The KM Group has today scrapped its bid to buy a series of rival newspapers in Kent after it was referred to competition watchdogs.
The family-owned publisher had agreed a deal with Northcliffe Media to buy seven titles in its Kent Regional News and Media series.
But the deal collapsed this afternoon after the Office of Fair Trading referred the proposed acquisition to a full Competition Commission inquiry amid concerns it could create a “local monopoly.”
The KM Group had made it clear, since before it embarked on the regulatory process, that if this was the outcome, it would withdraw its bid.
Titles which had been affected by the proposed acquisition include the Medway News, East Kent Gazette, Herne Bay and Whitstable Times, Isle of Thanet Gazette, Thanet Times, Folkestone Herald and Dover Express.
The decision, the first since the government amended its guidance on media mergers, could have far-reaching implications for any future ‘consolidation’ of the local press industry.
Northcliffe managing director Steve Auckland said: “This makes a mockery of politicians expressing their desire to reduce red tape in business and allow consolidation in the regional press. We are not talking about a Google or a Microsoft here.
“The OFT has to operate within a regulatory system that is not designed to cope with small local newspaper businesses that have no prospect of funding a Competition Commission review and are thus denied the opportunity to consolidate.”
KM Group chairman Geraldine Allinson said: “We have invested a huge amount of time on this project over the last few months.
“The costs and time required for a full Competition Commission review would be completely unreasonable for a business of our size and for a deal of this scale.
“The acquisition would have been a good opportunity for our business.
“However, we have a long list of other developments already in process and we intend to continue to build on our unique blend of multimedia services for the people of Kent.”
In a statement, the OFT said: “These companies publish the only local weekly newspapers in seven local areas in East Kent.
“The OFT’s investigation concluded that the monopoly of local newspapers that would result in these areas risks costlier advertising for businesses and higher cover prices for readers.
“During its investigation, the OFT consulted with advertisers and readers to find out whether other regional or online newspapers, websites or magazines would be able to curtail these risks
“The evidence was clear that local weekly newspapers remain a very important means for advertisers to reach local audiences and for readers to obtain local news, despite acknowledging that these media provide some competition.”
Amelia Fletcher, OFT chief economist added: “Local newspapers face significant challenges, including falling readership and increased competition from other media, most notably, the internet.
“However, this merger would create a monopoly in local weekly newspapers in several local areas across East Kent.
“UK merger law requires the OFT to be cautious in its “first phase” review of mergers. We require 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 evidence in this case did not permit us to clear this transaction; therefore we think it is appropriate that the merger is referred to the Competition Commission for a more detailed “second phase” review.'”
Commenting on the review process, the KM group’s former managing director Graham Mead, said: “We understand this is the first time the OFT has reviewed a case since the change in guidance.
“While the teams at the OFT and Ofcom were positive and supportive, almost without exception, there were some painful moments.
“From a personal perspective, it feels that the process is set up for large, corporate deals, not small transactions involving businesses of our size.
“The time and effort required appeared to be completely disproportionate to the transaction involved.
“Also, while we fully appreciate that the OFT team have to work to a strict framework, I don’t think that framework is at all relevant to the current state of our industry.
“Nor does it in any way reflect the broader government view on helping UK business by removing hurdles and giving it an opportunity to grow.”
Richard Karn, managing director of Northcliffe Media’s South East businesses said: “The last twelve weeks has been a period of great uncertainty for staff who have responded magnificently.
“We look forward to being able to return our focus entirely to the challenge of growing our business, by meeting the needs of our many valued advertising customers and business partners across Kent.”