Yell facing fresh price controls

Yell is the dominant directory service in the UK

Directories firm Yell, which owns Yellow Pages, could face new price controls following a competition study.

The Competition Commission said Yell retained a dominant position in the directories market and competition was not working effectively.

The commission will now consult on remedies, including possible new price controls. Yell is already subject to a price cap on advertising rates.

Yell said it was "disappointed" with the commission's findings.

"In our increasingly competitive environment, and particularly with the rapid growth of the internet and the re-entry of BT there is no need for continued regulatory involvement," said Yell chief executive John Condron.

'Powerful position'

The classified directories market has been under investigation by the Competition Commission for more than a year after the Office of Fair Trading asked it to look into concerns that the sector was uncompetitive.

Yell continues to hold a powerful position in this market and we have found that competition is not working effectively Diana Guy, Competition Commission

The commission said that Yell had a market share of about 75%, and could set prices to advertisers above market levels.

"Yell continues to hold a powerful position in this market and we have found that competition is not working effectively," said the commission's inquiry group chairman Diana Guy.

"Prices are capped at the moment and we think that, without this price cap, advertisers would pay more than in a well-functioning market."

At present, Yell is subject to a yearly price cap of RPI (Retail Price Index) less 6% - so at the moment, advertising rates are falling year-on-year.

Internet directories

Ms Guy added that while BT had re-entered the directories market, its market presence was still small compared with Yell's.

In addition, while the internet was becoming an increasingly important medium, printed directories continued to be a major advertising point for companies.

"We have found that many people continue to use printed directories, so that businesses are continuing to advertise in them, and, in fact, the revenues of all the major directory providers have continued to grow," Ms Guy said.

The commission will consult over possible remedies for the sector and is expected to produce its final report before the end of the year.