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Friday 21 January, 2005

Office of Fair Trade

Statement re TV Eye

Office of Fair Trading
21 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 certain
arrangements governing the sale of advertising airtime after the OFT put
competition concerns to them.

          TV Eye is owned by ITV, GMTV, Channel 4 and Channel 5. It provides
services to them and a number of smaller broadcasters. The OFT had concerns that
arrangements put in place by TV Eye enable those broadcasters to agree
collectively some of the terms and conditions under which they sell advertising
airtime to media agencies. The OFT was particularly concerned that TV Eye's
member broadcasters, acting through TV Eye:

•      made it more difficult for new media agencies to enter the market by
imposing an unduly strict registration policy

•      collectively agreed and enforced the terms and conditions on which credit
would be granted to media agencies (known as credit listing), without objective
justification

•      collectively set the form of security to be provided by agencies to cover
the risk of them defaulting on their contracts with broadcasters.

The OFT was concerned that, taken together, these practices placed media
agencies in an unduly weak bargaining position with little room for individual
negotiation with the broadcasters, and that this dampened competition between
both 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's
concerns by giving formal commitments (see note 3) that it will:

•      verify only that media agencies are bona fide, rather than impose
additional strict registration terms

•      no longer decide on behalf of its member broadcasters whether an
advertising agency does or does not meet collectively agreed creditworthiness
criteria but will simply gather and provide, on request, relevant financial
information and analysis to individual broadcasters to assist them in making
their own commercial decisions

•      reduce the scope of information it collects and shares with member
broadcasters

•      leave it to broadcasters to choose what type of security they wish to use
to cover the risk that an agency defaults

•      ensure that no sales directors of any of the member broadcasters sit on
the TV Eye board.

Welcoming the proposed commitments Sir John Vickers, OFT Chairman, said:

          'The OFT was concerned that, by allowing broadcasters collectively to
agree certain terms and conditions for the sale of advertising airtime, TV Eye
restricted competition between the UK's main terrestrial commercial TV stations.
Media agencies seemed to have little choice but to accept those terms in order
to 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 formal
commitments notice, which will set out in more detail how the proposed changes
meet the OFT's competition concerns. Assuming that the consultation process
confirms the OFT's preliminary position, it intends to make a decision to accept
binding commitments and close its file.



NOTES

1. TV Eye was formed in 2003 to take over certain functions previously
undertaken by ITV Network Limited.



2. The Competition Act 1998 gives the OFT powers to investigate suspected
infringements 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 the
object 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 undertakings
which amounts to the abuse of a dominant position in a market which may affect
trade 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's
competition concerns, requires the OFT to close its investigation into the
conduct addressed by the commitments. The proposed commitments will be open to
consultation before they are accepted by the OFT.



4.       Formal acceptance of commitments means that the OFT will terminate its
investigation into the parties' conduct and will not proceed to a decision. A
commitments decision will not include any statement as to the legality or
otherwise of the parties' actions either prior to acceptance of the commitments
or once the commitments are in place. Accordingly, the offer of commitments does
not necessarily imply acceptance of an infringement on behalf of the parties.







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