MEDIA: SPOTLIGHT - Media agencies demand clarification on the CRR

Agencies feel alienated by the legalese in ITV's merger draft, Lexie Williamson says.

A law degree would have been a real asset in TV buying departments last week as agencies attempted to decipher a draft of the Office of Fair Trading/Carlton and Granada merger undertakings.

The document proposed a package developed by the OFT, the Competition Commission, Carlton and Granada to "remedy the potentially anti-competitive effects" of the merger - largely the inflation of airtime prices, which buyers fear is inevitable when Carlton and Granada own 52 per cent of the market.

The undertakings centre on the Contract Rights Renewal remedy, which allows advertisers to roll over the terms of their existing contracts with ITV for the next three years. They therefore won't be forced to increase ITV's share of their spend and can also reduce the portion of their spend if ITV's audiences shrink.

An independent adjudicator will police changes to contracts, the creation of new contracts and any disputes, ideally returning a "yes" or "no" answer within 72 hours.

The OFT gave "any interested parties" just a few days for responses.

These were to be delivered in writing by 3 November to be considered for the final version of the document by Friday 7 November.

The IPA's submission raises several concerns. Among other things, it wants clarification on the duration of the CRR mechanism, expresses serious concerns over the ability of the adjudicator to cope with the potential level of work and wants clear provision for reviewing the effectiveness of the CRR.

It is also concerned about overtrading and that agencies appealing to the adjudicator will be required to pay a fee for that privilege. The IPA also wants more reassurance that the conditional selling of BSkyB channels (such as Granada Plus) and ITV2 should be expressly forbidden.

ISBA's submission focuses on two areas: pressing for a more proactive role for the adjudicator and for flexibility in deals to avoid overtrading if ITV is failing to deliver specific audience types. Flexibility is also the key in its suggested role for the adjudicator.

"We're talking to Ofcom about the adjudicator having a more proactive role so that they'd monitor ITV's deals regardless," an ISBA spokesman says. "If they merely act as a whistle-blower, then ITV could take retribution in other ways in the future and agencies might be fearful of appealing."

ISBA would have preferred "double divestment" of Carlton and Granada's sales houses but is cautiously optimistic about the CRR. "It's possible advertisers will be better off with the CRR remedy provided that the adjudicator is effective," its spokesman says.

"Divestment would have resulted in unwelcome uncertainty for advertisers and no guarantee that there'd be genuine competition in the sale of ITV airtime in future."

In the meantime, just when they should be limbering up for the buying season, TV buyers and ITV's sales force are in limbo waiting for the outcome and to see who will remain to negotiate 2004's deals after an estimated 200 sales staff are "let go". Most agencies have written to the OFT, although many are doubtful it has the time or the inclination to incorporate their worries.

Jim Marshall, the head of the IPA media futures group, finds the situation "deeply depressing". He argues: "A naturally competitive market will legislate itself but the OFT allowed an anti-competitive situation and is now trying to create artificial competition. The idea of extending contracts is hard to argue with in theory but fails to recognise that life moves on. The contract you negotiated three years ago is not the contract you would negotiate today."

Marshall adds: "What happens when your advertising objectives change or you get a new advertiser who doesn't have an agreement? We can negotiate something new, ITV can make an offer and if we're unhappy with it we'll refer it to the adjudicator but this might be too slow. We've made a submission but a lot of the draft is unintelligible and we've got no time to hire a lawyer to pore over the fine print."

Nick Theakstone, the head of investment at MindShare, attacks the lack of clarity in the document.

"It's written in a legal language that we're not familiar with, is full of loopholes and is open to misinterpretation. There's also not enough time to argue against it although we are putting together a response."

Theakstone also wants a clearer idea of changes he can make to his contract without endangering the CRR. "If, for instance, I have an umbrella agreement with ITV and have 20 clients but one doesn't want to advertise for a year, does this mean that the whole deal is in jeopardy," he asks.

Agencies also worry about potential ITV dominance after the initial three-year period and want the CRR to stay in place. Marshall says: "There's unlikely to be much transgression in the first year from ITV as they will want to keep their noses clean," he says. "If they try to manipulate the system, Ofcom has the power to unstitch the CRR agreement and divest them of their sales houses. But once they have established a single, successful ITV, then they'll go on the offensive. The contracts will come up for renewal in three years, and especially if we see the growth in adspend predicted, they'll start playing silly buggers and picking on the weaker agencies and advertisers. I think we'll have big battles in 2005."

He also believes that the focus on the CRR remedy and other implications of the merger will have a negative impact on TV buyers. "The saddest thing is that TV buyers will end up studying the legal terms and conditions on contracts when it should be all about creativity," Marshall adds.

Some, however, are more optimistic, and argue that once the initial panic about the CRR dies down business will continue as usual. Chris Boothby, the negotiations director at Vizeum, says: "The big issue for us is that the burden of proof to provide a fair deal lies with ITV so, overall, the CRR answers our concerns. The way to look at the CRR is as a fallback so that advertisers can clarify the rules. We'll be negotiating with ITV this year as tenaciously as we always do."

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