The Bundeskartellamt (the German competition authority)
found that the advertising marketing companies of RTL and
Pro7Sat.1, which are the two major German private broadcast
groups with a combined market share of more than 80% of the
German market for television advertising, had abused their
dominant position by entering into anti-competitive discount
agreements for television advertising with advertising
The agreements were deemed to be anti-competitive for two
reasons. Firstly, advertising agencies were granted discounts
and rebates if they agreed to place large proportions of their
advertising budgets with the broadcast group. This foreclosed
the television advertising market to smaller broadcasters,
which were not in a position to offer the same rebates.
Secondly, the agreements contain retroactive quantity
discounts, which have a negative effect on competition.
On 30 November 2007, the Bundeskartellamt imposed fines
totalling €216 million on the two companies, the
highest ever penalty imposed in Germany for an abuse of market
power. Both companies have accepted the fines and will
introduce new discount systems in their agreements.
Why This Matters:
This case indicates that the German competition authority is
prepared to rule that agreements which are common practice in
the television advertising industry breach competition law.
This should act as a wake up call for the UK television
advertising sales industry, as there is a risk that the UK
competition authorities may make similar findings. Moreover,
the German decision may also encourage private actions by
aggrieved small broadcasters which believe that they have been
foreclosed from the market.
In light of the decision, companies involved in the sale of
television advertising should review their agreements to ensure
that they do not breach competition law.
In November 2003, in relation to the merger of Granada and
Carlton, contract rights renewal undertakings were agreed with
these companies in order to allow buyers of advertising airtime
from ITV to continue with their pre-merger contracts. The
Competition Commission's report on the merger suggested
that a full review of the UK television advertising sales
market should be conducted. However, Ofcom decided in December
2005 that it was not necessary to conduct such a review.
Nevertheless, in January 2008, the OFT and Ofcom will commence
a review of ITV's contract rights renewal undertakings.
Details of the extent of the review will be published on its
commencement, so it remains to be seen whether the review of
the undertakings will take the German decision into account.
However, given that ITV's share of the UK television
advertising sales market is over 40%, the German decision may
prove to be a relevant consideration.
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