Carlton and SMG in contract fight

Carlton TV is suing Scottish Media Group for breach of contract. Carlton is believed to have issued a writ regarding an agreement over the amount that Carlton receives from SMG for handling its airtime sales.

Carlton Sales represents sales for SMG's two ITV licences, Grampian TV and Scottish TV. Negotiations to resolve the dispute have come to nothing.

Sources suggest that, among other things, it centres on the levels of bonus that SMG owes Carlton Sales for achieving various sales thresholds that trigger bonus payments.

A Carlton spokeswoman said that the disagreement concerns the interpretation of a sales contract bet-ween SMG and Carlton. A spokesman for SMG said that no court date had been set and that the company was currently in dialogue with Carlton in a bid to resolve the dispute.

The news coincides with a scramble for cash by the ITV sales teams in order to maximise any sales bonuses ahead of the trade secretary Patricia Hewitt's ruling on the ITV merger, which is likely to see Granada Enterprises and Carlton Sales become defunct.

It is expected that Hewitt will discard Carlton and Granada's argument that rollover deals are a suitable remedy, and instead recommend double divestment of the two ITV sales houses as a pre-condition of the merger.

Martin Bowley, the chief executive of Carlton Sales, would not comment.

SMG recently reported that pre-tax profits halved to £5.5 million in the six months to 30 June over the same period the previous year.

Despite this, SMG put on a brave face claiming the short-term advertising market had "returned strongly" across its businesses for September and October following three years of decline. It added that it expected this improved performance in the second half with revenues buoyed by the Rugby World Cup.

SMG's other media assets include a 25 per cent stake in GMTV and a 29 per cent stake in Scottish Radio Holdings.

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