FAIR TRADING AT THE BBC

New Fair Trading Regime for 2007/08

The new BBC Charter and Agreement that took effect on 1 January 2007 requires the BBC Trust to have regard to the competitive impact of the BBC's activities on the wider market. As a result the BBC Trust has developed a Competitive Impact Framework (the Framework) which will come into effect from 1 July 2007.

The Framework will apply to all BBC trading activities, including the BBC's public service and commercial activities. Further information is available at: http://www.bbc.co.uk/bbctrust/framework/index.html

BBC commercial activities and Fair Trading

The scope of the BBC's Fair Trading obligations has historically been enshrined in its Fair Trading Commitment and this has continued to apply during the course of this financial year. Further detail on the Commitment can be found here

Annual Statement on the BBC's compliance with the Fair Trading Commitment

The BBC's Fair Trading Commitment is underpinned by the Fair Trading Guidelines which provide a detailed operational framework building on the principles of the Fair Trading Commitment.

Compliance with the Fair Trading Commitment was scrutinised by a standing committee of the Board of Governors up to 31 December 2006. From 1 January 2007 the Trust Fair Trading Policy and Appeals Committee has undertaken this function on behalf of the BBC Trust, with BBC Executive scrutiny being undertaken by the Executive Fair Trading Committee (EFTC). The EFTC comprises three Nonexecutive Directors and two Executive Board members.

The management of the BBC's fair trading arrangements have been accredited with the ISO 9001:2000 quality standard and performance against this standard is regularly tested by the British Standards Institute. The most recent assessment, conducted in December 2006, confirmed that the procedures are continuing to operate effectively.

The BBC Trust commissions independent auditors, PriceWaterhouseCoopers LLP (PwC), to undertake an annual Fair Trading audit to determine whether BBC management has established and applied a system of internal controls which provide reasonable assurance that it has complied with the Fair Trading Commitment. PwC has confirmed this to be the case for the year ended 31 March 2007. Further details of the audit and opinion can be found here

THE NEW BBC CHARTER AND COMPLIANCE

In his statement at the front of this review, the Chairman has referred to the new governance regime for the BBC's commercial activities, including BBC Worldwide from 1 January 2007. The new BBC Charter and Agreement has fundamentally altered the governance of the BBC with the establishment of the BBC Trust and the implementation of a new regime under which the Corporation's performance is measured and ambitions tested.

Since the completion of the Commercial Review in 2004, BBC Worldwide has been engaged in a programme of work which has transformed the company's governance structure and its operations. A key change has been the appointment of three external Non-executive Directors and three BBC Nonexecutive Directors to the company's main Board. The report on corporate governance details the other changes.

The Charter has brought into effect a new structure of compliance for the BBC's commercial activities whereby BBC Worldwide and its operating divisions have to comply with the Four Criteria listed on p 2.

Under the BBC Trust's published Commercial Protocol (available at - www.bbc.co.uk/bbctrust/framework/ protocols/compliance), the first full year of implementation and compliance will be the 2007/08 financial year. However, in light of the substantial work undertaken since the completion of the Commercial Review (including the disposal of certain businesses) the Board is confident that for the period from 1 January to 31 March 2007, BBC Worldwide's operations reflect and comply with the Four Criteria.

The Company has adopted a range of initiatives to ensure ongoing compliance, including a controls framework, an extensive programme of training, internal reporting and external audit. Each new proposal is measured against the Four Criteria both in its development and implementation. Under the Commercial Protocol, an annual repor t on compliance will be made to the BBC Trust. The Board will report on the first full year of compliance in 2007/08.