Regulator 'out of touch' over advertising ruling, says ITV

ITV has rounded on the Competition Commission after losing the battle to remove its advertising "straitjacket," saying the regulator was "out of touch" and had failed to understand the media landscape.

The regulator refused to change its stance on the controversial Contract Rights Renewal (CRR) rules, despite ITV's entreaties. Yesterday's final decision strayed little from its provisional findings in September.

The commission said CRR was still needed to prevent the broadcaster from "exploiting" its "unrivalled ability to deliver large audiences" on its flagship channel ITV1. Diana Guy, the deputy chairwoman of the Competition Commission, said: "Despite all the changes in this market, no other channel or medium can come close to matching the size of audience that ITV regularly provides." In a swipe at ITV, the regulator said the channel had "overstated the cost and distortions imposed by CRR".

ITV hit back, saying the decision was "based on the misconception that the competitive environment is still very similar to that identified in the Competition Commission's 2003 report. This is not a view shared by those who understand the realities of today's media landscape".

Adam Crozier, ITV's newly installed chief executive, said: "Today's ruling is out of touch and damaging for the interests of creative Britain. UK media is over-regulated and this has to change if we value and want to sustain a vibrant independent broadcasting sector that can rival the BBC and compete on a global stage."

The group's share price actually rose yesterday, as the announcement was expected and investors hope the new administration will ease the regulatory burden on the group.

CRR was introduced in 2003, to protect advertisers and commercial rivals in the wake of the merger of Carlton and Granada to form ITV. The commission feared the market power held by the combined group could distort competition. The mechanism essentially means that advertisers automatically pay less if ITV's audience shrinks. The channel's audience share has fallen since since 2003 because of the proliferation of digital channels.

Ms Guy added: "The essential reason for the CRR undertakings remains: to protect advertisers and other commercial broadcasters from the enhanced market position created by the merger of Carlton and Granada."

ITV complained that CRR has had an impact on how much it could invest in programming, with £500m less spent on content between 2004 and 2008. It added that companies have been unable to sustain public service programming such as high-quality news and drama, and the restriction has "reduced the commercial sector's ability to compete with the BBC".

The company cannot appeal against the Commission's decision, and said the recourse to a judicial review was unlikely because the parameters were so narrow and technical. However, Ms Guy added "we have no wish to see CRR in place forever" and again called for a wider review of the whole system of selling TV advertising.

Mr Crozier said: "Today's decision fires the starting gun for a broader campaign for liberalisation to enable creative Britain and the enterprise media sector to compete on a level playing field against global competition in the digital age."