7th Sep 2006 07:01
Competition Commission07 September 2006 News Release 46/06 7 September 2006 CLASSIFIED DIRECTORY ADVERTISING SERVICES PROPOSED REMEDIES The Competition Commission (CC) has today published for consultation itsproposed remedies, designed to address the deficit of competition that itidentified in its provisional findings report on the market for ClassifiedDirectory Advertising Services (CDAS). In particular, the CC proposes that Yellshould, from April 2008, be allowed to raise its prices in line with the RPI. In its provisional findings report published in June, the CC concluded that,because of the features of this market that it had identified, were it not forthe price cap, customers of Yell would be paying more for advertisements inYellow Pages than they would if the market were functioning well. It accepted that BT's entry into the market offered the prospect of strongercompetition with Yell but said that the pace of its future growth was unclearand the extent to which its future presence would translate into a significantconstraint on Yell's prices was uncertain. It also acknowledged that advertisingon the Internet will increase in the future and that CDAS advertising maydecrease. Along with the report, the CC outlined a number of possible remedies to increasecompetition in the market. Since then the CC has been discussing those possibleremedies with providers of CDAS, other interested parties and the Office of FairTrading (OFT). Following these discussions, the CC is now proposing a package of measures whichit considers will be practical and effective in increasing competition in themarket to the benefit of customers. These are set out in more detail in theRemedies Proposals document which is available on the CC website atwww.competition-commission.org.uk. The proposed remedies have been published so that interested parties have afurther opportunity to comment before the CC publishes its report. This reportwill include the decision on the remedy measures to be introduced. The proposed package of remedies comprises: • A price cap on Yell's advertisement prices. This will apply to individual product types rather than a 'basket' of advertisements. Given the timetable of this inquiry Yell has told us that the practical consequences of the current price control is that it would not vary the prices it has already set and provided to the OFT relating to directories scheduled for publication up to and including March 2008. Directories published in this period will therefore be subject to the current level of control which is 6 per cent less than the rate of inflation. As from April 2008, we are proposing that the maximum prices that Yell can charge be capped at, rather than below, the level of inflation as measured by the RPI. • A formula for defining maximum prices in directories that are re-scoped. When Yell re-scopes one of its directories, typically splitting a distribution area into two, the prices which it may charge for advertising in the newly formed directories will be governed by a formula based on rates for the five immediately larger circulation directories and the five immediately smaller. The rate for the same advertisement in both the newly formed directories will be no more than an advertiser would have paid if the re-scope had not taken place. • Greater flexibility in applying the price control. We are proposing that, save in situations where Yell could use greater flexibility to target and thus weaken emerging competition, it should be given more scope to apply the control flexibly. • Freedom for Yell to publish local directories. Subject to certain safeguards designed to prevent Yell using local directories to damage its competitors and thus competition or avoid the price control on its main directories, we are proposing that Yell should be free to publish local directories. The same safeguards would apply to directories published around a particular theme. • Other provisions. We are proposing that Yell publish accounts for its printed directories business and make these available to the OFT and anyone else who requests them. We are also proposing that a good faith provision is included in our package of remedies so as to ensure that the price cap is complied with if there is any doubt. • Provision for a review of the remedy package. The CC recommends that the remedies package be reviewed by the OFT after a period of three years from its implementation. This was the shortest period that the CC considered reasonable. Comments on the proposed remedies are invited from all interested parties inwriting by no later than 29 September 2006. To submit evidence, please write to: The Inquiry Secretary (CDAS Market inquiry) Competition Commission Victoria House Southampton Row LONDON WC1B 4AD Or email: [email protected] Notes for editors 1. The CDAS market was first investigated, by the Monopolies and Mergers Commission (MMC), which reported in 1996. The MMC found that a monopoly situation existed in favour of BT, which then published Yellow Pages. As a result, BT gave undertakings, including an undertaking not to raise the price of its advertisements by more than the increase in the RPI -2 per cent. A review of the undertakings by the OFT was announced in 2000 and it published its report in 2001. As a result of the OFT review the price control was strengthened, to RPI -6 per cent. 2. The present reference was made by the OFT on 5 April 2005. The CC is considering whether there exist features of the CDAS market which prevent, restrict or distort competition; if so, there is an adverse effect on competition and it has to consider whether action should be taken to remedy or prevent the adverse effect or any resulting adverse effect on consumers. The CC is required to publish its final report by 4 April 2007 but expects to report before that date. 3. Under the Enterprise Act 2002, the OFT can make a market investigation reference to the CC if it has reasonable grounds for suspecting that competition is not working effectively in that market. 4. The members of the inquiry group are: Diana Guy (Group Chairman), Roger Davis, Graham Hadley, Christopher Smallwood and Professor Catherine Waddams. 5. Enquiries to Rory Taylor on 020 7271 0242 or [email protected]. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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