In a move that will change how television productions in Europe are financed, the European Commission has proposed new rules which will allow European companies to follow the example of their US rivals and charge for featuring products in programs.

The new proposals will allow broadcasters to charge for product placement in their programs on three conditions: The fact that the program is sponsored and that paid-for products feature in the show must be announced before the program begins; no product placement will be allowed in children's shows, news programs or documentaries, and the advertising of tobacco and prescription drugs will be prohibited.

European broadcasters currently operate under the Television Without Frontiers regulations, unchanged since their introduction in 1997, which remain open to interpretation. The rules state that broadcasters are not allowed to carry "surreptitious advertising," a contentious term that has led some countries like Austria allowing product placement while others have strictly banned the practice which is widely used in the United States to help fund productions.

The changes will allow European broadcasters to tap into a market that was worth $3.5 billion (2.9 billion euros) in the US in 2004 across television, films, magazines and video games.

Current regulations on product placement "anarchic"

The EU's information and media commissioner Viviane Reding announced that it was time to update the Television Without Frontiers directive since many more television stations had been started since it was brought into being.

"The system for product placement is complete anarchy at the moment," she said. "My aim is for Europe's audiovisual content industry to flourish under one of the most modern and flexible sets of rules in the world."

The new proposals will allow non-factual productions to use branded products on set to raise cash but the current restrictions regarding the amount of advertising allowed per hour, currently no more than 12 minutes, will remain. Broadcasters will, however, be able to decide whether they want to show commercials in one block or intersperse programs with single ads on split screens -- a method that could be used during a player exchange in soccer games, for example.

The new rules will apply to moving images in whatever way they are delivered, bringing Web-based streaming or pay-per-view cable television under EU remit.

"It would be a distortion of competition if we were to just regulate one and not all," Reding told reporters, adding that the new proposals would add a "light regulatory touch" in a multi-channel, multi-media age.

Road to ratification destined to be a rocky one

The new proposals will need the approval of the European Parliament and European Union member states to become law. But from the reaction the proposals got in the Commission earlier on Tuesday, the road to new regulations may not prove to be a smooth one. Reding's news conference was delayed after the Commission meeting to approve the proposals took longer than expected.

"There was quite a lively and long-winded debate in the Commission," Reding said, admitting that some commissioners felt the proposals were too liberal. But she added no major changes were made to her text.

When the proposals go to the parliament and member states for approval, some EU lawmakers are expected to say it is too easy on advertisers, and not strong enough in defending European culture against its American counterpart.