Memorandum submitted by ISBA (the Incorporated
Society of British Advertisers)
1. ABOUT IBSA
1.1 ISBAthe Incorporated Society
of British Advertisersrepresents the interests of major
UK advertisers in both the private and public sectors across all
areas of marketing communications, from media advertising and
direct marketing to sponsorship and public relations.
1.2 Some 300 companies comprise its membership,
including all 25 of the largest TV advertisers. Members' combined
expenditure on advertising media amounted to over £4.5 billion
in 2001, whilst their total television advertising expenditure
alone for that period was some £2.3 billion, nearly two-thirds
of the total.
1.3 They recognise that advertising represents
a very important part of their activitiesto many, it is
one of their largest operational costs. Within this, television
advertising continues to hold a special place in their favoura
fact reflected by the price premium it commands over other media.
1.4 At the same time, ISBA's members are
also rapidly increasing their use of the new communications and
marketing opportunities afforded by the new technologies.
1.5 ISBA welcomed the announcement of the
process which led to the publication of the Communications White
Paper in December 2000, as it offered clear signals that Government
recognised the pace of change in media, and also the impacts of
1.6 We have made submissions at each and
every stage to date (reference copies of which have been sent
to the Clerk to the Committee) and therefore welcome the opportunity
to continue to make what we hope is significant and useful input
in the final stages of the run-up to a new Communications Bill.
1.7 A consistent thread throughout these
extensive submissions has been the call to ensure that adequate
levels of competition are maintained in the markets for advertising
time and space in the UK media. Our relevant objectives can be
1. To see strong commercial media, delivering
maximum audience and hence effective commercial communications
for ISBA members.
2. To ensure competition in the market for
3. To reinforce advertisers' fundamental
belief in the value and effectiveness of self-regulation.
2. GENERAL AND
Overall, ISBA considers the April 2002 Draft
Communications Bill and its attachments encouraging. Indeed, there
is much in the Bill to support advertisers' fundamental aims:
2.1 A broad deregulatory stance, which we
2.2 It appears to give due regard for the
first time to the interests not only of the consumers of communications
media, but also of their customersin the case of this response,
the advertisers who fund the large majority of the UK's media
and whose interests overlap keenly with those of their customersthe
same consumers who are also viewers.
2.3 It confirms that OFCOM will have some
dominion over the currently largely-unregulated BBC, which, despite
existing to cater for "market failure", is currently
arguably one of its major causes! However, we have some concerns
regarding the further clarification as to the extent of OFCOM'S
exact powers which is contained in the proposed amendments to
the BBC Agreement (see section 3 below).
2.4 Recognising convergence, it gives strong
encouragement to industry to come forward with proposals for increased
self-regulation of advertising in the broadcast media (see section
2.5 We welcome the announcement that OFCOM
and the OFT will have concurrent competition powers, but seek
further clarification over exactly how this would work in practice
(see section 4 below).
2.6 We support the opening up ownership
of UK media assets to foreign, non-EAA, companies, provided it
leads to significant inward investment in the UK media and greater
competition in the marketplace.
2.7 We are heartened see the explicit recognition
in the Bill of the need for the application of competition law
before any further consolidation of ITV ownership, could go ahead.
We will expect any such consolidation to invoke careful scrutiny
by the competition authorities.
2.8 The opportunity the Bill creates for
companies such as ITV's or BSkyB's owners to acquire Channel 5
may excite similar concerns over monopoly power. Whilst recognising
that certain consolidations may argue benefits for viewers, advertisers
will nevertheless expect to see the airtime sales market protected
from the potential for monopoly behaviour.
2.9 ISBA and its colleagues at the IPA,
representing UK advertising agencies, have recently developed
a set of guidelines for such instances which we plan to use in
our future discussions with policymakers, OFCOM and the competition
authorities. A copy of this appears at section 6.
2.10 In Radio, we consider the rules requiring
three commercial stations plus the BBC in each locality to a necessary
but bare minimum protection against the adverse effects of over-concentration
of ownership, and propose certain enhancements. We do not support
the Bill's opening ownership of more than one national radio station
to the same holder (see section 7).
