From January 1, 2020, Dutch media company One Media Sales (OMS) will stop offering its so-called ‘budget-share discount’ when selling radio advertising spots. OMS has made this commitment to the Netherlands Authority for Consumers and Markets (ACM).
OMS is the largest supplier of radio advertising spots in the Netherlands. OMS sells radio advertising spots on at least eight popular commercial radio stations in the Netherlands, including those owned by Talpa Radio and RadioCorp. One element of OMS’s discount scheme is the aforementioned budget-share discount, which acts as an incentive for advertisers and media agencies to spend relatively more of their annual advertising budgets with OMS and less with other radio stations. This specific discount may result in a situation where other radio stations earn insufficient advertising revenue, thereby affecting their day-to-day operations.
Martijn Snoep, Chairman of the Board of ACM, explains: ‘The commercial radio stations owned by Talpa Radio and RadioCorp attract a huge number of listeners. Any company that wishes to advertise on the radio in order to reach listeners basically has to go through OMS. With this commitment, competitor radio stations will have better opportunities for selling radio advertising spots. And this commitment has enabled us to reach a solution in a relatively short amount of time, and with success. This is important, because the advertising negotiations for next year are currently underway.’
Following OMS’s commitment, ACM will suspend its investigation into a violation of the Dutch Competition Act by OMS. In this particular case, ACM believes a commitment to be more effective than the imposition of a sanction.
What is it about?
OMS is the largest supplier of advertising spots on commercial radio stations in the Netherlands, and sells advertising spots on stations owned by Talpa Radio (Radio 10, Radio 538, Sky Radio and Veronica), RadioCorp (SLAM! and 100%NL), and on Sublime and Classic NL. Since OMS sells advertising spots on so many stations, OMS is a key supplier for many advertisers.
How can a discount scheme be a problem for competition?
When selling advertising spots, OMS offers different types of discounts. One of the discounts offered is the aforementioned budget-share discount (in Dutch: bestedingsaandeelkorting). If an advertiser or media agency spends a larger proportion of its annual advertising budget with OMS-affiliated radio stations, their discount will be higher. If a larger proportion of their advertising budget is spent with competitors, the discount will be lower. In this way, advertisers and media agencies are incentivized to direct an even larger proportion of their radio advertising budget to OMS.
OMS’s discount scheme thus creates a risk that advertisers and media agencies will buy fewer advertising spots from other radio stations than from those affiliated with OMS, and that the other radio stations are unable to respond effectively. This may consequently lead to a downward spiral for these radio stations: reduced radio advertising revenues lead to a reduced appeal of their shows, which leads to a smaller market share among listeners. This may ultimately lead to these radio stations having to cease operations, thereby decreasing the selection of radio stations for listeners, and, in turn, clearing the way for the prices of radio advertising spots to go up. ACM seeks to eliminate that risk by declaring this commitment binding.