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Public Notice
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Ottawa, 18 February 1987
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Public Notice CRTC 1987-51
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Société de radio-télévision du Québec
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Related documents: Decision CRTC 85-609 dated 31 July 1985; Public Notices CRTC 1986-202 dated 11 August 1986 and CRTC 1986-273 dated 30 September 1986; and Notice of Public Hearing CRTC 1986-83 dated 18 November 1986.
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In Notice of Public Hearing CRTC 1986-83 dated 18 November 1986, the Commission advised the Société de radio-télévision du Québec (Radio-Québec) that it was called to a Public Hearing on 1 December 1986 in Montreal to discuss its reply to Public Notice CRTC 1986-273 dated 30 September 1986. This notice stated the Commission's concerns about the possible impact of the following amendments proposed by Radio-Québec with respect to its advertising code:
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1) to remove restrictions on the mention of the retail price of a product or service; and
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2) to accept the broadcast advertising of beer, wine and cider.
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Background
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This Advertising Code was submitted to the Commission by Radio-Québec following Decision CRTC 85-609 in which the Commission renewed Radio-Québec's licences until 30 September 1990. In its renewal application, the licensee had stated that an increase in its independent revenue was necessary for its development and it proposed to broaden the range of the kinds of advertising it would broadcast. As required by the Commission at the 13 May 1985 Public Hearing in Montreal, the licensee submitted a statement to the Commission, dated 12 June 1985, setting forth its policy on the broadcast of restricted advertising, in which it [TRANSLATION] "undertakes during the period covered by this application for the renewal of our licences, to abide by the following rules:
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1) Radio-Québec will avoid interrupting its programs with commercial announcements; such announcements will be grouped at the beginning and end of programs;
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2) In certain cases, commercial announcements may be broadcast during programs, but only where natural pauses occur, and only where they do not interrupt the natural flow of a program;
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3) The time devoted to the broadcast of commercial announcements will not exceed six minutes per hour; this includes Radio-Québec's own station and network promotion;
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4) Commercial announcements will only be aired on a network basis;
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5) Only the network will be permitted to sell air-time for commercial announcements. On a regional basis, individual stations will only be permitted to solicit prestige sponsorship."
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This statement also set out a number of specific guidelines restricting the content of commercial messages, in particular by prohibiting the mention of retail price and free gifts.
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Accordingly in light of the experimental nature of the licensee's proposals and its commitments in this regard, in Decision CRTC 85-609, the Commission approved Radio-Québec's advertising proposals subject to the following condition: that "local advertising, except in Montreal, [would] be limited to prestige sponsorship and the exchange of services." As suggested by Radio-Québec, the Commission also indicated that it intended to review with the licensee, at the end of two years, its advertising policies and their impact. The Commission also expected the licensee to submit, within three months of the date of the decision, a statement to be placed on the public file with respect to the standards and criteria which Radio-Québec would follow regarding the sale of air-time. This was done on 28 October 1985.
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The October statement continued to prohibit the mention of retail price and free gifts but it indicated that Radio-Québec would accept prestige sponsorship messages on tobacco, alcohol, beer, wine and cider products as well as games and lotteries.
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On 24 March 1986, Radio-Québec submitted a new version of its Advertising Code and proposed to eliminate the restriction against mentioning the retail price of a product or service and to accept for broadcast commercial announcements for beer, wine and cider products. The licensee indicated its intention that these amendments would be effective as of 1 June 1986.
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On 11 August 1986 (Public Notice CRTC 1986-202), the Comission published Radio-Québec's proposed amendments and indicated that, before making a decision, it wished to receive comments from all interested parties. In the meantime, the Commission expected the licensee to maintain its advertising policy in accordance with the standards and criteria contained in its Advertising Code dated 28 October 1985.
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In response to Public Notice CRTC 1986-202, the Commission received an intervention from Télévision de la Baie des Chaleurs Inc. (CHAU-TV Carleton) opposing Radio-Québec's proposals because of the reduction in its own sale of selective national advertising since the entry of Radio-Québec into the advertising market.
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In a further brief, Radio-Québec stated that it had implemented the proposed amendments with very little negative feedback from its listening audience, and that to withdraw them would mean reneging on its contractual commitments, returning to ineffective market regulations, particularly with respect to the mention of the price of products or services, and giving up an important source of revenue that it needed to achieve its objectives. The licensee also argued that it was justified in implementing the amendments because, apart from the five basic rules listed above, which it had undertaken to respect, the other criteria were [TRANSLATION] "rules of in-house management ... that could be amended by Radio-Québec without formality according to the circumstances".
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After considering the position of the intervener and of the licensee, the Commission concluded in Public Notice CRTC 1986-273 that the proposed changes constituted major and highly significant amendments that had not been dealt with at the May 1985 hearing and that went beyond the provisions of the Code submitted by Radio-Québec in October 1985. The Commission expressed concern that the changes would affect other broadcasters and the broadcasting system in general as well as the potential impact on the nature of Radio-Québec's programming over the middle and long term. Accordingly, the Commission advised the licensee that if it wished to retain the amendments proposed on 24 March 1986, the Commission would have to call the licensee to a Public Hearing to discuss these issues in a broader context.
