Executive Summary The House of Lords Select Committee on Communications (the Select Committee) published its report on media plurality (the Report) on 4 February 2014. The Select Committee proposes a framework that includes two key elements.
- Ofcom should undertake a media plurality review on every four to five years. This review should highlight concerns about media plurality but only allow for intervention in extremis.
- Transactional reviews should consist of two distinct processes: one concerned with plurality to be conducted by Ofcom; the other concerned with the competition aspects of the transaction to be conducted by the competition authorities. Both the plurality and competition aspects would then by subject to final review and decision by the Ofcom Board
Background Following concerns raised about the proposed (and then dropped) acquisition of BskyB by News Corp in 2011 and other reports on media plurality, including Ofcom’s report on Measuring Media Plurality and the Leveson Report, the Select Committee evaluated a number of proposals put to it and arrived at a clear set of principles which, it believes, any reform on media plurality should follow. Background Following concerns raised about the proposed (and then dropped) acquisition of BskyB by News Corp in 2011 and other reports on media plurality, including Ofcom’s report on Measuring Media Plurality and the Leveson Report, the Select Committee evaluated a number of proposals put to it and arrived at a clear set of principles which, it believes, any reform on media plurality should follow.
What is media plurality? The Select Committee considered that Ofcom had provided it with the clearest definition of media plurality:
- Plurality is not a goal in itself but a means to an end – a well-functioning democratic society.
- Plurality contributes to a well-functioning democratic society through the means of:
a. Informed citizens – able to access and consume a wide range of viewpoints across a variety of platforms and media owners
b. Preventing too much influence over the political process – exercised by any one media owner.
Existing legislative provisions The Report noted that the only legislative provisions which are very specifically an implementation of a media plurality policy are:
a. The “20/20” rule (which prohibits a newspaper group with more than 20% of national newspaper share from holding a Channel 3 licence or a stake in a Channel 3 licensee that is greater than 20%).
b. The Public Interest Test (Enterprise Act 2002, section 58(2B) and (2C)(a)).
The Select Committee expressed indifference to the ongoing relevance of the “20/20” rule stating that: “We do not recommend the removal of the ‘20/20’ rule, but equally would not argue for its retention”.
Scope of a plurality policy
Genre: the Select Committee recommends that a plurality policy should be limited to the activities of media enterprises engaged in news and current affairs content.
Geography: the Report recognises that plurality remains a matter for the UK. However, the scope of any plurality policy, the Select Committee believes, should encompass both local and regional media as well as national media in the devolved nations, but any decisions should take account of the question of financial sustainability.
BBC: the Report concluded that the BBC should be included in any assessment of media plurality but it should not be subject to any control measures imposed from outside its own regulatory framework (i.e. the BBC Trust) as a result of that assessment. Interestingly, the Report also supports the BBC’s position that the licence fee should not be subject to any top slicing, though, it says, that is not to say that funding to S4C should now be removed.
Online media: the Report recommends that media plurality policy should not be limited to print and broadcast. It should be open to the regulator to take account of content delivered over the internet and the influence of digital intermediaries (such as Facebook and Google) when making a plurality assessment.
News-value chain: the Report recognises that the value chain for the supply of news is complex. Content might be originated by one company (e.g. Reuters), aggregated by another (e.g. ITN) and made available to citizens by another (e.g. a broadcaster such as Sky). The Report recommends that a media plurality policy should be flexible enough to take into account the entire value chain for the supply of news and current affairs content.
Proposals considered by the Select Committee The Report considered five different proposed approaches ranging from no plurality intervention to a cap on the share of revenues of the “total media market” of 15% as proposed by Enders Analysis (with such media market being very broadly defined to include newspapers, magazines, video games, television and internet advertising and subscription, radio advertising, books and music). The Select Committee rejected the Enders Analysis proposal for a number of reasons, but primarily because it considered that plurality could not be reduced to a single figure stating that “…while 166 ways of measuring plurality (as recommended by the European Commission’s report, authored by Peggy Valcke) is surely overkill, we are not entirely persuaded that a concept as complex as plurality can legitimately be reduced down to one”.
Ofcom proposed that there should be a periodic review of media plurality (undertaken every four or five years), operating alongside the provisions of the existing merger-based public interest test.
Select Committee’s proposal on media plurality policy
Periodic reviews: the centre-piece of the Select Committee’s proposal follows that suggested by Ofcom; that the government should introduce a statutory periodic review of the plurality of the media markets to be undertaken by Ofcom on a 4-5 yearly basis. The metrics to be used in assessing plurality should be a matter for Ofcom. The review should contain both an assessment of the sufficiency of plurality and an indication of where plurality may be under threat in order to send a clear signal to media enterprises about the prospects for consolidation in the interval between these reviews. The Select Committee would not expect periodic reviews to result in any direct market intervention save in extremis, in which it should be possible for Ofcom to order a media enterprise to divest. The Secretary of State should have an obligation to accept the content and recommendations of Ofcom’s periodic report or publish good reasons for not doing so.
Transactional reviews: the Select Committee proposes that transactional reviews should consist of two distinct processes: one concerned with plurality, to be conducted by Ofcom, the other concerned with the competition aspects of the transaction, to be conducted by the competition authorities. The final step in the transactional review should be the submission of the competition assessment and the plurality assessment to the Ofcom Board which should be responsible for reconciling the recommendations of the two reports and implementing them as a single Public Interest Decision. This would mark a significant departure from the current process which requires Ofcom to make a preliminary assessment only of plurality with any substantive assessment to be made by the competition authority at second stage and with the ultimate decision on intervention, upon consideration of the competition authority’s recommendations, resting with the Secretary of State.
Final thoughts A periodic review of media plurality, leaving the metrics by which such review is carried out to Ofcom, and giving a clear steer to the media market as to the sorts of consolidations which are unlikely to be considered acceptable, seems entirely sensible.
The Select Committee’s proposals in respect of transactional reviews would represent a significant departure from current practice, placing the citizens’ interests (for which Ofcom is responsible), rather than (a) the consumer interests (for which the competition authorities are responsible) and (b) political interests (which may influence the Secretary of State’s decision), at the heart of the decision making process. Whether or not any government would be prepared to relinquish its ultimate back-stop power in respect of transactional plurality issues remains to be seen.
Client Alert 2014-094