CC rules that ITV must keep CRR
The Competition Commission has provisionally ruled that ITV must keep the Contract Rights Renewal system because of its “continuing ability to reach large numbers of viewers, and the strong bargaining position this gives it with media buyers”.
The decision saw shares in the broadcaster fall by almost 5.3% to 49.8p in early morning trading.
The CRR system was introduced as a means of protecting advertisers from a loss of competition in the UK TV advertising market following the merger between Carlton and Granada in 2003.
In outlining its ruling, the CC said that although CRR would stay, it recognises that there have been changes in the TV advertising marketplace since it was introduced and therefore some “variations” could be made to reflect this. Alongside today’s provisional decision the CC has launched a consultation requesting views on these possible variations.
Diana Guy, CC deputy chairman and chairman of the CRR Review Group, said: “ITV1 has seen a decline in its share of both viewers and advertising revenues since 2003 and there are now more alternatives for advertisers. However, ITV remains crucial for advertisers looking to reach large number of viewers, particularly if this needs to be done rapidly.
“The media agencies, through whom the vast majority of TV advertising is bought, need access to ITV1 for their advertiser clients. As a result they cannot withdraw all their business from ITV1. However, we found that if they try to reduce their proportion of expenditure on ITV1 they could be faced with significantly less attractive terms for their remaining ITV1 business. Because of this the changes in the market since 2003 have not increased the bargaining strength of agencies. It is therefore our view that a remedy needs to stay in place.
“However, we are considering whether some variations might be justified in light of the changed circumstances since 2003, and possible unintended effects of the CRR undertakings in practice. Although there may be a case for change, exactly how we do it is far from clear cut. We are wary of any measures that will increase complexity or will depart from the transparent and measurable virtues of the current system. So we would welcome views from all interested parties as we consider any potential changes in detail.”
Variations to CRR proposed by the CC include widening the definition of ITV1 to include any ITV+1 or ITV1 High Definition channel. It was reported earlier this month that ITV was delaying the launch of ITV+1 until it knew the outcome of the CC ruling on CRR.
It also wants views or alternatives to other possible variations, “both alternative ways of addressing the competition concerns and possible measures to address the unintended effects which may have arisen as a result of the CRR Undertakings”.
The CC intends to publish its final decision by the end of this year.