Ofcom will not refer ad trading market to Competition Commission
Ofcom today concluded its review of TV advertising trading. The review, which examined the way TV advertising is bought and sold, found no clear evidence of harm to consumers – whether TV viewers, advertisers or end users of products advertised on TV.
“In light of the costs associated with a reference, we concluded that it would not be proportionate to refer the TV advertising market to the Competition Commission,” a statement said.
In June, Ofcom consulted on whether the way TV advertising is bought and sold could prevent, restrict and distort competition. If they identified competition concerns, they could have referred the market to the Competition Commission for a full investigation.
At the time, Newsline commentator Jim Marshall asked whether the review was too late? “Ofcom needs to spend its time managing a TV market that is evolving very quickly, and it will best do that, not by introducing new rules, but by letting existing regulations apply until such a time when the market decides that they are obsolete and no longer relevant,” he said.
No significant detriment to consumers
Having now reviewed the evidence and submissions, Ofcom does not believe there is a strong case to suggest that there is significant detriment to consumers – whether TV viewers, advertisers or consumers of products advertised on TV. In light of the significant costs which would be imposed by a market investigation, and the potentially destabilising effects on industry, the regulator concluded that it would not be proportionate to refer the TV advertising market to the Competition Commission.
Scope of the review
In its June consultation, Ofcom identified potential areas of competition concern, specifically: transparency of pricing; bundling of airtime combined with the possible market strength of different companies; and the limited evolution of the trading model and its possible impact on innovation. However, they also recognised that the current system may deliver benefits and could provide an effective way of managing some of the risks in planning and scheduling TV advertising.
Conclusion:
“On price transparency, we found that media buyers and advertisers understand the terms of their deals with broadcasters and advertisers have access to detailed information about the performance of their media buyers. As a result, we do not believe that there is a basis for concern.
“Regarding bundling of airtime, while we are not able to dismiss completely that bundling of advertising across a broadcaster’s schedule could harm competition, we have not found any evidence or analysis to lead us to conclude that there was a detrimental effect.
“On innovation, we considered whether the apparently limited evolution of the trading model could inhibit innovation in the sector. We found that the trading model has evolved to some extent and has proved capable of adapting to significant changes in content distribution and consumption in recent years. Such developments include the growing number of TV channels, more advertising spots and audience fragmentation.”
Ofcom received 21 written responses to its consultation. The vast majority of respondents did not believe it was proportionate to refer the market to the Competition Commission.
The full statement can be found here.
The quantity of advertising on TV
Separately, Ofcom has today published a statement on regulating the quantity of advertising on TV, which considers whether there is a case for consulting on the number of minutes of advertising allowed on TV.
This is regulated within a framework, which is set at European level, and implemented in the UK by Ofcom’s Code on the Scheduling and Amount of Advertising Code (COSTA). The current UK rules allow less advertising than the maximum set by the European framework, and differ between Public Service Broadcasters and non-Public Service Broadcasters.
The aim of regulation in this area is the protection of the interests of viewers, in terms of their exposure to advertising, while helping to ensure that quality TV programming is available. Ofcom has decided that the current rules remain appropriate, saying they “did not find sufficient evidence to justify changing them at the present time. However, we could revisit this if the regulatory framework was to change”.
The statement can be found here.
Ofcom’s announcement that they have concluded their review of the TV trading market and are proposing not to refer it the Competition Commission could be viewed as a classic case of ‘doing nothing immediately’ (the immediately took six months, but in regulator timescales that is approximately immediately).
The same applies to their decision on airtime minutage rules, which will also remain unchanged. In fairness to Ofcom, there was no appetite for a review, which could have taken well over a year to complete – and consequently any findings would probably be out of date by the time they were published and any proposed remedies potentially irrelevant.
So, seeing it’s coming up to the season of goodwill, let’s applaud them for listening and responding to advice from the market and also take the opportunity to wish Ed Richards and his people best wishes for Christmas and the New Year.