Last month, BSkyB told Ofcom that its takeover by News Corp (NSDQ: NWS) should be approved because, in the online age, even News Corp doesn’t wield domineering power.
Now Ofcom itself is using the same rationale for possibly allowing consolidation between local media groups.
Explaining what it would do, when asked by the Office of Fair Trading to assess possible competition issues in proposed local media mergers, Ofcom says…
“In respect of product markets, a local media assessment will examine the extent to which competitive pressure is exerted by other forms of media (e.g. radio on newspapers etc). A key feature in the development of media markets has been the potential for greater substitutability between different media, due in particular to the growth of the internet and its use as a means of advertising.
“An assessment will, consequently, seek to provide views on whether there are broader competitive constraints from other products that potentially limit the merged entity’s ability to raise prices. In doing this, Ofcom will seek to provide views on product substitutability between different forms of media and between different platforms.”
In other words, Ofcom will factor in any online local media operators, when considering whether there is sufficient competition to two merging parties.
In theory, that could see Trinity Mirror (LSE: TNI), Northcliffe and Global Radio, in the event of any such merger, arguing that their local papers and stations would not dominate local ad sales because sites like Gumtree or Google (NSDQ: GOOG) also sell local ads in the same patch.
In practice, this may be unlikely to fly – whilst a growing number of local businesses do place ads online, far more national companies use the web as such.
Also, new online operators are just one factor Ofcom will use in assessments sought by the OFT. See the others.