In a rare development, a legal restriction on UK advertising has been scrapped. Yes, the 1988 Restriction on Conduct (Specialist Advertising Services) Order will be history as of 1 November 2005. But what have tents got to do with it?
Topic: Competition
Who: Department of Trade and Industry, Office of Fair Trading
Where: London
When: October 2005
What happened:
On 5 October 2005, the Restriction on Conduct (Specialist Advertising Services) (Revocation) Order 2005 was published. With effect from 1 November 2005, this revokes the Restriction on Conduct (Specialist Advertising Services) Order 1988 (the "Order"). This was imposed on publishers of specialist magazines for campers, climbers and walkers following an adverse monopoly report by the Monopolies and Mergers Commission ("MMC", the forerunner of the Competition Commission) in 1988.
By way of background, in 1985, the OFT published the findings of an investigation into the policy of certain specialist magazine publishers to exclude price information from product advertisements. This policy had been introduced following pressure from certain manufacturers and high street retailers who were unhappy that the magazines were publishing advertisements by mail-order firms offering goods at substantially lower prices.
The main publisher under investigation, Homes McDougall, argued that abandoning the policy might significantly affect the viability of its magazines, as it relied heavily on the advertising revenue of these influential retailers. The OFT concluded that regulation of all relevant publishers could be necessary in order to protect competition in the market. The matter was referred to the MMC for in-depth investigation in March 1987. In January 1988, the MMC published its report, finding that a complex monopoly situation existed in favour of all publishers operating the same policy.
1988 order passed
As a result of the MMC's report, the Secretary of State passed the Order. This made it illegal for publishers of specialist magazines to withhold, threaten or agree to withhold advertising services from persons who wished to place adverts in the magazines which contained price information. It also banned publishers from discrimination against such advertisers in relation to the prices charged for advertising. This has been in place since 1988.
It is a statutory duty of the OFT to keep under review the effectiveness of all orders of this type and, in 2005, it recommended to the Secretary of State that the Order be revoked. The OFT's review of the market revealed that not only had the number of mail order outlets significantly increased, there had also been significant convergence between mail order outlets and conventional retailers as high street shops began to offer mail order or internet services. The style of advertising had also changed, while publishers stated that they no longer felt under pressure to exclude pricing information. Perhaps most importantly, any collective attempt by retailers to boycott or penalise publishers who included price information would now breach the Competition Act 1998, without any need for the Order.
Why this matters:
A key, albeit often low profile, duty of the OFT is to monitor and periodically review any orders or undertakings in force – whether these flow from merger investigations or market inquiries. As with its review of the Specialist Advertising Order, the OFT must determine whether the remedy is working effectively and is still required. Where it finds that an order or other remedy is either no longer effective or necessary, the OFT will determine what remedial action needs to be taken – including, as in the present case, recommending its withdrawal. This case serves as a reminder of the pro-active approach which the OFT now takes in relation to its ongoing monitoring duties.
