The soon-to-be neutered Office of Fair Trading was unhappy about the way in which two of the biggest operators in the outdoor advertising market were contracting with local authorities for use of municipal ad space. It engaged with JC Decaux and ClearChannel and Zoe Hare reports the outcome.
Who: Office of Fair Trading
When: 17 May 2012
Law stated as at: 29 May 2012
In February 2012, the UK Office of Fair Trading ("OFT") opened an investigation into contracts for advertising on street furniture contracts (such as bus shelters and information panels) entered into by local authorities with either JCDecaux or Clear Channel UK.
The investigation was intended to assess whether any of the agreements in place had the object or effect of restricting competition, contrary to the Competition Act 1998. This followed on from the 2011 market study into the outdoor advertising sector in the UK, where the OFT had identified possible competition issues with contracts for street furniture. The UK competition authority considered that:
- market entry was hindered due to the contracts being re-tendered infrequently; and
- restrictive exclusivity provisions in the contracts with JCDecaux and Clear Channel prevented local authorities from entering into advertising contracts with their competitors.
Having launched its operation, on 17 May 2012 the OFT announced that it had accepted assurances from both JCDecaux and Clear Channel and, as a result, its formal investigation has been closed.
The assurances, which were offered voluntarily by both of these media giants, are aimed at removing potential barriers to entry for rivals and will affect JCDecaux and Clear Channel's behaviour going forwards in both existing and future contracts for advertising on street furniture. The key assurances agreed are:
1. not to enforce exclusivity provisions which prevent competitors advertising on types of street furniture different to those covered in the contract and located more than 25 metres from existing street furniture advertising sites;
2. not to enforce tacit renewal clauses which currently provide for the automatic renewal of contracts at the end of the initial term;
3. not to seek extensions to the contracts proactively, such that contracts will go out for tender at the end of the initial term; and
4. to assist the local authorities with the transfer to the new advertiser at the end of the contract.
In addition to receiving these assurances, the OFT has published a set of best practice recommendations to local authorities entering into street furniture contracts. While non-binding, it is hoped that these will encourage and stimulate competition and assist the local authorities in their future tender processes.
Why this matters:
The OFT takes a strong stance on competition law infringements and this is yet another example of how its enforcement powers have helped open up the UK markets to competition. The assurances given by these renowned media companies will impact their future behaviour and assist new market entrants in winning these lucrative contracts.
Going forward, local authorities should benefit from an increased choice of advertisers, resulting in lower contract prices – ultimately to the benefit of the UK taxpayers.
It is important to note that, since the investigation has been formally closed, the OFT has made no finding of any infringement of UK competition law and it stresses in its press release that no infringement is to be assumed from the acceptance of these assurances.
A copy of the assurances can be found here.
The recommendations for local authorities can be found here.