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OFT gets outdoor ad giants to change way contracts enforced with councils

Two of the largest outdoor advertising companies have agreed to change the way they enforce contracts with local authorities for advertising on bus shelters and information panels, the Office of Fair Trading has announced.

The OFT has also published non-binding recommendations to local authorities on the way they award street furniture contracts.

The watchdog said Clear Channel and JCDecaux had given a number of voluntary assurances. The two companies have in particular agreed:

  • Not to enforce exclusivity clauses which prevent competitors advertising on different types of street furniture from those covered by the contract, in locations more than 25 metres from existing street furniture advertising sites;
  • Not to enforce tacit renewal clauses which currently allow contracts to be rolled over automatically once they reach the end of their term;
  • Not to proactively seek extensions which have led to some existing contracts being lengthened rather than going out to tender at the end of the initial term; and
  • To co-operate with local authorities to transfer to a new operator when a contract comes to an end.

The OFT said: “The voluntary assurances [from Clear Channel and JCDecaux] mean that potential competitors will now be in a stronger position to compete for contracts coming up for tender and will have a greater opportunity to enter alongside existing contracts, particularly where they are proposing new forms of street furniture advertising.”

The move follows a competition investigation by the OFT into street furniture advertising contracts held by Clear Channel and JCDecaux.

The watchdog has now closed the investigation after receiving the companies’ voluntary assurances. It emphasised that no finding of any infringement of the Competition Act 1998 had been made “and none should be assumed from the offering of these assurances”.

The OFT recommended that local authorities should:

  • Be aware that long contract durations can limit the scope for competition. Councils should weigh up the short-term revenues from long duration contracts against the longer-term benefits of competition. They should also be aware of the downsides of being locked in to contracts which are difficult to negotiate;
  • Consider separating out contracts for installing and maintaining street furniture from contracts to advertise on that street furniture. Installation and maintenance contracts could continue to be of long duration, to match the expected lifetime of the assets, while an authority could hold more frequent tenders for the right to advertise – perhaps every four to five years;
  • Aim to arrange separate contracts for advertising on different types of street furniture wherever feasible;
  • Tender out contracts which come to the end of their current term, rather than simply renegotiating an extension with the incumbent provider;
  • Make contract end dates publicly and readily available;
  • Avoid agreeing exclusivity terms which restrict advertising in the local authority area, except where this is limited to the type of street furniture specified in the contract or in a specified radius around installed street furniture sites.

The OFT said it intended to publish the end dates of all existing street furniture contracts, once these have been confirmed by the parties and local authorities.

Ali Nikpay, Senior Director at the OFT, said: “We are pleased that Clear Channel and JCDecaux have offered to give these voluntary assurances in relation to their street furniture contracts with local authorities.

'We believe these assurances, combined with our recommendations to local authorities, will help open up the UK's outdoor advertising market to greater competition.”

Philip Hoult

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