The supply of cinema advertising services: A report on the supply in the United Kingdom of cinema advertising services

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On 28 June 1989 we were asked to report on whether a monopoly situation existed in relation to the supply in the United Kingdom of cinema advertising services and, if so, whether it operated against the public interest.

The reference (Appendix 1.1) followed a complaint to the Office of Fair Trading from one of the two suppliers, Pearl and Dean Ltd (PD), that it had lost business to the other supplier, Rank Screen Advertising (RSA), as a result of unfair competition.

We concluded that there were two monopoly situations. The first involved RSA and its parent company, The Rank Organisation Plc (Rank), which supplied some 78 per cent of the market, as compared with a 40 per cent share before RSA gained the two Cannon contracts in 1987. The second was a complex monopoly involving RSA and PD.

In examining the public interest we were struck by the way in which the structure of the cinema advertising market was largely determined by the ownership of cinemas. The two major cinema chains, Cannon (with 27 per cent of screens which take advertising) and Odeon (with 17 per cent), use only one contractor, RSA. In reaching our conclusions we took account of the following:

(a) RSA's profitability had been high in 1988 and 1989 but its ability to maintain this level is a matter of considerable uncertainty;

(b) the two suppliers engaged in exclusive dealing with cinemas but we accepted that such arrangements were generally attractive to exhibitors;

(c) payments by suppliers to cinemas were not lower than they would be in a more competitive market;

(d) RSA had not competed unfairly for new contracts; and

(e) where long-term contracts existed, they had been sought by the customer.

In sum, we found a market in which the two suppliers competed fairly with each other and in which high market share was the result of successful competition. Any risk of abuse of the monopoly situations is limited by the ability of advertisers to use other forms of display advertising, in particular television. Although we found monopoly situations to exist, we found no facts which operated against the public interest.

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