It has been seen as an almost certainty that the £2.6bn merger of Carlton and Granada was set to be referred to the Competition Commission. The commission will report by June 25 2003.
The merger is being referred to the government body by the Office of Fair Trading, largely on the back of concerns about the control of the television advertising market.
The decision is likely to be welcomed by industry bodies. In December, the IPA called for the merger to be referred to the Competition Commission because of its concerns over the creation of a possible single sales house.
Patricia Hewitt said: "The DGFT [Director General Fair Trading] has advised me that the proposed merger of Carlton and Granada raises competition concerns principally relating to the sale of TV advertising. The merger would greatly increase concentration in TV advertising, leaving one firm with more than half of national TV advertising revenue.
"The DGFT therefore considers that the case requires further examination by the Competition Commission to assess whether this increase in concentration is likely to lead to a substantial lessening of competition."
Hewitt said that the DGFT also concluded that the merger raises secondary competition questions in relation to potential competition for ITV licences and the supply of studio facilities in Northern England.
In a response to the decision to refer the merger, Carlton chairman Michael Green said: "This merger will not affect the competition for viewers. ITV is already one network and advertisers follow viewers and viewers follow programmes. We look forward to working with the Competition Commission over the coming months."
Green was joined by Charles Allen, executive chairman of Granada, who said that today's decision means that the merger is still on track and that the Competition Commission report, due on June 25, is in line with the original timetable the two envisaged on the announcement of the merger.
"A united ITV can become a counterbalancing force in British television that can grow in the future and deliver for our viewers, advertisers and shareholders," Allen said.
The Department of Trade and Industry said in a statement that the decision to refer to the Competition Commission does not in any way "prejudge the question of whether or not the merger would be against the public interest".
Despite the enquiry -- a similar one having previously barred the merger of Carlton and United Business Media -- it is not thought that this merger will be blocked.
Areas of concern have centred on the merger of the two companies' sales houses. Combined, the two would have a monopoly with over 50% of UK advertising revenues. However, with the rise of the multichannel home, this figure has been falling and recently it was reported that ITV's share of TV advertising was set to slip under 50%.
In their submission to the OFT, Carlton and Granada argued that apart from London they do not overlap or compete for advertising. In addition, the two say that they already compete as a single entity against the BBC, BSkyB, Channel 4 and Five.
The two have argued that they should be allowed to act as one company in relation to television advertising.
If the merger is given the go-ahead, a rival sales house is likely to be created out of the sales operations of Channel 4 and Five and possibly BSkyB also.
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