Global Radio Holdings Limited and GMG Radio Holdings Limited A report on the completed acquisition by Global Radio Holdings Limited of GMG Radio Holdings Limited 21 May 2013 Competition Commission 2013 Website: www.competition-commission.org.uk Members of the Competition Commission who conducted this inquiry Simon Polito (Chairman of the Group) Alexander Johnston Ian Jones Stephen Oram Chief Executive and Secretary of the Competition Commission David Saunders The Competition Commission has excluded from this published version of the final report information which the inquiry group considers should be excluded having regard to the three considerations set out in section 244 of the Enterprise Act 2002 (specified information: considerations relevant to disclosure). The omissions are indicated by []. Some numbers have been replaced by a range. These are shown in square brackets. Non-sensitive wording is also indicated in square brackets. iii Contents Page Summary .............................................................................................................................. 4 Findings ................................................................................................................................ 8 1. Background and the reference .......................................................................................... 8 2. Radio broadcasting ........................................................................................................... 8 Background and history .................................................................................................... 8 Regulation ........................................................................................................................ 9 The companies ............................................................................................................... 10 Global Radio............................................................................................................ 10 GMG Radio (now RSL) ............................................................................................ 11 Other commercial radio operators ........................................................................... 11 Radio listening ......................................................................................................... 13 Advertising on radio ........................................................................................................ 13 3. The merger and the relevant merger situation ................................................................ 14 The acquisition and rationale for the merger ................................................................... 14 Jurisdiction ..................................................................................................................... 14 4. The counterfactual .......................................................................................................... 15 Ownership of RSL .......................................................................................................... 16 The potential sale of RSL to a third party ................................................................. 16 Potential continued ownership of RSL by GMG ....................................................... 18 Conclusion on the ownership of RSL absent the merger ................................................ 18 The National Sales Agency Agreement .......................................................................... 18 Background to and principal terms of the Agreement .............................................. 19 Views of Global and GMG ....................................................................................... 19 Views of third parties ............................................................................................... 20 Our assessment ...................................................................................................... 20 Conclusion on the counterfactual ................................................................................... 21 5. The relevant market ........................................................................................................ 22 Product market definition ................................................................................................ 22 Listeners .................................................................................................................. 22 Advertising .............................................................................................................. 24 Competition from other media and the hypothetical monopolist test ........................ 26 Conclusion on product market definition .................................................................. 30 Geographic market definition .......................................................................................... 30 Conclusions on the relevant market ................................................................................ 31 6. Assessment of pre-merger competition........................................................................... 31 Radio station operators .................................................................................................. 31 Commercial radio revenue ............................................................................................. 32 Pricing and negotiations ................................................................................................. 35 Negotiations for non-contracted advertising ............................................................. 35 Negotiations for contracted advertising .................................................................... 37 Introduction to the assessment of pre-merger competition ............................................. 38 Competition with other media ......................................................................................... 38 The views of the parties ........................................................................................... 39 Third party views ..................................................................................................... 40 Our assessment ...................................................................................................... 41 Conclusion on competition with other media advertising .......................................... 48 Competition between radio stations ................................................................................ 49 Factors affecting competition between radio stations ............................................... 49 Competition between the parties’ stations ............................................................... 53 Conclusions on pre-merger competition ......................................................................... 56 7. Assessment of the competitive effects of the merger ...................................................... 57 The impact of the merger on competition in the overlap areas ........................................ 57 London .................................................................................................................... 59 1 East Midlands .......................................................................................................... 60 West Midlands ......................................................................................................... 62 Cardiff and South Wales .......................................................................................... 63 North Wales............................................................................................................. 65 Yorkshire, Humberside and Lincolnshire ................................................................. 67 Greater Manchester and the North-West ................................................................. 69 North-East ............................................................................................................... 71 Glasgow and Central Scotland ................................................................................ 73 Overview of the effects on non-contracted advertisers in the overlap areas ............ 75 Impact of the merger on advertisers buying through contracted agencies ...................... 76 Impact of the acquisition on competition .................................................................. 77 Our assessment ...................................................................................................... 79 Impact of the acquisition on possible future competition .......................................... 83 Conclusions on effects of the merger on advertisers buying through contracted agencies ................................................................................................................ 84 Branding effects ............................................................................................................. 85 Industry bodies ............................................................................................................... 86 Multiplex interests ........................................................................................................... 87 Rivalry-enhancing efficiencies ........................................................................................ 87 Views of the parties ................................................................................................. 87 Third