2.11 We do however, continue to challenge
the omission of the Outdoor and Cinema media from the scope of
the both the Bill and OFCOM (section 8).
3. OFCOM AND
3.1 Clause 144 of the Bill outlines OFCOM's
powers in respect of the BBC, and refers to the Agreement between
the BBC and the Secretary of State as the instrument through which
these powers will be specified. However, the intended extent of
OFCOM's powers is less than clear.
3.2 The attendant Policy Document confirms
that the current Agreement will need to be amended in order to
give OFCOM powers over the BBC, and that this process will be
initiated shortly. The Government's proposed amendments to the
BBC Agreement were circulated on May 31 and comments invited concurrent
to consultation on other parts of the Bill.
3.3 ISBA has consistently argued against
the exclusion of the BBC in any part from OFCOM's remit. We continue
to have serious concerns that, once again, the Government may
forego an opportunity to create a level regulatory playing field
for commercial media, which would only be achieved by bringing
the BBC under the full regulatory control of OFCOM.
3.4 We would assert that such a level playing
field is crucial for the future success of the UK media ecology.
We see no sense for a broadcaster, which controls around 40 per
cent of UK viewing to be excluded from the "single"
3.5 Nor do we believe that the BBC's current
behaviour can be overlooked. On the one hand, it is the nation's
publiclyand mandatorily-funded public broadcaster, and
should therefore meet the very highest expectations of public
service delivery. Yet on the other, it has for some time been
behaving in an increasingly commercial and opportunistic manner
to the demonstrable detriment of its commercial counterparts.
We see the former as simply irreconcilable with the latter.
3.6 Indeed, hardly a week now passes without
another example of the BBC's increasingly opportunistic behaviourfrom
cross-promotions for radio programmes within morning TV news bulletins
(which practice is strictly forbidden to commercial licensed broadcasters),
to the BBC's recent broadcast of an electronic command to the
UK's 50,000 installed hard-disk TV recording devices (TiVO &
SkyPlus) commanding them to record a programme without the user's
instruction. This latter act has led to calls from MP's and consumer
groups for the BBC's activities to be constrained by "a strong
3.7 However, the Government's proposals
for amendments to the BBC Agreement concentrate mainly on second-tier
"editorial" issues such as independent and original
productions, news and current affairs in peaktime and party political
broadcasts. In so doing, they fall well short of ensuring that
the BBC is regulated in every respect in a manner consistent and
compatible with its commercial counterparts.
3.8 Point 32 of the proposed amendments
suggest that one of the reasons Government may be wary of full
regulation of the BBC by OFCOM is that regulatory sanctions might
include fines which would in the BBC's case have to be paid from
licence fee revenues, thus reducing the funds available for programme-making.
3.9 We would ask why this should be problematic,
as exactly the same holds true for commercial broadcasters. A
commercially-funded broadcaster which infringes regulations may
be subject to a fine which would similarly impact up on its ability
to invest in its programming, since it cannot simply go into the
market and call for more advertising revenue are this is by market
3.10 Further, we would suggest that the
BBC might find the (very public) imposition of financial sanctions
more embarrassing than would a commercial broadcaster, making
the threat of such sanctions yet more powerful.
3.11 Finally, the BBC has suffered frequent
criticism for using funds raised by a universal licence fee to
launch digital and/or subscription channels which are not available
to all. We believe that only holistic, all-inclusive regulation
can effectively deal with such issues. Whilst the BBC is regulated
in any way separately or differently, it will not be effectively
3.12 Whilst we recognise the formidable
lobby which the BBC represents, we continue to call for itand
its Board of Governors if it to continues to existto be
brought fully under the control of OFCOM.
4. INDUSTRY SELF-REGULATION
4.1 The UK model for self-regulation of
advertising in the non-broadcast media has been widely recognised
as effective, efficient and fair. The Advertising Standards Authority
is an independent body that implements the Industry's Codes of
Advertising Practice and Sales Promotion and is funded by a levy
on advertising media spend collected by the Advertising Standards
Board of Finance.
