13th Dec 2005 07:01
Office of Communications13 December 2005 Television advertising sales market and the CRR remedy 13 December 2005 Ofcom today set out its approach to the UK television advertising sales marketand the Contract Rights Renewal (CRR) remedy put in place as a condition of theCarlton-Granada merger to protect the interests of the advertising communitypurchasing airtime from ITV plc. Television advertising sales market In its conclusions granting regulatory approval for the Carlton-Granada merger,the Competition Commission suggested that a wider review of the UK televisionadvertising sales market should be considered. In its Annual Plan for 2005/6,Ofcom proposed conducting this review. Ofcom has subsequently undertaken a preliminary analysis of the market. In itsview, the case supporting the need for a full review of the entire market hasnot been made. The reasons for this include: • Ofcom has received no complaints regarding the operation of the television advertising sales market; • there is no strong evidence of consumer detriment arising from the workings of the market as currently constituted; • there have been no calls from either the advertising or the broadcasting industries for such a review; and • the CRR remedy (of which more below) has a significant effect on the market; therefore, in Ofcom's opinion, there would be limited value in a wider review prior to any examination of the case for a review of the CRR remedy. Ofcom's regulatory principles state that it will operate under a bias againstintervention and that it will always seek the least intrusive regulatorymechanisms. Given these and the absence of demands for - or evidence to support- a review of the television advertising sales market at this time, Ofcom hasremoved this proposal from its work plan. Contract Rights Renewal (CRR) remedy The CRR remedy was established in October 2003 in acknowledgement of thepotential for the newly-merged Carlton and Granada to exercise significantinfluence over the ability of advertisers and media buyers to negotiatecontracts fairly and effectively. ITV plc has given formal undertakings tocomply with the CRR remedy as a condition of regulatory approval for the merger. The CRR remedy imposes conditions upon ITV plc which are intended to ensure thatadvertisers and media buyers are no worse off after the merger than before. Itincludes an automatic "ratchet" - a linkage which reduces the amount advertiserswill have to commit if ITV's audience shrinks. The remedy is overseen by anindependent Adjudicator to ensure that fair competition prevails. The Office of Fair Trading (OFT) is responsible for the CRR remedy, supported byOfcom. The decision as to whether the CRR remedy should be reviewed - and if so,when - would rest with the OFT. As the sector regulator, Ofcom will continue inits role of monitoring the CRR remedy and assessing its impact on the widerindustry. ITV1 still has a significant (greater than 40%) share of the televisionadvertising sales market and may continue to do so in future. Therefore, theassumption based on current understanding of the television advertising marketis that any request for review and subsequent modification of the CRR remedywould have to demonstrate, with substantial evidence, that the wider market as awhole would not be adversely affected by any such modification. The Office of the Adjudicator (CRR) The Office of the Adjudicator seeks to ensure that ITV plc responds fairly whenthe demands of advertisers or buyers change from time to time. It alsodetermines the outcome of disputes between the broadcaster and its advertisingcustomers. In examining a dispute the Office of the Adjudicator has access toall of ITV plc's contracts and trading information. Its decisions are final andbinding on ITV plc. The Adjudicator is independent of Ofcom; however Ofcom is responsible forensuring the Office of the Adjudicator is able to function according to theterms of the merger undertakings. The current Adjudicator David Connolly has decided to step down next year, inline with his original commitment to spend three deal seasons in the role. Hewill continue in post until the end of March 2006. Under the terms of theAdjudicator's contract, confidentiality and employment restrictions will remainin place until 2007. The selection process for David Connolly's replacement willbegin in January. Ofcom Chief Executive Stephen Carter said: "The airtime sales market is complex,with multiple players. Our priority is to continue to monitor the CRR remedy andto work with the OFT in the event of any subsequent review." He added: "I would like to thank David for his work over the last three years.The role of the Adjudicator is - and will remain - an important part of theremedy." NOTES FOR EDITORS AND CSEs Ofcom is the independent regulator and competition authority for the UKcommunications industries, with responsibilities across television, radio,telecommunications and wireless communications services. For further details please visit www.ofcom.org.uk CONTACT Ofcom Media [email protected](+44) (0)20 7981 3033 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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