The Competition Authority proposes a review of RÚV's participation in the advertising market. RÚV's conduct has led to a serious restriction of competition.

The Competition Authority publishes an opinion today No. 4/2008, Restrictive practices arising from the position and conduct of the National Broadcasting Service in the market for the sale of advertising in audiovisual media. The opinion sets out the Competition Authority's investigation into the market for the sale of advertising and sponsorship in radio (television and sound).  The opinion is available on the Competition Authority's website, www.samkeppni.is.

The investigation reveals that in addition to the competitive distortion caused by RÚV's participation in the advertising market alongside its funding from public taxes, RÚV has made the competitive position in this area even worse through its offers and discounts. RÚV has done this by not acting in accordance with the purpose and objectives of the rules established regarding the company's pricing. This also provides indications that the regulatory framework for this activity of RÚV is not sufficiently robust. This conclusion is based, inter alia, on the following:

• RÚV has largely deviated from its published advertising tariff, which runs counter to the goals of transparency.
• RÚV has offered free-of-charge broadcasts, temporary or individual offers, product placement, and the intertwining of advertising and sponsorship, which contravenes the requirement for transparency regarding discount terms for sponsors and advertisers.  Furthermore, it is likely that certain discount terms were not available to all, and that equality of treatment was therefore not guaranteed.
• There are indications of harmful subsidies, i.e. that public funds have been used to subsidise advertising activities, thereby distorting competition from non-subsidised competitors.

In light of the foregoing, the Competition Authority has directed the following to the Minister of Education:

1. It is clear that a full competitive balance would be achieved if RÚV were to leave the advertising market and its operations were to be funded entirely by public funding. Given the current economic climate, such a move could help private broadcasters to continue operating. This would help to ensure public choice in the media sector. However, it must be borne in mind that the broadcast networks of private stations generally do not cover as large a part of the country as RÚV. In light of all the above, it is desirable to establish a policy aimed at RÚV ceasing this activity as a full-fledged competitor when circumstances permit.
2. If the Minister of Education and/or the legislature consider it inappropriate for RÚV to withdraw from the market for the sale of radio advertising, The Competition Authority considers it important that the company's market presence is significantly reduced and that it is subject to clear rules limiting its said activities.  Such rules must be effective, simple and transparent so that they are easy to comply with. It is essential that the rules include, amongst other things, the establishment of a non-negotiable tariff schedule subject to approval and supervision, so-called free-of-charge broadcasts will be prohibited, restrictions will be placed on advertising time and marketing, it will be forbidden to broadcast advertisements within programme content, and sponsorship will be prohibited, as it creates a lack of transparency and is liable to discriminate between the company's commercial clients.

The opinion further emphasises that the Competition Authority considers it important that, alongside a review of RÚV's participation in the advertising market, legislation on media and their ownership is introduced, with the aim, among other things, of ensuring a spread of ownership.

Background information:
By letter dated 13 November 2006, the Competition Authority submitted a review to the Parliamentary Education Committee on the Bill on Ríkisútvarpið ohf. The Competition Authority concluded that the competitive distortion arose from RÚV operating in the market for advertising broadcasting and the market for sponsorship in free competition with other parties, whilst also having income from tax funds to provide a defined radio service in the public interest.These two factors resulted in a competitive distortion in the market for advertising and sponsorship, where RÚV competes freely with other parties.

To prevent this competitive distortion, the Competition Authority proposed two options. On the one hand, it was proposed that RÚV should withdraw from the advertising market and its operations be funded entirely by public funding. The Competition Authority pointed out in this regard that this was a common approach among European countries, as was stated in the explanatory notes to the bill. However, the Competition Authority noted that it would also be possible for RÚV to operate separate audio stations or channels, which would be funded entirely by advertising revenue and sponsorship, so that it would be ensured that this competitive activity of RÚV would not be subsidised with public funds, were, in any event, considered a reason for RÚV to operate in the advertising market.

In light of the views expressed in the above-mentioned opinion of the supervisory authority on the bill concerning RÚV, and taking into account the discussion on the situation in the radio advertising market and the suggestions and complaints received by the institution, the supervisory authority decided of its own initiative to examine thion of RÚV in the market for the sale of advertising and sponsorship in radio. The investigation began in July 2008. Opinion No. 4/2008, which is now published, is part of this investigation.