The Competition Commission of India has suggested to the government that it should streamline its policies with regard to the directorate of advertising and visual publicity (DAVP) in order to save public money. Once accepted, the move may open the doors to government advertisements worth over Rs. 7 billion annually to private advertising agencies, who currently cannot service the ads released by the central government departments, ministries and public sector undertakings.

“Introducing competition in DAVP may lead to best rates for advertisement released by the government departments and public sector undertakings,” the CCI said in a recent order while examining a case pertaining to alleged violation of dominant position by DAVP under the Competition Act, 2002. However. CCI has given a clean chit to DAVP stating that it is not violating section 3 and 4 of the Competition Act, which is abuse of dominant position and indulging in anti-competitive agreements.

The CCI observations on DAVP, which is the nodal government advertising agency, came after the Advertising Agencies Guild (AAG) had challenged its dominant position based on a recent circular issued by the information and broadcasting ministry directing all central ministries, departments and PSUs to route their ads via DAVP. AAG is now set to challenge the CCI order before the Competition Appellate Tribunal, sources said.

The AAG in its submissions before the CCI said that DAVP is a dominant player with a turnover of more than Rs. 7 billion. “The circular not only established the dominance of the DAVP, but also created entry barriers for new entrants and foreclosed the market for existing competitors in violation of section 4 of the Act,” AAG alleged.

On its part, the CCI said since the total print advertising market is worth Rs 80 billion, the share of DAVP is not even 10%. “As bulk purchaser of ad space and time in electronic and print media, I&B ministry has a right to have its own purchase department to save costs. Saving costs on commission or striking a bargain is right of every bulk purchaser. No issue of predatory pricing or abuse of dominance arises, if the purchase department of government or an enterprise passes on the entire commission it gets on purchase of material to the parent organisation,” CCI said.

However, a section of CCI is also of the view that several small and regional newspapers solely depend on DAVP led advertisements for revenue, the DAVP is a dominant player.

“According to Press Council of India, alone DAVP accounts for 80-100% of the revenue for some categories of newspapers; it gives an idea that a major portion of the market is out of reach of the private advertising agencies,” said a CCI member in his dissenting order. Also, since DAVP is financially dependent on government, it can pass on the 15% commission back to the government departments something the private advertising agencies cannot do as agency commission is the only source of income, it said stating that the director general of investigations in CCI should further examine the matter.

News Source: Indian Express | Image credit: Prasad Ramachandran