Why do advertisers spend so much money with ITV?
Most advertisers and the agencies who buy airtime for their TV commercials accept that ITV is the only commercial TV channel that can deliver really large audiences through shows like Coronation Street and Pop Idol.
The audiences for these shows are large enough to make a significant and immediate impact on sales or awareness of their products or services.
ITV is by far the biggest commercial TV channel in terms of audiences and that makes it valuable.
According to Barb, in multichannel homes, ITV had a 19.9% share of total viewing in January, all terrestrial channels (ITV, Channel 4 and Channel Five) had 30.4% and all satellite TV stations (there are almost 140 of them) had 42.4%.
So using cable and satellite to reach the same number of viewers as ITV would mean embarking on the time consuming process of booking across a huge number of channels.
How much money is at stake?
It's easy to see why running an ITV company was once described as a licence to print money.
In 2001 advertisers spent £3.5bn on TV advertising in the UK. Of this huge sum of money, ITV companies received 54%.
How does ITV sell its airtime?
To say the way ITV sells its advertising airtime is confusing and bizarre is no understatement.
ITV's two sales houses, Granada Enterprises and Carlton Media Sales, sell a large proportion of their airtime in advance during a trading round usually in November and December each year.
Most of the contracts last more than two years and unusually, between 60% and 70% of Granada and Carlton's contracts were up for renewal last year.
In much the same way as supermarkets offer their customers a discount on products purchased in bulk, ITV's customers and the agencies that negotiate for them, are offered a discount if the proportion of their budget for TV advertising reaches a certain level.
Unlike supermarkets though, ITV charges its customers a premium if they do not spend enough.
But imagine if a supermarket failed to tell you the price of the product you were buying until you had taken it home and opened the packet.
That is effectively what ITV's advertisers face, because the price of ITV airtime is not known when these advanced deals are negotiated.
Instead, the price advertisers pay is totted up using a rolling monthly supply and demand equation: the money an advertiser spends in a month is divided by the level of exposure to audiences ITV delivers.
Once the sums have been done each month, advertisers know the average price of advertising airtime they have to pay.
This means ITV's customers are effectively gambling on the proportion of total TV viewers ITV will account for across the year.
The trouble is, it is too late to complain if they do not think they are getting value for money.
In contrast, Channel 4, Five and multichannel sales houses simply set an up front fixed price for airtime - just like any retailer.
Is ITV really good value for money?
ITV's share of audiences has declined dramatically in recent years, but in contrast to the usual laws of economics, this has meant that advertisers have been charged more to reach fewer viewers, creating airtime price inflation.
A recent report by City firm Deutsche Bank estimates ITV's cost per thousand (the price charged for TV ads to reach 1,000 people within the target demographics, say 16-34 year-olds for example) has increased 5.7% a year since 1997.
According to Barb, between January 1999 and January this year, ITV's share of total viewing in terrestrial homes fell from to 33% to 24.5%.
Why do ITV's customers put up with it?
On balance ITV is still delivering far bigger audiences than any other commercial channel.
Over the past five years, ITV delivered 80% of all advertising funded TV shows with audiences of over 2.5 million viewers.
Reaching the same number of viewers elsewhere can be even more costly. So media buying agencies risk failing to hit the audience reach targets set by their clients.
In short, there is no viable alternative - and despite a lot of grumbling about inflation, most agencies do not want to challenge the system.
Why are advertisers so opposed to the creation of a single sales house?
ITV companies clearly wield a huge amount of power in the marketplace already.
Advertisers believe allowing them to create one sales house will result in an dangerous monopoly.
Most observers think ITV will account for at least 50% of the TV advertising market this year - way above the usual 25-30% market share limit the competition commission tends to enforce.
Granada Enterprises and Carlton Media Sales currently compete for revenue. Both sell different regional franchises, but signals from these regions overlap significantly.
The most pronounced competition is the London area, where Carlton is responsible for the Carlton weekday franchise and Granada for the LWT franchise.
With 11 million individuals and 4.8 million homes, this is the most affluent area of the country and thus the most attractive to advertisers.
David Jowett, broadcast director at MediaCom, one of the UK's largest TV buying agencies, says even with two sales points it is very hard to justify not buying into the whole of ITV's network of franchises.
"You can demonstrate to clients how to operate with only half of ITV, but it is very difficult to get them to buy into that," he says. "Pulling any TV sales point off you schedule in totality is a big ask".
Why does ITV think it is a special case?
ITV has been badly hit by the recession in advertising.
It saw its market share and revenues plummet last year and there is little sign of a real recovery this year.
Not only is it facing a tough marketplace but it is facing very tough competition from the BBC, which it believes has taken a commercial approach to competing for audiences under director general Greg Dyke.
Carlton and Granada argue that a strong and united ITV is not only in advertisers' interests, but in the public interest too because it will be able to deliver more and better programming.
It has also been argued that a struggling ITV will effect the entire UK broadcast industry in the long term, because historically the network has acted as a competitive spur to other stations - especially the BBC, which has been forced to improve its service as a result.
Advertisers want a strong ITV too, but not at their expense.
What impact would the creation of a single ITV sales house have on TV advertising market?
The biggest concern for advertisers is it will mean higher prices.
It could also prompt other broadcasters to join forces. For example, Sky and Five could choose to merge their sales forces or perhaps Viacom (owner of MTV) and Channel 4, thus reducing competition further.
Potentially it could mean the six sizeable sales points currently operating would be reduced to three, meaning advertisers have even less freedom to choose.
"Essentially it will mean you can't choose to invest your client's money freely in the most effective places ," says Jowett.
Ironically, by forcing its rivals to unite, it could mean ITV faces even tougher competition for money than before.
Given that ITV is struggling in a competitive market, what is the advertisers' solution to avoiding a monopoly?
That is the billion dollar question that the OFT will have to answer. Advertisers are categorically against a merger of ITV's sales houses, while Carlton and Granada see it as integral to the future success of the company.
The only compromise solution on the table would see one or both of the sales houses sold to independent companies while Carlton and Granada's programme production operations are merged.
Suffice to say that neither side would be happy with this fudge.