The UK Competition and Markets Authority (CMA) has cleared Global Radio Holding's (Global) acquisition of Juice Holdco (Juice) at Phase 1, following a statement released by the Secretary of State in September 2015 that the proposed acquisition did not trigger any public interest issues. Global owns a number of popular commercial radio stations including Capital, Heart and Smooth Radio which are broadcast nationally via regional stations, whereas Juice’s sole asset is Juice FM, which is broadcast in Liverpool.
The parties overlap in the supply of commercial radio services in Liverpool, the Wirral and the North West, a market which involves competition for both audiences and advertisers. However, the CMA only examined the effects of the acquisition on the supply of commercial radio advertising as previous cases held that the BBC provides “a significant alternative to commercial radio” which largely protects listeners from the effects of a merger of commercial radio stations.
The CMA assessed three types of commercial radio advertising: contracted airtime, non-contracted airtime and sponsorship and promotions. The key issue was that the price for contracted and non-contracted airtime is negotiated individually with each advertiser and a merger of competitors prevents each advertiser from negotiating between sellers, which could enhance the ability of the merged entity to raise prices. The likelihood of the merged entity being able to increase its prices is dependent upon the degree to which the parties are close alternatives to each other, as significant differences between them may limit the ability of an advertiser to switch.
In response to this issue, the CMA assessed the similarity of the parties’ radio advertising offerings, focussing on the factors that are important to advertisers when choosing between radio stations. The CMA concluded that advertisers were not likely to switch between the parties because there is:
- a “significant difference” between the geographic coverage of the parties, as advertisers consider Global's stations as "regional” stations and Juice FM as a "local” station and therefore would not view the parties as close competitors;
- a substantial difference between the audience size and listening hours of the parties in Liverpool, the Wirral and the North West, because Global’s aggregate share of listening hours is just over half of Juice FM's listening hours, and there is very limited overlap in listeners; and
- a difference in the demographics of the target audience of the parties, because Juice FM has a much younger audience than most of Global’s stations, save for Capital.
The CMA concluded that the acquisition would not cause a substantial lessening of competition as a result of horizontal effects because there would be sufficient competitive restraints in the market post-merger, as there is a low switching rate between the parties and a number of remaining competitors in the area. It did consider whether the merged entity would be incentivised to bundle advertising across its radio stations, but concluded that this was unlikely and that there were no competitive concerns arising from non-horizontal effects.