4.2 ISBA, together with the UK Advertising
Association, has argued that the proposed reforms in the Communications
Bill provide the right vehicle to extend self-regulation to all
media. It is not part of our case that the role of the ASA should
be extended, but rather that the ASA is the role model for a new
self-regulatory body to cover the broadcast media.
4.3 As the broadcast media adapts to the
challenges of the new media and the burgeoning choices available
to viewers and listeners, the dividing lines between the media
will become less distinct. Yet no one doubts the need for standards
to be set and applied. Self-regulation is a well-tested means
to achieve regulation, without the legislative and organisational
hurdles that State regulation inevitably entails.
4.4 In the Policy Paper, published with
the draft Bill, the Government has noted that it awaits proposals
from the industry before considering the issue of self-regulation
further. There are however good reasons for our decision to await
the opportunity to enter into a discussion with Government and
Parliament about the nature of self-regulation. Our principal
concerns surround definitions. Pure self-regulation, where industry
draws up codes in consultation with interested parties, then administers
them and applies sanctions is not one that, in practice, we have
adopted in the UK.
4.5 The ASA model is a form of co-regulation
which gains its strength from the double authority of industry
codes backed by the power of the Office of Fair Trading. That
is to say the codes are not voluntary in a way that some industry
"best practice" codes would be. It is this co-regulatory
model we recommend for broadcast regulation. It is important to
us however that industry owns the codes and that the implementation
of the codes resides with a fully independent body.
4.6 A reading of the Policy Paper leaves
open the possibility that the Government wishes to exercise authority
over both the codes production and the implementation, whist asking
industry to pay. This is not a model that is likely to find support.
FOR OFCOM AND
5.1 ISBA welcomes the indications in the
Bill's clauses 246 to 248 that OFCOM and the OFT shall have concurrent
competition powers with regard to the media, and particularly
welcomes the indications that OFCOM may itself make a reference
to the Competition Commission (clause 248/7).
5.2 We believe that the effectiveness of
previous interventions by the competition authorities has suffered
from a lack of first-hand knowledge of the precise and sometimes
quite peculiar workings of the UK media markets.
5.3 The sector regulator should be expected
to have a much closer knowledge of these issues than is practical
for the general competition authorities to achieve. This being
the case, we would welcome its having the power to consult and
5.4 However, we call for greater clarification
of exactly how such concurrent competition powers will be exercised
and will work.
5.5 We note the detail in which section
9.7 of the Policy Document sets out the procedures and roles of
The secretary of State, the OFT and OFCOM for reviewing changes
in newspaper ownership. We call for Government to set out the
way in which OFCOM and the OFT will work together on all other
relevant competition issues, including advertising matters, with
6. ISBA'S GUIDELINES
We are including the exhibit below, which has
been developed jointly by ISBA and the IPA representing the UK
advertising agencies, as we believe that is both relevant and
gives a good insight into our concerns and position.
Media ownershipthe needs of advertisers
1.1 ISBA exists to represent its ca.300
advertisers-members, who comprise many of the UK's largest companies
and owners of the nation's best-known and -loved brands. Their
combined expenditure on TV advertising alone accounts for £2.2
billion, or some two-thirds of the total.
1.2 ISBA and its members have long held
that competition is fundamental both to the effective operation
of markets and to the consumer interest.
1.3 Meanwhile, the UK's media are consolidating
rapidly. ISBA therefore seeks to ensure that acceptable levels
of competition are maintained in the marketplace.
1.4 The markets for advertising media time
and space (and in due course, bandwidth) should operate as proper
competitive markets. Restriction of supply or other forms of price
fixing should (continue to) be outlawed.
1.5 ISBA recognises that some media mergers
and/or acquisitions may be predicated on commercial grounds alone,
whilst others may be based in whole or part on more subjective
public interest enhancements, such as improved editorial. We assert
that the following criteria and solutions should be applied to
all potential consolidations regardless of their motivation.
