The Office of Fair Trading is investigating contracts between local authorities and the owners of street furniture such as bus shelters, saying it suspects that some agreements restrict competition.
The OFT has written to the biggest two - Clear Channel and JCDecaux - saying it will consider the length and potentially restrictive terms of the contracts.
Heather Clayton, OFT’s senior director of infrastructure, said: “The OFT has launched a competition investigation in order to assess whether certain street furniture agreements are compatible with UK and EU competition law. No assumption should be made at this stage that there has been an infringement of competition law.”
OFT says local authority contracts cover sites which accommodate about 25% of outdoor panels and about 20% of outdoor advertising revenue. Council deals represent around 80% of small format sites and Clear Channel and JCDecaux have virtually all of them.
They generate an annual revenue of £100-150m for media owners, who pay £25-50m in rent to local authorities.
“While media owners incur other costs in operating the sites (such as, for example, maintenance and administration costs) some contracts appear to be very profitable. Many local authorities do not appear to be aware of the advertising revenues that sites on their land generate. This makes it difficult for them to negotiate from an informed position,” the report says.
The market study, Outdoor Advertising, also notes that councils can themselves take steps to secure competitive procurement procedures and contracts that represent good value.
“Some local authorities have not monitored the progression of their existing agreements carefully, with contracts tacitly renewing even when the local authority may have wished to re-tender,” it adds.
It advises councils to be more proactive in securing ownership: many contracts give the sites to the media companies and that can be both costly and a local nuisance when contracts end or are transferred because, for example, bus shelters can be dismantled.
The report also suggests:
- where appropriate, contracts should be subject to competitive tendering. This has not been the case where the contracts are seen as either ‘concessions’ or ‘disposal of land’
- local authorities should ensure procedures are in place to monitor their current agreements
- councils should share best practice, for example by using the Cross Council Revenue Group led by Leeds MBC and Tower Hamlets LBC