C4 hits out at £320m ITV advertising deal

ITV's blockbuster £320m advertising deal with Unilever breaks competition rules, according to Channel 4, which has lodged a protest with the commercial television regulator.

The advertising contract, signed in May, is the largest in UK media history, but Channel 4 believes it breaches laws that prevent ITV acting as one company. Under current media rules, Carlton and Granada, the two main ITV companies, cannot operate a single sales house. But the four-year Unilever agreement, announced with much fanfare, gave the food and toiletries manufacturer coverage across the ITV network.

A Channel 4 source said: "They're already acting as if a single ITV is a reality. How could they have signed this deal when they are not allowed to trade as a single organisation? How could this be allowed to happen? There is a real lack of engagement here with competition regulation."

Carlton and Granada control well over 50 per cent of the TV advertising market. Current media ownership rules also bar a single ITV company being formed. Channel 4 believes the pairgot the Unilever contract by offering ITV as a package.

"They secured a mass market premium by offering Unilever a chance to reach the whole ITV audience," the Channel 4 executive said.

Channel 4 has written to the Independent Television Commission, questioning how the Unilever agreement can be squared with the rules on a single ITV. It received a response from the ITC that it believes to be "inadequate". It is now considering its legal options, which could include taking the matter to the Office of Fair Trading.

A spokeswoman for Granada said Unilever had negotiated separately with Granada and Carlton's ad sales houses. "This was two separate deals, one with Granada, the other with Carlton. It was Unilever that aggregated them, allowing them to buy across ITV," she said.

Channel 4, along with ITV, has been under severe financial pressure because of the two-year long advertising recession. Against this background, the size of the Unilever contract, and the guaranteed income it provides over four years, was a great boost to ITV.

A single ITV will be permitted under new media ownership rules passing through Parliament but it will be at least a year before this is law. But a Carlton-Granada merger would still need to pass competition law. Channel 4 is expected to campaign hard against allowing a single ITV on competition grounds.