MEDIA FORUM: Should the OFT obstruct exclusive media deals? - Last week, the Office of Fair Trading again made it clear that it was prepared to stamp out exclusive deals, whereby advertisers are rewarded for giving a campaign solely to a single media owne

By ALASDAIR REID, campaignlive.co.uk, Friday, 15 October 1999 12:00AM

It’s not often that events in Aberdeen or Weston-super-Mare have potentially important ramifications for the media industry - but this might be one of those rare occasions. In the last couple of weeks, the Office of Fair Trading has asked for and received undertakings from two publishing houses - Aberdeen Journals and Community Media, based in Weston-super-Mare - that they will refrain from overly aggressive sales practices. The misdemeanour? Their practice of ’making it a condition when offering free or cut-price advertising in (their) publications, that advertisers agree not to advertise in other publications’.

It’s not often that events in Aberdeen or Weston-super-Mare have

potentially important ramifications for the media industry - but this

might be one of those rare occasions. In the last couple of weeks, the

Office of Fair Trading has asked for and received undertakings from two

publishing houses - Aberdeen Journals and Community Media, based in

Weston-super-Mare - that they will refrain from overly aggressive sales

practices. The misdemeanour? Their practice of ’making it a condition

when offering free or cut-price advertising in (their) publications,

that advertisers agree not to advertise in other publications’.



John Bridgeman, director-general of the OFT, stated: ’Under new

competition legislation, from 1 March 2000, I will be able to impose

penalties of up to 10 per cent of UK turnover for each year of the

infringement up to a maximum of three years, for companies acting in a

such an anti-competitive manner. I will also be able to make an interim

order requiring an undertaking to refrain from engaging in suspected

illegal activity while I investigate the matter.’



This is potentially scary stuff, given that exclusivity is an important

ingredient in all negotiations in some parts of the media market,

especially regional and trade press where the possibility of there being

two bitter rivals in a relatively small market is arguably greater than

in any other sector. Other publishing groups given an OFT warning in

recent years include Centaur, Reed Business Information, Scotsman

Communications and VNU Business Publications.



Chris Stanley, the marketing director of the Newspaper Society, states:

’My particular experience of the industry is that it is far more common

to incentivise advertisers to use your media than to attempt to bar them

from using others - and from my understanding of what I’ve seen from the

OFT, they are particularly concerned with negative tactics. They are not

common tactics but I’m sure they exist and can be found in all corners

of the media world.’



The OFT’s new powers, and its enthusiasm to assert them, could have

implications for the whole media industry. It is hardly unknown for

sales teams to offer incentives for exclusivity, and it isn’t just a

sales issue - buyers regularly offer campaigns on a solus basis in

return for favourable rates. Nor is it just a press phenomenon. The OFT

has in the past censured Capital Radio for this sort of thing.



Some buyers privately admit that this could have huge implications.

After all, exclusivity is a fundamental part of the trading currency -

and some publishers in the national newspaper market are notorious for

insisting on it. As one press buyer puts it: ’It is common to find

policies that incentivise advertisers to use all of a group’s titles and

it is equally common to be rewarded for not using a competitor.’



Laura James, the director of press at New PHD, comments: ’I do think

this will have implications for some aspects of trading because there

are obviously incentives for rewarding the stronger players - and some

take advantage of this route more than others. If this is taken away

from them, it will be interesting to see what alternative route they

will pursue.



But there are difficulties. For instance, this sort of incentivisation

takes place in other industries and, if the OFT does start the ball

rolling, it may find it has a big problem on its hands. It will be

harder to administer and will have broader ramifications than it

realises.’



National newspaper publishers were reluctant to comment on the record

for obvious reasons - they don’t want to do anything that might attract

the attentions of the OFT. However, one said: ’Exclusivity is a major

factor in press negotiations. The thing is, it’s introduced by buyers as

much as sellers. If you were being honest you’d have to say the OFT

stance has implications for all of us.’



Marc Mendoza, the managing director of Mediapolis, is also concerned. He

states: ’As I understand it, it is now deemed unfair for an advertiser

who goes solus to get a better rate than someone who doesn’t. I can’t

see it. A greater commitment given by an advertiser is always going to

affect the rate paid. If everyone pays the same regardless, then our

side of the fence becomes redundant. The OFT is trying to interfere with

the parameters within which you can negotiate and I can’t see how that

can be practical.’



And Mendoza agrees that the OFT may regret embarking on its existing

course. He adds: ’It’s fundamental that a supplier should be able to

reward a customer for greater custom. For instance, what about an

organisation with a fleet of company cars, all of which are Fords? The

rate they get would obviously change if they started buying one or two

Vauxhalls too.’



The law, in this case, seems to be a bit of an ass. That’s certainly the

view of Tim McCloskey, the deputy managing director of BMP OMD. He says:

’Though the OFT legislation is designed to be in the public interest and

to stamp out anti-competitive behaviour, it is potentially a hindrance

to our business and ultimately detrimental to both advertisers and

consumers alike because it limits trading.’



McCloskey also points out that the OFT tends to get involved when one

media owner complains about another. He says: ’Media owners who go

crying to the OFT rather than getting on with improving their products

and services and actively selling their audience to advertisers are

often taking a soft option. In very few instances do media owners force

us to buy space and technically we can always walk away. But advertisers

want deals because each one rightly wants incentives for volume and

competitive advantage over rivals. Agencies are briefed accordingly. We

are paid to negotiate these deals.



’In the real world, there have always been exclusive deals in every

marketplace and to pretend otherwise is both fatuous and incorrect. If

legislation leads to an increase in the price of advertising, it doesn’t

do many favours to consumers. It restricts the number of messages

detailing client benefits and ultimately puts up the price of marketing

by putting up the cost of advertising.’



This article was first published on campaignlive.co.uk

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