2. ISBA'S STANCE
2.1 To protect our members' interests and
indeed the wider issue of competition in general, our several
recent relevant submissions to Government have called for ownership
limits of 25 per cent by medium and 15 per cent overall in the
UK. (See also point 4.4)
2.2 This would mean that no less than four
companies could own all the commercial assets in any given medium,
and no less than seven could hold the commercial assets across
all UK media.
2.3 We have acknowledged that these proposed
limits should not apply to companies which have already achieved
higher market shares through organic growth, and should therefore
not be retroactive or apply to pre-existing situations.
2.4 We also recognise that these limits
might constrain any further movement in those sectors which have
already settled beyond them, such as cinema. We call for further
consultation by the sector regulators and/or competition authorities
before granting authority in such instances.
2.5 ISBA recognises that the primary role
of regulation is to protect the public/consumer interest. However,
we also assert that each and every transfer of media asset ownership
will excite different degrees of industry concern according to
any or all of the following influences:
the sizes of the merging parties;
the medium or media they operate
the size of those markets;
relevant market precedents;
above all from the advertiser perspective,
the degree of substitutability of the mediaassets under proposed
ownership and thus control.
ISBA therefore argues that the response, and
solutions or remedieseither applied by the industry itself
or imposed by the sector regulator or competition authoritiesshould
be proportional to the scale of the concerns thus aroused.In some
significant cases such as the further consolidation of
ITV, for examplethe solutions sought may well exceed the
minimum safeguards proposed in this paper.
2.6 In arguing for effective market competition
in all sectors of the UK's media, ISBA also seeks balance between
the offerings and inventories arising under any potential merger.
ISBA would therefore seek referral to the competition authorities
of any concentration in media asset ownershipeditorial
and/or media saleswhich might lead to excessive market
2.7 These limits should not only apply at
national level but also to key and sensitive regions of the UK,
"Political": Where a part
of the UK might be set to devolve to such an extent as to adopt
its own laws with regard to media content and ownership (ie Scotland).
"Significance": where the
distribution areas or catchments of the media in question account
for a significant proportionie 20 per centof the
relevant total UK market (such as London ITV, for example) as
measured by a) advertisement revenue share and b) share of key
demographic groups, particularly in those instances share a market
player's influence cannot be determined by advertisement revenue
(ie licence fee, subscription or pay-funded services).
2.8.1 As a minimum safeguard, wherever mergers
or acquisitions arise within the media sector which lead to market
shares in excess of these limits, sales of the advertising inventory
which represents market share in excess of these limits must be
handled by separate and independent sales companies. (See also
3. RULES GOVERNING
3.1 The UK has a well-established, long
and successful history of independent media sales companies. However,
we recognise that their introduction to handle separated advertising
sales for market shares in excess of the 25 per cent and 15 per
cent limits will present some difficulties, albeit not insurmountable.
In these instances, to prevent undue influence or collusion, the
following rules should apply:
3.2 In accordance with established practice,
the enforcement of adherence to these rules should in the first
instance be the responsibility of the sectoral regulatorOFCOMand
its appointed specialists.
3.3 A media owner on whose behalf an independent
sales company operates may not own more than 19 per cent of the
sales company, whether directly or indirectly.
3.4 An independent sales company may not
have any direct or indirect interest in any media owner which
3.5 Independent sales companies which jointly
represent a common media owner must not have any direct or indirect
interest in one another.
3.6 Nor may a media owner be represented
on the board of any independent sales company on whose behalf
3.7 Whilst the media owner should have access
to sufficient information to enable it to determine the independent
sales company's effectiveness on its behalf, it should not have
access to any information whatsoever on the sales company's specific
arrangements with individual advertisers and/or agencies, nor
within overly narrowly-defined advertiser sectors.
3.8 Whatever their basis, any sales incentives
operated by the media owner for the independent sales company
must relate entirely to the performance of the sales company on
its behalf, and must not relate in any way to the overall performance
of the media owner or of others within the market.
