UK Government: Ad Market Runs Fairly

Media executives of all stripes have long complained about the closed nature of the national TV advertising market with matters of price and competition. Imagine the FCC investigating the charge.

A version of that has been completed by Ofcom (an FCC equivalent) in the United Kingdom. The government arm found that the market there works fairly -- and there is no reason for further investigation by the Competition Commission. Matters such as pricing transparency and the bundling of airtime, as well as innovation, are not encumbered by a lack of competition, Ofcom found.

Separately, Ofcom opted not to change the limit on the number of ads that can run in an hour from an average of seven minutes over a 24-hour period for public service broadcasters, and nine minutes for all others. A European body sets the limit at 12 minutes, and Ofcom could have moved in that direction.

Ad Age and British newspaper The Guardian reported that Ofcom had completed its investigation into the dynamics of the ad market, which began in June.



Back then, the agency said it intended to review how advertising that is “bought and sold prevents, restricts or distorts competition, and whether this has a harmful effect on consumers.”

In its findings released last week, Ofcom found “no clear evidence” of that. Considering “the significant costs” that would come with a Competition Commission investigation and “the potentially destabilizing effects on [the] industry,” it decided to end the matter.

On price transparency, Ofcom found that advertisers and media buyers have sufficient knowledge of deal terms with broadcasters, allowing them to make informed decisions about where to place monies. Also, advertisers have “access to detailed information” about how their media buyers do in the market.

In June, Ofcom suggested that “bundling of airtime” might allow a station to use market power to generate higher prices in time slots than would be expected. Perhaps prime-time placements might be contingent on daytime buys. But Ofcom found that “while we are not able to dismiss completely that bundling of advertising across a broadcaster’s schedule could harm competition, we have not found any evidence or analysis to lead us to conclude that there was a detrimental effect.” 

Some in the U.S. believe the legacy market stunts “innovation” and may prevent the growth of alternate and more efficient models, such as online trading.

Ofcom looked into “innovation” in the market from a slightly different angle -- including adaptation to a growth in channels and audience fragmentation -- and found the market has adapted to the changes.

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