OFT to investigate local newspapers

The Government has asked the Office of Fair Trading to consider an inquiry into the local newspaper market after ministers blocked a Johnston Press deal.

Trinity Mirror had agreed to sell eight free weekly titles to Johnston press last year. Yesterday the Department of Trade and Industry backed a report on the deal from the Competition Commission that concluded the transfer of four of these titles was against the public interest.

The authorities were concerned about damaging competition in the local advertising markets. The other four papers were allowed. However, the views of the Competition Commission panel were not unanimous.

Trinity and Johnston said the £16m transaction may not be viable at all now. The companies are "considering whether a partial transaction can proceed and if so on what basis".

The Competition minister, Melanie Johnson, went further. She said that the commission's report had raised much wider issues and she wanted the OFT to consider an industry-wide inquiry into the implications of local consolidation in the industry. "The Commission questions whether the spread of local monopolies might give rise to a 'live and let live' attitude among major publishers, that is a tacit sharing of the market on a geographic basis," she said.

Tim Bowdler, the chief executive of Johnston Press, said he was perplexed by the ruling, especially as Johnston's much bigger acquisition of Regional Independent Media was waved through. "I remain utterly convinced that we operate in a competitive environment," Mr Bowdler said. "Further consolidation is not only inevitable but it will turn out to be a very good thing. The industry needs healthy financial returns, otherwise titles will close."