Can a TV station vary the fee it charges for carrying advertising in the same commercial break depending on the advertiser? Not unless this is “objectively justified,” says Ofcom in the new proposed Code on Prevention of Undue Discrimination between Broadcast Advertisers for which the consultation period has just closed. Zoe Hare reports.
Topic: Competition
Who: Ofcom
Where: UK
When: 2 November 2011
Law stated as at: 25 November 2011
What happened:
On 2 November 2011, the Office of Communications ("Ofcom") published a month long consultation on its proposed Code on the Prevention of Undue Discrimination between Broadcast Advertisers (the "Code"). The Code is intended to implement the standards enshrined in the Communications Act 2003, which requires Ofcom to ensure that "there is no undue discrimination between advertisers who seek to have advertisements included in television and radio services" (s319).
Key provisions
The key provisions of the Code provide that:
(a) a television broadcaster must not unduly discriminate between advertisers that seek to have advertising included in its licensed services; and
(b) a radio broadcaster must not unduly discriminate between advertisers that seek to have any commercial communication included in its licensed services.
For the purpose of (a) above, "advertising" is deemed to be as defined under the EU Audiovisual Media Services Directive: any form of announcement broadcast whether in return for payment or for similar consideration or broadcast for self-promotional purposes by a public or private undertaking or natural person in connection with a trade, business, craft or profession in order to promote the supply of goods or services, including immovable property, rights and obligations, in return for payment.
For the purpose of (b) above, "commercial communication" is defined as a spot advertisement or a commercial reference.
Guidance on the Code
The Code helpfully sets out the process by which Ofcom will assess whether there has been undue discrimination by a broadcaster. Ofcom will first examine whether or not the licensee has discriminated between advertisers, before going on to assess whether the discrimination was undue.
In the accompanying guidance to the Code, Ofcom considers that discrimination means that "the licensee does not reflect relevant differences between (or does not reflect relevant similarities in) the circumstances of advertisers in deciding whether or not to include advertisements in their licensed services and the terms on which a licensee agrees to broadcast the advertising in question". Such discrimination could take place if the broadcaster offers more favourable terms to itself or an associated company, in comparison to a third party advertiser, or where the broadcaster treats one advertiser different from another.
Having assessed whether there is discrimination, Ofcom will consider whether such discrimination may be objectively justified. If there is no objectively justifiable reason for the differing treatment, Ofcom is likely to consider there to be undue discrimination.
Ofcom does give limited guidance on possible objective justifications, but evidently the analysis of whether the discrimination can be objectively justified will need to be considered on a case-by-case basis.
Why this matters:
It is important that broadcasters take note of the new Code. Any television or radio broadcaster licensed by Ofcom will be obligated to comply with the new standards set out in the Code. However, Ofcom has expressly stated that BBC services funded by the licence fee or grant in aid are not subject to the Code.
Furthermore, in the Code, Ofcom also reminds advertisers and broadcasters of its ability to investigate conduct under the Competition Act 1998. While the UK's national competition authority is the Office of Fair Trading, sector regulators such as Ofcom and Ofgem have concurrent powers to investigate and enforce competition law in their sectors. Under the Act, the following anticompetitive conduct is prohibited:
(a) agreements or concerted practices between undertakings (which would include advertisers and broadcasters) which have as their object or effect the prevention, restriction or distortion of competition within the UK; and
(b) any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market.
Ofcom acknowledges that discrimination between advertisers may fall foul of competition law and require Ofcom to examine whether "the arrangements or conduct is prejudicial to fair and effective competition". Ofcom must uphold its statutory obligations under the Competition Act and protect fair and effective competition before exercising its powers under the Code.
For example, a dominant broadcaster who discriminates between advertisers may be found to be abusing its dominant position in the market, such that it would be more appropriate for Ofcom to investigate and take action under the Competition Act.
This clear and express statement by Ofcom in the Code itself is a vital reminder for broadcasters that their conduct may not only be caught by the broadcasting rules. Given that the penalties for infringing the Competition Act are severe, it is important that companies ensure they are aware of and comply with the rules.
Following the consultation, which closes on 2 December 2011, Ofcom intends to publish the final Code by the end of 2011, together with accompanying guidance which will explain how Ofcom will likely interpret the rules.
The consultation document can be found here.
