No doubt relieved that it has so far evaded the Coalition bonfire of the quangos, the Office of Fair Trading has started a market study of the UK outdoor advertising industry. Zoe Hare looks at what this may mean for UK advertisers.
Who: Office of Fair Trading
When: 18 May 2010
Law stated as at: 2 August 2010
On 18 May 2010, the OFT launched its market study on outdoor advertising, in order to examine whether there are any distortions of competition or barriers to entry in this area of advertising.
The OFT states that:
"The outdoor advertising sector has a complex, multi-levelled structure, with advertising agencies, specialist buyers of outdoor advertising space, outdoor media owners who provide the space, and site owners such as local authorities. The sector is highly concentrated at the levels of the specialist buyers and outdoor media owners. This study will consider whether there are any distortions of competition or barriers to entry at different levels within the sector."
Outdoor advertising is any type of advertising which targets consumers away from their homes or offices. Therefore, it includes any posters on panels or billboards which may be located on the side of a road, in a petrol station or in shopping centres. The OFT estimates that, in 2009, advertisers spent approximately £780 million on outdoor advertising in the UK.
Accordingly, it has a pivotal part to play in the advertising sector.
The market study will investigate all levels within the sectors (from the site owners to the advertisers themselves) whether the market is working as best it can. The OFT wishes to examine, among other things, the payment flows between parties within the market and the contracts between outdoor media owners and site owners. The OFT suspects that the sector is highly concentrated at the levels of specialist buyers (those who buy space from outdoor media owners) and the outdoor media owners (those who contract with the site owners to provide advertising space). The aim of the market study is to consider whether this gives rise to any competition concerns.
It is expected that the market study will be completed by December 2010.
Why this matters:
The cost which a company has to pay for advertising of its product/service is factored into the price which consumers have to pay for those goods or services. Accordingly, it is the OFT's job to ensure that the markets are working well for consumers and that a high level of competition is maintained. Markets which do not work well are likely to produce serious negative effects for consumers and businesses. Indeed, the market study was launched after a number of complaints were made by industry stakeholders.
While it is unclear from this early stage whether the OFT is correct to investigate the market for outdoor advertising, if it considers there to be issues in the sector, it is within its power to take enforcement action. The OFT states the possible outcomes of the market study include:
- Enforcement action
- A reference of the market to the Competition Commission
- Recommendations for changes in laws and regulations in the industry
- Recommendations to regulators
- Recommendations to self-regulatory bodies and others to consider changes to their rules
- "A clean bill of health"
Advertisers should be aware of the market study and, in particular, keep an eye out for the final decision. They should also be aware that the OFT may contact them directly as part of their enquiries in the market.
We await the final result.
Osborne Clarke, London