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Ofcom proposes new rules on advertising deals

Only due discrimination will be kosher. Take heed!

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Ofcom said it was laying out the proposed new rules as required of it under the UK's Communications Act. Under the Act, Ofcom must set out a code of practice that sets standards on "the content of programmes to be included in television and radio services" that ensure that "there is no undue discrimination between advertisers who seek to have advertisements included in television and radio services".

Broadcasters licensed by Ofcom will have to comply with the conditions of the Code under the terms of the Act.

"A television broadcaster must not unduly discriminate between advertisers that seek to have advertising included in its licensed service," Ofcom said in its proposed Code (17-page / 140KB PDF).

"A radio broadcaster must not unduly discriminate between advertisers that seek to have any commercial communication included in its licensed service," it said.

The regulator said it had defined "advertising" in the same way "television advertising" had been defined under EU broadcasting laws set out in the Audiovisual Media Services Directive.

Ofcom said it considered advertising to be "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".

The regulator said its "commercial communication" rules for radio broadcasters would cover "a spot advertisement or a commercial reference" that was transmitted.

In reviewing compliance with the proposed Code Ofcom said it would first assess whether broadcasters did discriminate against advertisers before then assessing whether the discrimination was undue.

"In this context, 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 service and the terms on which a licensee agrees to broadcast the advertising in question," Ofcom said in its proposals.

"Discrimination can occur both where a licensee treats one third party advertiser in a different manner to another and where it offers more favourable terms to itself or an associated company," it said.

Ofcom said some discrimination between advertisers would not be considered "undue" if broadcasters could show it was "objectively justified". "There may be various reasons why terms and conditions and access to airtime may differ between advertisers," it said.

The regulator cited examples of where discrimination between advertisers may be legitimate, including where broadcasters give one charity free advertising space "as part of a social responsibility policy" while charging other charities. Broadcasters may also refuse to carry advertising "for legal or moral reasons" and offer stricter terms to some advertisers over others if there is doubt over their "creditworthiness", Ofcom said.

Some complaints from advertisers regarding undue discrimination by broadcasters may need to be further investigated on competition grounds, Ofcom said.

Under the UK's Competition Act, companies are generally prohibited from establishing agreements with other UK trading firms that "have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom". Under the Act, organisations are also generally prohibited from engaging in activity that amounts to an abuse of a dominant market position.

"Concerns raised by advertisers in relation to discrimination may require Ofcom to consider whether an arrangement or conduct is prejudicial to fair and effective competition," the regulator's proposals said.

"Ofcom is required before exercising any enforcement powers under the Code to protect fair and effective competition to consider whether it would be more appropriate to proceed under the Competition Act. Depending on the circumstances, it may be the case that concerns which relate directly to, for example, abuse of market power or agreements designed to distort competition, are more appropriately dealt with under the Competition Act," it said.

The Office of Fair Trading (OFT) recently announced proposals to introduce higher maximum fines for anti-competitive behaviour. The OFT has general overall responsibility for regulating competition in the UK, but some sectors have additional regulators, such as Ofcom in regulating communications, to oversee compliance with the laws.

Respondents have until 2 December to submit comments to Ofcom on its proposals. Ofcom said it intends to issue a further statement on the Code before the end of the year.

Copyright © 2011, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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