3.9 The contract between the media owner
and the independent sales company should acknowledge and be based
upon these enforcible rules. Likewise, the contracts between the
media agencies and the sales companies, and between advertisers
and their media agencies should also acknowledge and base themselves
upon these rules similarly, carrying their currency right through
the business process
4.1 The relevant markets are currently:
television, radio, national newspapers, regional and local newspapers,
magazines, outdoor/out-of-home (posters, transport and other location
specific advertising), online (ie internet) and wireless messaging
4.2 Ownership of sales is defined as ownership
of the sale of advertising. The most effective measure of this
is the revenue thus generated.
4.3 Advertising is defined as all forms
of paid-for commercial communications, and includes spot and space
advertising as well as sponsorship, "advertorials",
items inserted into or onto publications etc.
7.1 Local ownership controls
7.1.1 Although ISBA has always argued for
rather tighter restrictionsspecifically no less than four
operators in addition to the non-commercial BBCwe sense
that Government has clearly been strongly impressed by joint submission
presented by the Radio Authority and the Commercial Radio Companies'
Association, whose contents are reflected in the Radio ownership
provisions of the Bill.
7.1.2 However, we do not feel that the "currency"
on the basis of which market substitutability proposed at point
22.214.171.124 (a) and 126.96.36.199 of the Policy Documentthat of stations'
population coverageis sufficiently revealing. We would
strongly argue for this determination to be based on each station's
relevant reach as measured by RAJAR, the BBC & industry-agreed
radio audience measurement system, which is sufficiently robust
as to bear such interrogation.
7.1.3 This is because stations' market dominance
stems from high reach of key populations or demographic groups.
Under the rules proposed in the Policy Document's section 188.8.131.52,
media owners of stations with relatively dissipated listenershipsie
large population coverage but small reach, such as specialist
stationsmight be prevented from local expansion, whereas
those owning stations with more concentrated listenershipie
smaller catchment but much higher reach, like city centre mainstream
music or talk channelsshould excite scrutiny but might
well be overlooked.
7.2 National ownership controls
7.2.1 We are also concerned by the indication
that the rule preventing ownership of more than one national analogue
radio service will be removed (Policy Document, section 184.108.40.206).
This not only puts heavy pressure on the regulator to enforce
the differences between the existing services through their licenses,
it also disregards advertisers' concerns regarding possible undue
exercise of market dominance.
7.2.2 The UK's national radio stations are
all, to a greater or lesser extent, successful in generating advertising
revenue as they provide advertisers ready access to segmented
national listening audiences. Whilst they are owned by different
companies, market competition exists between them. This competition
would be most seriously threatened were one or more to be acquired
by the same owner. ISBA argues that these key assets should not
be allowed to fall into the same hands for the foreseeable future.
8. THE OMISSION
8.1 Despite the comments in our several
previous submissions, the Bill continues to ignore the Outdoor
(poster/billboard) medium completely. We can only assume that
this oversight arises from the fact that outdoor has no editorial
content and therefore does not excite Government's concerns regarding
8.2 We feel this is gravely misguidedother
parts of this Bill clearly indicate that one of the key aims of
this legislative process is to avoid the accretion of undue influence,
whether editorial or commercial.
8.3 Hitherto, the scrutiny of the competition
authorities alone has not delivered controls which have addressed
and satisfied advertisers' concerns regarding the Outdoor medium.
Four major companies now control this medium, and continue consistently
to mop up its remaining independent assets.
8.4 This impacts adversely on the opportunity
for effective competition, especially since each company has areas
of specialisation. For example, Viacom outdoor, a subsidiary of
the US-based broadcast holding company, controls all transport
media, and two companies, US-based Clear Channel's subsidiary
More Group and French J C Decaux control all local authority contracts.
8.5 Outdoor's omission from the scope of
both this Bill and OFCOM's responsibilities does not bode well
for advertisers into the future.
8.6 We believe the same to holds true for
Cinema. Advertising sales for Cinema have been controlled by only
two companies for many yearsone, a subsidiary of Carlton
Communications, controlling ca. 75 per cent of the market, the
remainder being controlled by a subsidiary of Scottish Media Group.
8.7 Regrettably in our view, the Bill also
fails to cover cinema.