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In a letter of reply dated 21 October 1986, Radio-Québec indicated that the two proposals could be dealt with separately. With respect to the broadcast of commercial messages for beer, wine and cider, the licensee stated [TRANSLATION]:
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Radio-Québec does not intend to keep the amendment proposed on 24 March with respect to alcoholic beverages, for the two-year experimental period.
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The licensee indicated, however, that it did wish to retain the amendment regarding the mention of the price of a product or service. It expressed the opinion that, otherwise, it would be forced to forgo most of the contracts offered by advertising agencies and would face a virtually untenable administrative situation.
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1 December 1986 Hearing
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At the hearing, Radio-Québec described how its situation had evolved since the last renewal of its licences and that it had complied with the expectations of the Commission as set out in Decision CRTC 85-609. The licensee then repeated the position stated in its letter of 21 October 1986 and pointed out that the withdrawal of advertising for alcoholic beverages would mean a substantial loss of revenue, which the licensee estimated would be at least $500,000 per year.
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In support of its proposal to retain the amendment regarding the mention of the price of a product or service, the licensee stated that including a restriction on the mention of price in the original Advertising Code had been an error in judgment at the time the Code was drawn up, due to Radio-Québec's lack of experience in the field of advertising. The licensee explained that, at the time, it mistakenly thought that the mention of prices in television advertising was limited to local advertising, and it later realized that national advertising mentioned prices as well. The licensee also stated that advertising agencies reserve air-time for their clients without knowing whether the commercial messages will mention prices or not, and that this makes the restriction on mentioning prices very difficult to apply. Furthermore, Radio-Québec said that it could not demand that commercial messages be prepared exclusively for its broadcast requirements. The licensee estimated that it would lose approximately $800,000 in additional revenue if it were forced to forgo broadcasting commercial messages that mention the price of a product or service.
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Moreover, Radio-Québec argued that the advertising revenue it would draw from the planned amendment would not harm other broadcasters because it would represent a negligible amount in relation to the whole of the advertising market, although it was essential to the development and maintenance of quality programming in light of the major budget cuts facing Radio-Québec. The licensee pointed out that, in view of its commitment to broadcast no more than six minutes of advertising per hour and not to interrupt its programs for advertising unless there is a natural pause, the total available advertising time in its programming schedule for the fall of 1986 was 125 minutes per week, which was only 60% of its total authorized advertising time. Its forecasts of total advertising revenue, including revenue from commercial messages that mention price, indicate that in 1988/89 Radio-Québec would take approximately 4.4% of total projected national revenue for television stations in Quebec, or 2.2% of total projected revenue for the same stations. The licensee further pointed out that its government grants had been reduced substantially: for the broadcast years 1985/86 and 1986/87 they had been reduced by more than $8 million.
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Radio-Québec indicated that its programming [TRANSLATION] "has remained basically educational and cultural" in spite of its use of advertising for partial financing. The Commission notes that the "formal education and informal or popular education" content on Radio-Québec has varied in level from 56% to 66% between 1980/81 and 1983/84 and reached a level of 63% and 68% in 1984/85 and 1985/86 respectively. Moreover, purely "formal education" content has increased considerably over the past two years, from a level of 18% in 1984 to levels of 27.3% and 28.5% in 1984/85 and 1985/86 respectively. Radio-Québec again gave assurances that [TRANSLATION] "in the future, advertising revenue will be integrated into programming to make it better and more diversified".
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Conclusion
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Having carefully considered all the evidence on record in the present case, and in particular:
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- that only one intervener was opposed in principle;
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- that there is no evidence that greater access by Radio-Québec to the television advertising market would have a negative effect on the nature of Radio-Québec's programming;
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- that its negotiations with advertising agencies and potential advertisers would be very difficult if the restriction on the mention of price continues to apply;
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- that, in view of the reduction in government grants, a reduction in advertising revenue would jeopardize the maintenance and development of its programming; and
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- that its forecast revenue is modest and would represent less than 3% of total projected revenue for television stations in Quebec in 1988-1989
the Commission has decided to authorize Radio-Québec to lift the restriction in its current Advertising Code prohibiting the mention of the price of a product or service. This authorization will remain in effect until the end of the experimental period as agreed upon in Decision CRTC 85-609.
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The Commission reminds the licensee that all other provisions of its Advertising Code of 28 October 1985 remain in force. The Commission expects Radio-Québec to comply with them fully and to submit to it for approval any proposed amendments to any of the provisions.
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As discussed at the 1 December 1986 hearing, the Commission expects the licensee to submit a report at the end of the two-year experimental period on the breakdown of its revenue from various sources over the years, along with an analysis of any impact such revenues may have had on its programming and an assessment of future trends in this area.
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Fernand Bélisle Secretary General
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