Office of Fair Trading
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OFT consults on its preliminary view on ITV's contract rights renewal obligations
The OFT has reached a preliminary view to recommend to the Competition Commission that it relaxes ITV's Contract Rights Renewal (CRR) Undertakings. These were introduced following the merger of Carlton and Granada in 2003.
The consultation document, published today, follows the OFT's in-depth review into CRR, conducted with the assistance of Ofcom. The OFT highlights that since CRR was introduced in 2003, ITV1's market position has declined but the channel remains almost the only provider of very large commercial audiences, which are of particular value to some advertisers. The OFT provisionally concludes that the detrimental effects of the merger on the advertising market appear to have reduced but may not have been eroded completely.
The OFT's consultation document explores a range of possible outcomes from, at one end of the scale, the removal of CRR in its entirety to retaining CRR largely as it is today, and various easements and modifications in between the two extremes.
On the basis of the evidence collected so far, the OFT's preliminary assessment is that:
* It may be appropriate to ease CRR if there is an effective remedy which addresses any remaining detriments arising from the merger between Carlton and Granada.
* One such easement could be to remove the requirement that ITV1 rolls over contracts, while retaining effective safeguards to prevent discrimination against those advertisers which still rely heavily on ITV1. Following the consultation the OFT may remit the matter to the Competition Commission, which makes the final decision on whether change to CRR is appropriate or not and, if it is, what form it should take.
John Fingleton, OFT Chief Executive, said: "Since the remedy was introduced in 2003, ITV's position has changed and so has the wider market. This means it is now the right time to ask whether the remedy remains proportionate, or could be eased or removed.
"Our provisional view is that we should recommend to the Competition Commission relaxation of the CRR Undertakings, whilst retaining safeguards for advertisers and media buyers. However we are keen to hear any new evidence or data during consultation before formally advising the Commission."
Interested parties can submit their views or evidence, by 27 Feb 2009, to: CRR@oft.gsi.gov.uk
The consultation document is available at: http://www.oft.gov.uk/advice_and_resources/resource_base/consultations/contract
NOTES
1 The CRR Undertakings are a part (Clauses 5 to 11 and associated clauses) of a larger set of undertakings given by Carlton and Granada in 2003 following a report by the Competition Commission on the proposed merger of those two businesses to form ITV plc. The CRR Undertakings address concerns the Competition Commission had about the effect the enhanced market position ITV plc would have on competition in the sale of advertising airtime.
2 Among other things, the CRR Undertakings allow buyers of advertising airtime to roll forward their pre-merger contracts, subject to annual adjustments which reflect the change in ITV1's share of advertising (measured in the form of its share of commercial impacts). The Undertakings created the Office of the Adjudicator which is responsible for determining certain disputes arising under the Undertakings and which reports on compliance. For a full text of the undertakings and more information on CRR and the Office of the Adjudicator go to http://www.adjudicator-crr.org.uk.
3 The OFT and Ofcom formally launched a review of CRR in January 2008. This review was undertaken in light of possible changes of circumstances in the sale of UK television advertising since the Undertakings were accepted in 2003.
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