Watchdog refuses to scrap TV advertising rules

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The competition watchdog today dashed ITV's hopes that onerous rules over advertising would be scrapped, but said it was considering relaxing the regime.

The Competition Commission said changes "might be justified" on the Contract Rights Renewal (CRR) system - introduced when Carlton and Granada merged to form ITV in 2003 to protect advertisers from its dominant position.

CRR cuts the amount advertisers have to pay if ITV1's audience shrinks, which has hit ITV hard in recent years.

ITV had been calling for the rules to be removed altogether, arguing that it is inappropriate in a world of digital TV and leads to a risk averse attitude among programmers and production teams.

The Competition Commission (CC), which reviewed CRR after a request from the Office of Fair Trading in May, is suggesting changes to CRR, in particular updating the definition of ITV1 to include time-shift and high definition channels.

But it found ITV continued to enjoy a dominant position in the market, in spite of a falling audience.

It said: "ITV1 has seen a decline in its share of both viewers and advertising revenues since 2003 and there are now more alternatives for advertisers.

"However, ITV remains crucial for advertisers looking to reach large number of viewers, particularly if this needs to be done rapidly."

It added that changes in television advertising market had not increased the bargaining strength of media buying agencies, through which the vast majority of TV advertising is bought.

If they reduce their spend on ITV1, they could be faced with "significantly less attractive terms" for their remaining ITV1 business, found the Commission.

"It is therefore our view that a remedy needs to stay in place," it said.

ITV welcomed proposals to amend CRR, despite the provisional decision against complete removal.

Michael Grade, executive chairman, said: "We look forward to engaging with the Competition Commission over the next three weeks to identify which post-CRR option best serves the interests of ITV plc, its viewers and advertisers."

ITV - home to shows such as X-Factor and I'm a Celebrity... Get Me Out Of Here! - has suffered plunging advertising revenues, reporting a 15% fall in the first quarter and forecasting worse to come.

It has been slashing costs and cutting jobs to tackle the tough conditions.