LONDON Culture secretary Andy Burnham has blocked the introduction of product placement in the U.K., a move described as "perverse" by commercial broadcaster ITV and "astonishing" by European commissioner for media and information Viviane Reding.
Wednesday's decision -- at least until a further review in two years time -- may be challenged under law, according to ITV executive chairman Michael Grade, who is seeking to overturn the ruling via judicial review.
Burnham's decision follows a prolonged consultation period as part of the E.U. Audiovisual Media Services Directive aimed at allowing individual governments to decide on a range of deregulation options.
In a statement, the culture secretary said he had "very serious concerns about blurring the boundaries between advertising and editorial content" and added that the economic benefits of product placement were unclear.
"I have listened carefully to the arguments on both sides around product placement and concluded that it should not be permitted in programs made for this country," Burnham said. "I am well aware that a number of commercial broadcasters are facing difficult economic times and I will continue to work with the industry to explore ways we can support them, but my preference is to consider all other avenues before allowing product placement."
Leading broadcasters including ITV have been lobbying for a relaxation to the rules and believe the practice could generate millions annually in new revenue.
Under the European Directive spearheaded by Reding, each country can make its own decisions on product placement after a relaxation of the guidelines last year.
Speaking on BBC Radio, Reding said she was "very much astonished that the U.K. government seeks to oppose a form of funding that would support its television industry," and said the move "really does punish U.K. production companies."
ITV said the decision to block "an important new revenue stream" is "perverse but not surprising," citing Burnham's long-held "hostility" to the idea.
The broadcaster said the decision would hit TV channels hard at a time when they are seeing unprecedented advertising revenue declines.
"Given the extraordinary economic pressures ITV and others face, we can't let a decision like this go through without trying to fight it. We are considering our next steps and I am consulting my legal team as to whether we have a strong case for judicial review," Grade said.
U.K. production trade body Pact said the decision is "a lost opportunity," but Channel 4 said it supported Burnham's position, with chief executive Andy Duncan saying product placement raised "serious issues of trust for viewers."