THE Office of Fair Trading will re-examine the classified directories market in three years to determine whether it should remain regulated, after the Competition Commission surprised the market by easing price controls for Yell.

Shares in the directories business rose 39p to 572p after the commission said that Yell would be allowed to raise prices in line with retail price inflation (RPI) from April 2008, rather than the current cap of RPI minus 6 per cent.

The commission said that it was publishing its proposals for consultation and that it would finalise its report by April 4 next year, at the latest.

The regulator said in June as part of its consultation into the classified directories market that it would assess the level of price caps. However, the feeling was that it was planning to keep prices at the same level. The competition watchdog did, however, say at the time that it recognised that Yell faced competition from the internet and the growth in market share of BT’s directories business.

John Condron, chief executive of Yell, welcomed the proposed relaxation in price regulation but repeated his belief that the business would be better regulated by market forces. He said: “We have said many times that we do not think the rapidly evolving and highly competitive classified directories market requires regulation and we will continue to press this point.

“We obviously welcome the proposed reduction in the level of advertising price regulation envisaged in the commission’s provisional remedies.”

The commission said in a statement yesterday that BT’s entry into the market offered the prospect of stronger competition with Yell, referring to the rival classified advertising publication from the telecoms group.

It also said that advertising on the internet would increase, and could hit directories in the future.

Yell has been reducing its dependence on its heavily regulated UK business in recent times. The UK now accounts for roughly 15 per cent of the value of Yell. This year it acquired Spanish directories business TPI from communications giant Telefónica. It has also built a significant presence in the US market.

Earlier this year there were concerns that the commission could look at a break-up of Yell. However, this idea was soon ruled out. At this stage the feeling was that the commission would not look at a relaxation of prices. However, Yell is understood to have had a number of discussions with the competition watchdog to defend its position.

Yell said in January that competition in the sector had increased “markedly” since the watchdog’s last review and that cuts of about 30 per cent in its prices, which it has implemented, were more than it needed to do.

Yell is the biggest player in the country’s £900 million classified directory market.

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