Ofcom warned the Office of Fair Trading against blocking KM Group’s bid to buy seven newspapers from Northcliffe Media, telling the regulator that both publishers could be forced to close titles if the merger fell through.
The deal collapsed last month when the OFT referred the decision to the Competition Commission. The costs involved in the review were said to have prompted KM Group to withdraw its bid.
Before the OFT made its decision it asked the media regulator Ofcom to carry out a local media assessment into the takeover, which concluded that both publishers would ‘struggle to achieve profitability in their current form’and that this ‘might lead them to respond by closing newspaper titles or reducing quality (or both)”.
Ofcom said the merger would provide an opportunity to ‘rationalise costs, maintain quality and investment, and provide a sounder commercial base from which to address long-term structural change”.
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This outweighed fears that the deal would result in a monopoly of local newspapers for the KM Group in Kent.
After announcing the referral to the Competition Commission the OFT said it required ‘compelling evidence to dismiss concerns that the combination of such close competitors as these might result in substantially higher prices or less choice for advertisers and readers”.
The Ofcom report said that revenue reduction at KM Group and the seven Northcliffe titles had contributed to losses at both companies – warning that the ‘implication is that that the firms may eventually close titles and perhaps go out of business”.
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Since 2008, KMG has shut down three free titles serving the Bexley, Bromley, Sevenoaks, Tonbridge and Tunbridge Wells areas and has merged titles in Gravesend/Dartford and Ashford/Folkestone.
Northcliffe has closed one paid-for title in Medway, four free titles in Maidstone, Tunbridge Wells, Sevenoaks and Ashford and also merged its free titles in Medway, Canterbury, Thanet, Swale, Dover and Shepway with paid-for titles.
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