Outlook: Gerry boxes clever but John has the knock-out punch

HERE'S A question worthy of Who Wants To Be A Millionaire? By the way, let's call the contestant Gerry. You decide to merge Britain's only two television rental chains. Gerry, do you create a) a 100 per cent monopoly? b) an automatic referral to the Competition Commission? or c) a major competitor in the electrical retail market? Gerry, you have chosen c) which is the WRONNNGGG answer. Next contestant.

Gerry Robinson has pulled off some slick deals in his time. But he has surely gone squared-eyed from watching the goggle box too long if he thinks the competition authorities will give their blessing to the merger of Granada's TV rental business with Radio Rentals. Box Clever, the name for the proposed venture, will have 900 outlets, 2.5 million customers and an iron grip over virtually every high street in the land. The picture goes a bit fuzzy when Granada and Thorn, Radio Rentals' owner, are pressed on job losses and the overlap between the two chains. In any case, they say, such considerations are irrelevant. This is not about cornering the rental TV market. This is about creating a third national force in TV retailing, where Box Clever, as luck would have it, will only account for 7 per cent of the market.

There'll be plenty of competition from the other high street names, they say. Unfortunately, the average Radio Rentals customer may not find the reception quite so welcoming when he turns up at Comet or Dixon's without a credit card.

The salesman may also look at him in puzzlement when he asks for a TV with built-in video and digital decoder that costs nothing upfront, is serviced by the retailer and upgraded as soon as the technology is obsolete. Box Clever says its merger will give customers a real choice by creating a new force capable of taking on the established retail giants. But everything which Granada and Radio Rentals point to as giving Box Clever a competitive edge merely reinforces just how distinct the market is for TV rental, as opposed to TV retailing.

Lots of people buy TVs but only some people rent them. They belong to a slice of the market which is too poor to purchase or too much of a credit risk to own plastic. They are the socially excluded and Gerry underestimates them at his peril. If he doubts that, then the Director General of Fair Trading, John Bridgeman, will doubtless point to the precedents. Liam Strong of Sears came unstuck when he tried to sell Freemans to Littlewoods by urging the regulators to look at the whole retail market, not just agency mail order. Where Granada has boxed clever is in the financing of the deal, which rather niftily takes pounds 600m of debt out of the parent group and transfers it to the new joint venture, giving Gerry more scope to pursue his bigger agenda.

But this may be academic. Gerry looks dangerously boxed in and just waiting for Mr Bridgeman to deliver the knockout punch.