Hewitt accepts Carlton & Granada merger undertakings

Following October's Competition Commission finding that the proposed merger of Carlton and Granada "may be expected to operate against the public interest", Trade and Industry Secretary Patricia Hewitt has accepted legally binding undertakings from the ITV giants.
As Carlton and Granada jointly attract more viewers than any other commercial channel, representing more than half of total advertising revenues, the Commission reported that a merged ITV could have significant influence over the ability of advertisers and media buyers to negotiate contracts freely and fairly.
Accordingly, they recommended a Contract Rights Renewal (CRR) remedy that gives advertisers the right to renew their current contracts with no increase in the share of their spend that they commit to ITV and no reduction in the discounts they receive. From now "until the remedy is no longer necessary", the share of revenue committed by advertisers on television advertising to ITV1 need not increase above 2003 levels. However, this 'Protected Contract' is a fallback right. Advertisers may always negotiate a change to this contract or indeed negotiate an entirely new contract. If they do negotiate a change or a new contract, the CRR requires ITV to offer them fair and reasonable terms to do so.
The remedy also links advertising terms to audience performance, and gives advertisers the right to automatically reduce the proportion of their spend they give to ITV if audiences shrink. This Audience Ratchet Mechanism (ARM) is designed to offer both added protection to advertisers as well as a powerful incentive for ITV to produce compelling programming of widespread appeal to UK viewers.
The ITC and Ofcom, with input from industry representatives, are to appoint an Adjudicator, with a "strong background in the television advertising market", to act as an expert should any disputes between an advertiser and ITV arise.
In examining a dispute the Adjudicator will have access to all of ITV's contracts and trading information, and decisions will be final and binding. Advertisers will have a right of appeal to Ofcom under defined circumstances and thereafter to the courts if required.
The CRR also gives advertisers a number of additional rights to cover certain situations, including the rights of an advertiser to move between media buyers, how advertisers who previously held contracts with ITV should be treated, how new advertisers should be treated and what happens when advertisers merge.
The boards of Granada and Carlton welcomed the acceptance of their undertakings.
Sir Brian Pitman, interim Chairman of ITV plc's Board-in-waiting, said: "This announcement clears a major hurdle on the track towards the merger of Carlton and Granada. Both companies are working towards the satisfaction of the remaining pre-conditions, with the expectation of launching ITV plc early in the New Year."
Charles Allen, Executive Chairman of Granada and Chief Executive designate of ITV plc, added: "This is excellent news and marks the end of a lengthy regulatory process over the last year. The management teams at Carlton and Granada have done a fantastic job working with the competition and regulatory authorities to achieve this result. We now look forward to working with advertisers and moving swiftly to implement the integration plan and complete the merger."
(GB)