ITV deal prompts P&G ad threat

Britain's top advertiser has warned that it could desert ITV if the proposed merger between Carlton and Granada, the two main companies behind the channel, goes ahead.

Britain's top advertiser has warned that it could desert ITV if the proposed merger between Carlton and Granada, the two main companies behind the channel, goes ahead.

The media groups will have their work cut out convincing household goods company Procter & Gamble that a combined ITV is not too dominant in the advertising market.

"We are interested to hear what they have got to say," said Gary Cunningham, head of external relations at Procter & Gamble. "If ITV were to merge, one would have to reconsider one's options. ITV is a very important way of reaching huge audiences quickly, so it is difficult to eliminate from the schedule. But yes, we would be more inclined to look elsewhere."

Between August 2001 and July 2002, P&G spent £138m on advertising in Britain, 82 per cent of which was on TV, according to media research firm AC Nielsen.

ITV attracts around half of the TV advertising revenue in the UK, but it has been losing its market share as viewer numbers fall.

"Increasingly, advertisers will be able to do without ITV," said Mark Jarvis, head of broadcasting at media-buying firm Carat, who thinks a merger will be a good thing.

"The good old days when advertisers needed ITV don't necessarily prevail. If I have a brand for a youth audience, I don't need ITV. I can use Channel 4, Channel 5 and satellite TV, and can do the job effectively." However, he said, consumer products companies such as P&G are more restricted. "The packaged goods market doesn't have the same options," he said.

The Incorporated Society of British Advertisers said it had "grave concerns" about the merger but that Carlton and Granada had not yet discussed how it could alleviate the problem of the dominance in advertising sales.

The Communications Bill, to be published in the next few weeks, is expected to allow the two companies to merge, and leave decisions on future mergers solely in the hands of competition authorities rather than ministers.

A committee of MPs chaired by Lord Puttnam, the former film producer, recommended extra safeguards to protect the diversity of British media. But Whitehall sources said that Tessa Jowell, the Secretary of State for Culture and Media, has dismissed the proposals.

The so-called "plurality test" would have prevented media barons – such as Rupert Murdoch – from increasing their grip on publishing, television, radio and film.

Lord Puttnam, who headed a committee investigating the draft Communications Bill, also argued that the test was needed to ensure that the creation of a single ITV company wouldn't damage programme diversity.

However, it is understood Ms Jowell believes that free market forces are not a threat to diverse media and the plurality test won't appear in the Communications Bill.

Carlton and Granada believe they can deal with the concern by spinning off an advertising sales house that would peddle up to half of the airtime on the network.