No love lost between ITV and advertisers as regulator calls for 'vigilance' on pricing

ITV has been rapped over the knuckles by the media regulator's referee, who adjudicates in disputes between the commercial broadcaster and advertisers.

Charles Allen's group has become increasingly "inconsistent" in the way it complies with new rules designed to protect advertisers, according to the adjudicator, David Connolly.

Mr Connolly was appointed by the regulator, Ofcom, to make sure that ITV, formed by the merger of Carlton and Granada last year, did not abuse its newly dominant position by forcing up advertising rates.

His criticism comes as broadcasters - including ITV - prepare to call on the Government to scrap plans to give the BBC more power.

In his latest six-monthly report, Mr Connolly said that ITV had become less "co-operative". He noted there was concern at alleged threats of reprisals by ITV against those media agencies and advertisers which cut their advertising spend with the broadcaster.

Mr Connolly said: "Concern remains about specific aspects of ITV's behaviour and the adjudicator considers that this demands continued vigilance by his office, Ofcom and the Office of Fair Trading."

According to media buyers, ITV is lobbying Ofcom for an early review of the rules. ITV and Ofcom deny this. Under the Contract Rights Renewals (CRR), ITV must link the cost of advertising on ITV1 - its main channel - to its audience share. Like other terrestrial channels, ITV1 is losing viewers as more households take up multi-channel television. To comply with the rules, ITV must cut the price of its advertising slots.

But media buyers claim ITV has been trying to maintain prices by offering supplementary advertising on its digital channels, ITV2 and ITV3, which are not covered by CRR.

Matt Blackborn, the executive buying director at Starcom Mediavest, said: "ITV has worked out the boundaries which it can push. Where there isn't absolute clarity on the CRR rules, ITV has tried to exploit this and bring into play its digital channels. But you can't blame it because ITV1 is struggling."

Separately, ITV and Channel 4 are preparing responses - due in at the end of the month - to the Government's proposals outlined in the Green Paper on the future of the BBC. They will call for greater restrictions on the state-funded broadcaster.

ITV and Channel 4 are concerned over recommendations that the BBC Trust - the proposed replacement for its board of governors - be given the power to introduce new services and channels or to change the remit of those that already exist.

Ofcom would carry out a market impact test to assess the changes, but the trust itself would decide whether to go ahead with them. Under the existing rules, ministers make such decisions.

One source close to Channel 4 said: "It's unrealistic to expect the trust to be objective in issuing new licences for services."

Also this week, when it reports its annual results, the radio and magazine group Emap will be come the latest media company to highlight faltering demand for advertising. Its report comes as concerns over the UK economy deepen. The owner of Kiss FM and FHM magazine is expected to meet profit targets for the year to March, but Deutsche Bank analysts are estimating negligible growth in the current year.

Simon Baker, an analyst at Société Générale, said: "The market will be seeking reassurances that the economic slowdown is not flowing through into the performance of [Emap's] UK consumer magazine division."

Its radio division in particular would be suffering in line with the rest of the sector, he said, but the division contributes less than 10 per cent of group revenues.

Media buying agency Starcom has been revising down its estimates for total advertising spend in the second quarter of this year from an initial prediction of 2 per cent growth. It now forecasts a 2 per cent fall.