Ofcom kicks off inquiry into £4bn ad market

The media watchdog has kicked off its investigation into the £4bn-a-year television advertising industry over fears it could be anti-competitive.

Ofcom yesterday announced it had launched its review of the UK's television advertising trading market after identifying three concerns that could distort buying and selling ads.

The consultation, which will send tremors through the market, will close next month, with the regulator publishing a statement in the autumn deciding whether to refer the matter to the Competition Commission.

Ofcom is worried that at present the pricing of buying and selling adverts is less than transparent. It "may make it difficult for advertisers to make meaningful and informed price comparisons between channels and act upon them".

Advertising is sold in bundles and the regulator said it is possible "that bundling, when combined with the market strength of television stations, may have a detrimental effect on competition". It added that broadcasters may be able to use its market strength to drive up its prices.

Ofcom will also scrutinise the trading model for buying and selling advertising as it "does not appear to have altered significantly in nearly 20 years. It is also a system unique to the UK."

Despite its concerns, the regulator said that the current system "may be an efficient way of managing some of the particular risks involved in planning and scheduling television advertising".

Ed Richards, the chief executive of Ofcom, told the Incorporated Society of British Advertisers earlier this year that the time was right to consider "whether there are reasonable grounds for suspecting that the trading mechanism might be expected to prevent, restrict or distort competition in the sale of television advertising airtime," adding it was the industry's chance to weigh in on a "very important issue".