5th Apr 2005 11:00
Office of Fair Trading05 April 2005 63/05 5 April 2005 OFT REFERS CLASSIFIED DIRECTORIES MARKET FOR INVESTIGATION The classified directory advertising services market is not working effectivelyaccording to the OFT and has been referred to the Competition Commission (CC)for investigation. The move follows a seven-month study into the market and the effect ofundertakings. These placed a cap on advertising prices in Yellow Pages and arestriction on the publication of local Yellow Pages directories in order toaddress concerns about high prices and the undermining of effective competition(note 1). The OFT has continued concerns that competition in the market is notoperating effectively. The structure of the market remains highly concentratedwith Yellow Pages and Thomson Local directories accounting for over 90 per centof supply in the UK: barriers to entry are high due to strong branding andnetwork effects. Profits appear high and there seems limited competitivepressure on prices. While there has been some new entry to the market - notably,British Telecommunications re-entered the market in 2003 - the OFT does notbelieve recent entrants have strengthened competition to a material degree. Jonathan May, Director of Markets Policy and Initiatives Division atthe OFT, said: 'Our study has concluded that there are real concerns about thismarket and whether competition is working effectively. The CompetitionCommission will now investigate further to decide on any necessary remedies.' NOTES 1. The undertakings given by Yell Ltd in 2001 to the Secretary of State forTrade and Industry include undertakings to provide a price list to anyone whorequests it; to cap prices at RPI-6 per cent (or as they were on 1 December2001, whichever is the lower); and not to have overlapping distribution areasunless after two of the undertakings there is no supplier in that area otherthan Yell. Full details are given in DTI 2001 press notice P/2001/307.Originally, undertakings were given by BT, the previous owner of the YellowPages, in 1996 following a Monopolies and Mergers Commission report onClassified Directory Advertising Services (Cm 3171). In 2001, the Yellow Pagesbusiness was sold by BT to Castaim Ltd, now Yell Ltd. 2. The study was carried out under Section 5 of the Enterprise Act 2002,which gives the OFT powers to obtain and compile information about mattersrelating to the carrying out of its functions so that it can take informeddecisions and carry out its other functions effectively. 3. Under Section 131 of the Enterprise Act 2002 the OFT may make a marketinvestigation reference to the Competition Commission where it has reasonablegrounds for suspecting that any feature, or combination of features, of a marketin the UK for goods or services prevents, restricts or distorts competition inconnection with the supply or acquisition of any goods or services in the UK orpart of the UK. 4. The OFT's reasoning for making a market investigation reference isavailable from the OFT's website. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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