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Monday, 3 April, 2000, 14:27 GMT 15:27 UK
Regulator casts doubt on TV merger
The Railway Children
Carlton recently sold British children's classic to US
The Independent Television Commission has said a planned merger between UK media giants Carlton and United News & Media would require a major change in current legislation.

The commercial broadcasting regulator confirmed that the deal would break rules concerning how much market share any one broadcaster is allowed to control.

United chief executive Clive Hollick

And it said the rules would have to be changed so much to allow the merger to proceed that this may be viewed as unacceptable.

It also said it saw no "convincing case" for such a change, although it believed there might be a case for modifying some legislation.

The ceiling on advertising market share - currently 25% - would have to be raised to as much as 40%, it said.

The audience share limit of 15% would also be broken, and this would mean either Carlton or United must sell the 20% stake they each hold in ITN (Independent Television News).

The regulator said it was for the Competition Commission to decide whether the proposed merger should invoke an early review of the law.

Response

Carlton and United said they welcomed the fact that the watchdog recognised there was a case for consolidation in ITV.

Carlton chairman Michael Green

They said they were particularly encouraged that the ITC was open to an increase in the maximum share of advertising revenue that may be held by one company.

The companies said: "We are discussing this and other issues with the Competition Commission and look forward to an early conclusion of the process."

Carlton Communications and United News & media agreed to merge in November, announcing a deal which would create the UK's most powerful TV company.

The 7.8bn combined group would control six independent television franchises, broadcasting to about 65% of the country's households.

Referral

In February, the Trade and Industry Secretary, Stephen Byers, said the merger raised competition concerns and referred the proposals to the Competition Commission.

The commission is due to report to Mr Byers by 16 May.

One analyst said: "The ITC has no clout in itself but the competition authorities will listen to what it has to say.

"The good thing is that it is not saying it is fundamentally in disagreement with the merger."

The issue over whether the rules should be relaxed to allow independent television companies to own a larger market share is being seen as crucial for the future of UK broadcasting.

The key argument is whether they will not be able to compete with overseas competitors if they not allowed to grow.

The biggest of the current ITV companies, Granada, is also trying to take over either Carlton or United as the industry's major players battle to secure UK domination.

At the close, United shares were down 40.5 pence (4.91%) at 784p. Carlton shares were 63.5p (8.35%) lower at 697p.

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See also:

08 Feb 00 | Business
Inquiry into TV merger
07 Jan 00 | Business
Granada to bid for rivals
26 Nov 99 | Business
Is Carlton United a winning team?
26 Nov 99 | Business
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26 Nov 99 | Business
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