Yell relief at Commission statement

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Shares in Yell, the Yellow Pages publisher, jumped 4.6 per cent yesterday as the market reacted with relief to a statement from the Competition Commission relating to its investigation into the classified directories market.

The Commission released its "issues statement" to the stock market, detailing the areas on which the competition watchdog would focus its inquiry.

The broad range of topics included in the issues statement led some investors to believe that Yell, under its chief executive John Condron, stands a good chance of enjoying a lenient outcome from the inquiry with the Commission defining the market in its broadest terms, including the new online classified advertising. There was also relief that the issues statement did not contain any nasty surprises.

The Commission said it would concentrate its analysis on five main areas. It intends to ascertain whether online directories and internet search engines are part of Yell's market and if not, the extent to which they will provide a constraint on the market for printed classified directories in the medium term.

It also wants to examine barriers to entry to the market and whether there is a limit to the number of printed classified directories that can compete at a national level. The recent entry of Trinity Mirror and BT Group into the market will be examined, as will whether BT has any advantage in the market.

Other areas to be examined will be the effects of existing price controls imposed on Yell, which together with Thomson Local Directories accounts for 90 per cent of the market, and whether levels of profitability suggest excessive prices are being charged.

"The issues statement should not be seen as implying that the inquiry group has identified any competition concerns - the CC has yet to reach any conclusions on this inquiry," the Commission said yesterday.

In April, the Office of Fair Trading announced it was referring the classified directories market to the Commission for an in-depth investigation, knocking nearly 10 per cent off the Yell share price on the day of the announcement. The OFT concluded that the market was not working effectively. It said supply remained highly concentrated while Yell and Thomson's strong brands and scale meant barriers to entry remained high.