ITV welcomes regulators' review of advertising regime

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The Independent Online

ITV received its second bit of relief courtesy of the Government this week after regulators launched a review into the rules governing its advertising regime.

The Office of Fair Trading and the Competition Commission have begun a review of the Contract Rights Renewal (CRR) system, put in place in 2003 when Carlton and Granada merged to create the company. Under the rules, the broadcaster must compensate advertisers if viewership of ITV1 falls. The CRR was designed to protect advertisers from the dominant position that ITV gained through the merger.

The system is a bugbear of ITV boss Michael Grade, who has argued that it constrains creativity and innovation and has hindered his efforts to turn around the struggling broadcaster.

The regulators expect the review to last a year, and will take evidence from all interested parties. ITV said it would submit a summary of its views this week.

The company's shares did not react to the news, which had been previously flagged up by the Government. In a statement yesterday, the OFT said that it "is required to consider from time to time whether merger undertakings such as CRR should be varied, revoked or superseded in the light of any changes of circumstances. It will be necessary to revisit the CC's 2003 report and take account of relevant market changes and industry developments in relation to the matters that these sections of the undertakings are intended to address."

Since the merger, ITV's share of the national advertising market has fallen from just over half to about 40 per cent, though its digital channels have helped it to recoup some of the lost ground. The OFT may publish "emerging thinking" documents as the process progresses.

The move by the regulators came a day after John Hutton, Secretary of State for Business, Enterprise and Regulatory Reform, upheld a Competition Commission ruling to force Sky to reduce its 17.9 per cent stake in the broadcaster to less than 7.5 per cent because it was deemed anti-competitive. The blocking stake had dampened investor interest in the stock, which has lost about a third of its value in the past year.

Analysts expect Sky to appeal against the decision, which could drag the process out for another year, though few expect it to be successful. The pay-TV company booked a major loss related to the holding. A forced disposal, most likely via a steady drip-feed into the market, could further depress the stock's value.