and may be expected not to result in a substantial lessening of competition, one or more than one relevant public interest consideration operates or may be expected to operate against the public interest.

3. The Secretary of State will also consider whether undertakings in lieu of a reference are justified, but is bound by the OFT's finding on whether it would be appropriate to deal with the matter (disregarding any public interest considerations) by way of undertakings.

4. In the event that the Secretary of State concludes that there are no public interest considerations that are relevant, he will instruct the OFT to deal with the merger as an ordinary merger case.

5. The OFT's report will be published following the Secretary of State's announcement of his decision on reference.

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