IPA refers TV Eye issue to Office of Fair Trading

The IPA has carried out its threat to the commercial broadcasters' collective TV Eye and referred the body to the Office of Fair Trading.

In a statement, Marina Palomba, the IPA's legal affairs director, said: "A formal complaint has been made today (8 April 2003) to the Office of Fair Trading about the trading practices of TV Eye and the broadcasters."

This comes at a particularly sensitive time for the ITV companies Carlton and Granada, as their proposed merger is under scrutiny from the Competition Commission.

The IPA has been in dispute with TV Eye - which comprises Granada, Carlton, Channel 4, five, GMTV and Flextech's IDS - for several months over the issue of bank guarantees broadcasters want agencies to have. TV Eye insists agencies without an equal debt-to-equity ratio must have guarantees, in order to cover any unpaid airtime costs in the event of an agency folding.

Historically, the majority of agencies have always agreed to this. However, a minority has had a special hedge fund, which was organised by the predecessor of TV Eye, ITV Networks Ltd.

These were arranged in the early 90s when the agencies concerned failed the equal debt-to-equity ratio criteria. Instead of paying for bank indemnity, the agencies contribute to a charge fund, which the broadcasters control.

The issue came to the fore last year when the City became concerned that those agencies without bank guarantees, but with the charge funds, expose the TV companies to excessive risk of default of payment. The City has recommended all agencies take out bank guarantees.

TV Eye maintains it has not changed the criteria it requires from agencies, or that it is imposing a conditional sell. The agencies, on the other hand, dispute why they should have to guarantee TV spend when they don't have to with any other medium, and that the evolution of agency supergroups makes the concept unworkable.

Andy Barnes, Channel 4's sales director and the chairman of TV Eye, was unavailable for comment.