OFT publishes outdoor advertising market study

3 Feb 2011 10:38 AM

The OFT has today published its market study into the outdoor advertising industry which has found that the sector is broadly competitive amongst both specialist buyers and media agencies.   

As part of the study, the OFT looked at whether the payment of rebates by outdoor media owners to specialist buyers could affect incentives and worsen the deals offered to advertisers. It found that competition between buyers and between agencies ensured that the majority of these rebates pass through to advertisers.

However, the OFT found some potential for rebates to distort how campaigns are booked and increase the price that advertisers pay. To address this, it recommends that advertisers should take steps such as using media auditors to monitor campaigns to ensure agencies and specialist buyers act in the advertiser's best interests. In addition, advertisers should consider negotiating contracts which explicitly set out how rebates are to be treated.

The study also looked at potential barriers to entry and expansion for media owners. As a result the OFT has opened an investigation into contracts entered into by each of two media owners, Clear Channel and JCDecaux, with some local authorities relating to advertising on street furniture such as bus shelters and information panels. In particular, the OFT will consider the long durations and potentially restrictive terms of these contracts.

The OFT has written to these two media owners to explain that there are reasonable grounds for suspecting that the agreements restrict competition, within the meaning of the Competition Act 1998 and/or Article 101 of the Treaty on the Functioning of the European Union. The OFT's investigation is at a very early stage and no assumption should be made that any of the agreements infringes competition law.

Heather Clayton, OFT Senior Director of Infrastructure, said:

'While there is evidence that competition broadly works well for larger purchasers of outdoor advertising, our study shows that advertisers could do more to ensure that they get a good deal from specialist outdoor buyers and media agencies.

'There are some concerns around barriers to entry and expansion for media owners and the OFT has launched a competition investigation in order to assess whether certain street furniture agreements are compatible with UK and EU competition law.  No assumption should be made at this stage that there has been an infringement of competition law.'

In light of the investigation under the Competition Act and its other recommendations, the OFT has provisionally decided that a market investigation reference to the Competition Commission would not be appropriate at this time. It is now consulting on this conclusion and responses should be sent by 5pm on 18 March 2011 to: Outdoor Advertising Market Study (Floor 2C), Office of Fair Trading, Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX or email: outdooradvertising@oft.gov.uk

NOTES

1. The market study report and Q&As are available from the market study page.
2. See press release OFTs launches market study into outdoor advertising (May 2010).
3. OFT market studies are carried out under section 5 of the Enterprise Act 2002 which allows a market-wide consideration of both competition and consumer issues.
4. Market studies involve an analysis of a particular market with the aim of identifying and addressing any aspects of market failure from competition issues to consumer detriment and the effect of government regulations. Possible results of market studies include: enforcement action by the OFT; a reference of the market to the Competition Commission; recommendations for changes in laws and regulations; recommendations to regulators, self-regulatory bodies and others to consider changes to their rules; campaigns to promote consumer education and awareness; and a clean bill of health.
5. Under section 131 of the Enterprise Act the OFT may make a market investigation reference to the Competition Commission where it has reasonable grounds for suspecting that any feature, or combination of features of a market in the United Kingdom for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or part of the United Kingdom. The OFT's guidance sets out four criteria, all of which must, in its view, be met before it will decide to make a reference.
6. The investigation of contracts between media owners and local authorities is being carried out using the OFT's powers under the Competition Act 1998. Under section 25 of the Competition Act the OFT has powers to investigate where there are reasonable grounds for suspecting an infringement of UK or EU competition law. The OFT has sent information requests to Clear Channel and JC Decaux to assist with its investigation but no assumption should be made that any of the contracts under investigation infringes competition law.