Ofcom Issued Stark Warning of Newspaper Closures Over Kent Deal

Ofcom warned the Office of Fair Trading that blocking the KM Group’s proposed acquisition of seven weekly Northcliffe titles in the county could lead to a closure in newspaper titles.

The full text of Ofcom’s Local Media Assessment, undertaken for the proposed acquisition, was published this week. It said the proposed merger “may provide a sounder commercial base from which to address long-term structural change, for example by expanding the availability of online and other digital local services."

The assessment read: “The evidence available to us suggested that the target business and the regional newspaper business of KMG would struggle to achieve profitability in their current form, which might lead them to respond by closing newspaper titles or reducing quality (or both)... In light of this, we considered that a merger may provide the opportunity to rationalise costs, maintain quality and investment, and provide a sounder commercial base from which to address long-term structural change, for example by expanding the availability of online and other digital local services.

“We said these potential benefits needed to be weighed against any potential customer harm resulting from reduced competition identified in the OFT's overall assessment.”

In its full text of the decision to refer the proposed acquisition to the Competition Commission, the OFT said it could not conclude that the arguments put forward by the Ofcom were “sufficiently compelling”.

“The OFT believes that there is a realistic prospect of a substantial lessening of competition arising in relation to the supply of local weekly newspapers and advertising space in local weekly newspapers in six areas of East Kent (Thanet, Canterbury, Swale, Dover, Ashford and Shepway) and Medway…the OFT does not believe that it would be appropriate to apply its de minimis discretion,” the text read.

“The OFT does not have sufficiently compelling evidence to assess this merger against a threshold other than the pre-merger situation and therefore to consider that all titles would continue being published, absent the merger.

“In addition, with regard to the specific relevant customer benefits assessed by Ofcom, as noted in the LMA, the OFT cannot conclude, taking its appropriate cautious approach that the evidence presented to it are sufficiently compelling to corroborate that those benefits will arise and can only be achieved through the merger.

“Therefore, the OFT does not consider that the criteria to use its discretion apply in this case.”

• Ofcom issued warning over impact of halting KM Group and Northcliffe deal (Media Guardian)

• OFT Refers KM Group's Proposed Acquisition of the Kent Regional News and Media Newspapers