CARLTON GRANADA MERGER: ITC and Ofcom begin hunt for adjudicator to settle disputes

The appointment of an independent adjudicator to rule on disputes between the merged ITV and the advertising community is one of the most contentious parts of the trade secretary Patricia Hewitt's remedy ruling.

The Independent Television Commission and Ofcom are responsible for selecting the adjudicator, who will be an individual with "significant industry knowledge".

Among the names already linked to the job are: David Connolly, the vice-chairman of Starcom Motive, who has resigned from the agency; David Cuff, the former executive vice-president, commercial, at Flextech TV and a former broadcast director at Initiative Media, and ISBA's Bob Wootton.

The media auditing companies Billetts and Media Audits are considered unlikely as they are too involved in the agency process.

The adjudicator's remit includes dealing with complaints that arise following changes in a contract. It will also handle disputes arising from advertisers wishing to switch media agency or for new advertisers unhappy with an ITV price being offered.

However, observers feel that the role is open to abuse and misinterpretation.

Although Hewitt approved the merger, she ruled that it was anti-competitive and she insisted that a remedy that counterbalances ITV's dominant position be in place for the TV negotiation season this summer.

The advertising community had pushed for the Competition Commission to recommend a structural remedy, such as the divestment of both of its sales houses, but Hewitt has ruled that ITV be allowed a behavioural remedy called Contract Rights Renewal.

This solution gives agencies and advertisers with existing Carlton and Granada airtime contracts the right to renew these on their existing terms for the next three years. The idea is that this will protect advertisers from a post-merger ITV hike in ad rates, although they are not forced to adopt the CRR mechanism.

It claims to protect advertisers in the event of a decline in ITV's audience.

Advertisers and agencies will be able to drop their share of TV spend to ITV by the proportionate amount that ITV's share of commercial impacts has fallen. However, in the event that ITV's impacts rise, the station will not be able to force agencies or advertisers to commit above the level they committed to pre-merger.

This contract protection applies to advertisers who deal directly with ITV, media agencies that have line-by-line advertiser deals or agencies that do umbrella agency deals.

To allow clients to change agencies if they want to, advertisers in agency deals will be allowed to take their current share and discount levels with them, while those in umbrella deals will be able to move about freely and benefit from new agencies' terms.

The idea behind CRR is that it gives advertisers the same flexibility post-merger as they currently enjoy, but it is not without its critics.

In particular, rival broadcasters have criticised it as unwieldy and potentially unworkable, while some agencies have complained that it will make it difficult to balance their books, given that they trade discount in order to win new clients.

MERGER CONDITIONS

- Appointment of an independent adjudicator to oversee disputes between ITV and advertisers

- Right to renew existing favourable deals

- Protection against audience decline. Broadcast commitments can be adjusted according to the proportion of commercial impacts

- Greater protection for new or lapsed advertisers. ITV must offer fair terms, with disputes referred to adjudicator

- Right to change agencies while retaining existing conditions.

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