Authority's decision on advertising will embolden RTÉ's competitors

MEDIA & MARKETING:After the Competition Authority aired its views the very idea of dual funding is up for dispute

THE COMPETITION Authority’s publication of a 27-page enforcement decision against RTÉ’s advertising trading system this week strongly hints at its wider feelings about the broadcaster’s dual-funded status, potentially opening the door to future complaints by rivals.

David McRedmond, chief executive of TV3, which made the original complaint, describes the outcome as “a really profound decision” that has potential ramifications for Minister for Communications Pat Rabbitte, the Broadcasting Authority of Ireland and the RTÉ Authority.

Under the RTÉ “share deal” scheme that the Competition Authority said “could be anti-competitive”, the broadcaster grants discounts to advertisers based on how much of their total television advertising budgets they commit to RTÉ.

As the authority notes, rebates and discounts are a common way to attract customers. But if a dominant player in a market offers conditional rebates calculated on the basis of customer loyalty, it may be a breach of competition law.

The question of whether RTÉ is a dominant player in the market, and indeed the very definition of the market itself, then became a critical part of the investigation.

RTÉ challenged the authority’s definition of the market, contending that it had not considered the competitive impact of digital media or the “spillover” effect of non-Irish channels – the latter was not “material”, the authority said.

RTÉ also claimed it was not “dominant” in the TV advertising airtime market. But the authority maintained it had “unavoidable trading partner” status, which “could be considered as a barrier to expansion” for TV broadcasters if advertisers’ dependence on RTÉ meant they did not wish to switch a significant portion of their budget to other channels.

RTÉ’s market share by revenue was also “substantially higher” than its closest competitors, TV3 and Sky TV, it added. Indeed, RTÉ’s request for a large share of revenue from advertisers could in itself be evidence of a dominant position, the authority felt. It typically used a “reference share” of 60-70 per cent as a benchmark for negotiations – a percentage far in excess of its share of “commercial impacts” in the market. Advertising agencies “may not have the ability to play one broadcaster off another”, the authority remarked.

Though it acknowledged that RTÉ separates its accounting systems for public service and non-public service activities, the authority also sided with TV3 on the issue of whether RTÉ’s dual-funding model gave it a competitive advantage. Drawing a link between the television advertising market and programming, it notes that the revenue broadcasters earn from advertising “allows them to invest in better programming”. This, for TV3, is the nub of the issue.

As RTÉ agreed in October 2011 to ditch the contentious aspects of the scheme no later than July 2012, the authority’s views are preliminary rather than final – which has sparked some semantic quibbling on the part of RTÉ.

“It is important to note that no finding of anti-competitive behaviour has been made,” it stressed on Tuesday, implying that the title of the authority’s document, “Enforcement Decision”, is merely a formal one. For its part, the authority is happy to describe its statement as an enforcement decision, adding that RTÉ’s undertaking to reform its trading system is legally binding.

McRedmond is impatient with what he calls “word crafting” and insists RTÉ should end the share deal system immediately. He’s also wary of “hints” that any new system may see RTÉ sell advertising across television, radio and online, “which would further extend its dominance”.

RTÉ television commercial director Geraldine O’Leary says the new system, to be modelled on those used by public service broadcasters across Europe, is “under development”. RTÉ will consult “key stakeholders in the advertising sector” about the new scheme, then publish the details.

Asked if the authority’s preliminary findings would lead to any policy actions from the Department of Communications, the Minister said he welcomed the closure of the authority’s case.

It may not prove to be that simple. The authority’s clear views on the “unique status” and benefits RTÉ derives from the licence fee may give confidence to competitors – current and future – in both broadcasting and the wider media sector to pursue their grievances against the very essence of dual funding.

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HAVING SATIATED judges Dylan McGrath and Nick Munier with her warm lobster salad, Masterchef Irelandwinner Mary Carney will from this Sundaybe the "resident chef" in, er, Sunday, a new tabloid supplement with the Irish edition of the Sunday Times.

Sundayis 40 pages of "lifestyle, cooking and gadgets", according to Frank Fitzgibbon, editor of the Sunday Timesin Ireland. The supplement, which incorporates coverage previously found in the Homeand InGearsections, will mean "more micro-involvement" by the title in the Irish market – essentially bringing local restaurant reviews, motoring coverage and other lifestyle features into the package.

“It’s about time we had one,” says Fitzgibbon of the supplement, which will be edited by former news editor Richard Oakley. But while Carney is the new star signing, one somewhat older, less local ingredient – Jeremy Clarkson’s column – will also be retained.