21st Jan 2005 11:00
Office of Fair Trading21 January 2005 7/05 21 January 2005 TV EYE AGREES TO REVISE ADVERTISING ARRANGEMENTS FOLLOWING COMPETITION CONCERNS TV Eye and its member broadcasters have provisionally agreed to amend certainarrangements governing the sale of advertising airtime after the OFT putcompetition concerns to them. TV Eye is owned by ITV, GMTV, Channel 4 and Channel 5. It providesservices to them and a number of smaller broadcasters. The OFT had concerns thatarrangements put in place by TV Eye enable those broadcasters to agreecollectively some of the terms and conditions under which they sell advertisingairtime to media agencies. The OFT was particularly concerned that TV Eye'smember broadcasters, acting through TV Eye: • made it more difficult for new media agencies to enter the market byimposing an unduly strict registration policy • collectively agreed and enforced the terms and conditions on which creditwould be granted to media agencies (known as credit listing), without objectivejustification • collectively set the form of security to be provided by agencies to coverthe risk of them defaulting on their contracts with broadcasters. The OFT was concerned that, taken together, these practices placed mediaagencies in an unduly weak bargaining position with little room for individualnegotiation with the broadcasters, and that this dampened competition betweenboth media agencies and broadcasters. The OFT launched its investigation into TV Eye under the Competition Act 1998,following a complaint by the Institute of Practitioners in Advertising (IPA),which represents media agencies. TV Eye is proposing to address the OFT'sconcerns by giving formal commitments (see note 3) that it will: • verify only that media agencies are bona fide, rather than imposeadditional strict registration terms • no longer decide on behalf of its member broadcasters whether anadvertising agency does or does not meet collectively agreed creditworthinesscriteria but will simply gather and provide, on request, relevant financialinformation and analysis to individual broadcasters to assist them in makingtheir own commercial decisions • reduce the scope of information it collects and shares with memberbroadcasters • leave it to broadcasters to choose what type of security they wish to useto cover the risk that an agency defaults • ensure that no sales directors of any of the member broadcasters sit onthe TV Eye board. Welcoming the proposed commitments Sir John Vickers, OFT Chairman, said: 'The OFT was concerned that, by allowing broadcasters collectively toagree certain terms and conditions for the sale of advertising airtime, TV Eyerestricted competition between the UK's main terrestrial commercial TV stations.Media agencies seemed to have little choice but to accept those terms in orderto secure TV advertising for their clients. These revisions will allow a freer,more competitive environment.' The OFT will shortly be consulting third parties through publication of a formalcommitments notice, which will set out in more detail how the proposed changesmeet the OFT's competition concerns. Assuming that the consultation processconfirms the OFT's preliminary position, it intends to make a decision to acceptbinding commitments and close its file. NOTES 1. TV Eye was formed in 2003 to take over certain functions previouslyundertaken by ITV Network Limited. 2. The Competition Act 1998 gives the OFT powers to investigate suspectedinfringements of the Act's prohibitions (which mirror the EC competition rules: i) the Chapter I prohibition prohibits agreements between undertakings,decisions by associations of undertakings or concerted practices which have theobject or effect of preventing, restricting or distorting competition in the UK(or any part of it) and which may affect trade within the UK (or any part of it) ii) the Chapter II prohibition prohibits conduct by one or more undertakingswhich amounts to the abuse of a dominant position in a market which may affecttrade within the UK (or any part of it). 3. The Competition Act 1998 has been amended, with effect from 1 May 2004,to allow the OFT to accept binding commitments from those under investigation.The formal acceptance of such commitments, which must address the OFT'scompetition concerns, requires the OFT to close its investigation into theconduct addressed by the commitments. The proposed commitments will be open toconsultation before they are accepted by the OFT. 4. Formal acceptance of commitments means that the OFT will terminate itsinvestigation into the parties' conduct and will not proceed to a decision. Acommitments decision will not include any statement as to the legality orotherwise of the parties' actions either prior to acceptance of the commitmentsor once the commitments are in place. Accordingly, the offer of commitments doesnot necessarily imply acceptance of an infringement on behalf of the parties. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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