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 fortnight, 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 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, says:
’It is more common to incentivise advertisers to use your media than to
attempt to bar them from using others - and from what I’ve seen from the
OFT, it is 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.
Laura James, the director of press at New PHD, comments: ’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: ’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.’
The law, in this case, seems to be an ass. Tim McCloskey, the deputy
managing director of BMP OMD, says: ’The OFT legislation is designed to
be in the public interest and to stamp out anti-competitive behaviour,
but it is a hindrance to our business and ultimately detrimental to
advertisers and consumers 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 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.
’There have always been exclusive deals in every market and to pretend
otherwise is fatuous and incorrect. If legislation leads to an increase
in the price of advertising, it doesn’t do any favours to consumers. It
restricts the number of messages detailing client benefits and puts up
the price of marketing by putting up the cost of advertising.’
