Contract rights renewal: the key OFT proposals

Nearly a year after opening a probe into CRR, the OFT today concluded that it would advise the Competition Commission to relax ITV's CRR undertakings. Following consultation, it will pass its recommendations to the Competition Commission, which will make a final decision on any changes to CRR.

The OFT said that on current evidence, its assessment is that the most appropriate relaxation would be to remove ITV’s obligation to roll over contracts. Rolling over contracts allow media agencies to keep the same terms and conditions from one year’s deal to the next should they wish – while being allowed to cut spend based on ITV’s share of commercial impacts.

Specifically, CRR gives purchasers of ITV1's airtime the right to roll forward the contracts that they had before the 2003 merger, and, if a new contract is negotiated, to choose to protect this contract and roll it forward. These contracts set out various terms and conditions, including the discount from station average price the buyer is entitled to, and the share of budget that the buyer commits to ITV1.

However, if this obligation were removed, the OFT said there should be safeguards put in place to prevent ITV from discriminating against those advertisers that still rely heavily on ITV1.

It proposes that such safeguards might require ITV to maintain the so-called SAP trading mechanism, which sets an average price per commercial impact, and allow trading under so-called umbrella deals – arrangements between media buyers and a particular channel or sales house, where the agreement specifies the buyer’s share of spend.

While this appears to be the OFT’s preferred remedy, it also outlined a series of other proposals today. Among them, it proposes that CRR could be abolished entirely, and that to protect advertisers from potential market dominance, ITV would be forced to clearly distinguish between sales for ITV1 and its digital channels.

The OFT proposes, for example, that this could be achieved if the GMTV Sales House were reconfigured to sell the wider ITV family alongside GMTV airtime. This may provide a degree of independence between the negotiations for ITV1 and its digital channels, it said.

However, the regulator noted that this remedy may well be inappropriate, as Ofcom already has significant powers to investigate ITV’s potential leveraging of digital channels.

For full analysis, read next week’s edition of Media Week.

Full details of the OFT’s proposals can be viewed here.