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Yell, the owner of Yellow Pages, is likely to face further price controls after an official investigation concluded its market was uncompetitive but pulled back from “more draconian” measures, such as breaking up the company.

The Competition Commission said it was considering a new set of price restrictions, although these would not necessarily be tougher, could be more flexible and would take into account the growing market share of Yell’s competitor BT.

Shares in Yell fell 11p to 495p, in line with a declining market, as analysts said many investors had priced in the prospect of an unfavourable decision.

Diana Guy, chairman of the commission inquiry, said “something [was] needed” to regulate an industry in which Yell had a market share of about 75 per cent and there was little or no price competition.

Ms Guy agreed that Yell’s dominance would probably wither on the vine “at some point” as BT, internet advertisers and other competitors became stronger. But she added: “We are not sure we have reached that point yet”.

The commission did not think breaking Yell up would be “appropriate and proportionate” in a changing market, she said.

A decision on a price cap or other restrictions would be made after consultation with Yell and other interested parties ahead of publication of the commission’s final report in November.

Ms Guy said the commission was prepared to consider a more flexible “basket” price cap, which would allow Yell greater freedom to vary the prices of individual advertisements according to features such as colour and size.

The Yell price controls date back a decade, when the Yellow Pages were owned by British Telecommunications and were investigated by the Monopolies and Mergers Commission.

Yell had argued that the Competition Commission should drop the price cap and broaden its definition of the market to reflect the growth of internet directory services such as its own yell.com.

The commission played down the competition offered by internet advertising, saying many people continued to use printed classified directories.

Richard Hitchcock of Numis Securities said Yell would be disappointed by the commission’s “dismissive” response to its argument that BT’s return to the directories market had increased competition.

He said there was a chance the next price cap could be a third tougher than the present conditions, which require Yell to reduce its rate card prices by at least 6 per cent a year relative to the retail price index.

Copyright The Financial Times Limited 2019. All rights reserved.

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