Ofcom Clears Way For Sales House Consolidation
Ofcom has lifted the rules banning Channel 4, Channel Five and BSkyB from selling advertising airtime jointly, in a move that paves the way for a merger of their sales operations.
The super-regulator has decided to withdraw the ITC’s rules on the joint selling of airtime, which prohibit the large television sales houses from collaborating. The move is the result of its consultation on the rules governing the UK television airtime sales market.
The ITC and Ofcom believe the robust provisions of the Competition Act and the increasing body of competition case law provide sufficient mechanisms to prevent distortions of competition in the joint selling of airtime.
The move follows considerable speculation that broadcasters such as BSkyB and Channel 4 are planning to merge their sales house to adequately compete with the newly-merged ITV, which will control more than 50% of the airtime sales market (see Advertising Industry Consulted On ITV Merger Remedy).
However, the ITC and Ofcom have emphasised that the removal of the rules governing joint airtime sales will not necessarily equate to further consolidation in the market. The Competition Act provides strong rules which prevent joint selling where it is anti-competitive.
Ofcom further reveals that preliminary analysis has suggested that a merger of two larger sales houses could easily damage competition, even if the combined sales houses has a market share of less than 25%.
The new super-regulator also reaffirmed its commitment to prohibit the practice of conditional selling, whereby broadcasters require media buyers who wish to purchase airtime on one channel buy another of the broadcasters’ products to ensure the sale. However, the bundling of channels will be permitted under the rules of the Competition Act.
The rules governing the withholding of airtime, whereby broadcasters artificially inflate prices through restricting supply have also been reaffirmed and will be kept under review.
Ofcom has also pledged to continue to review the Carlton and Granada merger in the future. The regulator also recently launched a wide-ranging consultation on its proposals to introduce a new self-regulatory scheme for broadcast advertising (see Ofcom Launches Consultation On Advertising Regulation).
A full summary of the rules can be downloaded here: http://www.ofcom.org.uk/codes_guidelines/airtime/airtime_sales_rules.pdf
Ofcom: 020 7981 3000 www.ofcom.org.uk
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