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 couple of weeks, 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 potentially 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, states:
’My particular experience of the industry is that it is far more common
to incentivise advertisers to use your media than to attempt to bar them
from using others - and from my understanding of what I’ve seen from the
OFT, they are 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. As one press buyer puts it: ’It is common to find
policies that incentivise advertisers to use all of a group’s titles and
it is equally common to be rewarded for not using a competitor.’
Laura James, the director of press at New PHD, comments: ’I do think
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: ’As I understand it, 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 too.’
The law, in this case, seems to be a bit of an ass. That’s certainly the
view of Tim McCloskey, the deputy managing director of BMP OMD. He says:
’Though the OFT legislation is designed to be in the public interest and
to stamp out anti-competitive behaviour, it is potentially a hindrance
to our business and ultimately detrimental to both advertisers and
consumers alike 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 do 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.
’In the real world, there have always been exclusive deals in every
marketplace and to pretend otherwise is both fatuous and incorrect. If
legislation leads to an increase in the price of advertising, it doesn’t
do many favours to consumers. It restricts the number of messages
detailing client benefits and ultimately puts up the price of marketing
by putting up the cost of advertising.’
