the development of a media plurality test in the UK

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The development of a
media plurality test in
the UK: Criteria and
competence
Rachael Craufurd Smith
University of Edinburgh
[email protected]
Communications Act 2003
Deregulatory thrust of the 2003 Act, which
removed many of the existing ‘structural’
media ownership restrictions, eg it removed
all restrictions on accumulations of TV
licences. The Act was influenced by:
 Technological developments, especially
scope for enhanced transmission capacity
from move to digital terrestrial TV,
 Policy goal to create internationally
competitive UK firms.
Communications Act 2003
The Act did, however, retain restrictions on:
 Cross media (print/tv/radio) concentration at the
local level – now under review,
 Companies with a 20% share of the national
newspaper market (and related companies)
holding 20% or more of the shares in the holder
of the Channel 3 terrestrial television licence, and
 National news on Channel 3 is to be by an
‘appointed news provider’.
Reliance on Competition Law
Marked a general shift to reliance on
competition law, supplemented by a ‘media
plurality test’, introduced after pressure from
the House of Lords (upper Parliamentary
chamber in the UK).
Plurality test is contained in section 58 of
the Enterprise Act 2002, as amended by the
Communications Act 2003, ss375-89.
Enterprise Act 2002, Section 58
Print merger considerations:
 accurate
presentation of news, and free
expression of opinion,
 the
need, to the extent reasonable and
practicable, for a sufficient plurality of views
in newspapers in each market for
newspapers in the UK, or part of the UK.
Enterprise Act 2002, Section 58
Broadcast and newspaper/broadcast merger
considerations comprise the need:
 in relation to every different audience in the UK
(or part) for a sufficient plurality of persons with
control of the media enterprises serving that
audience,
 for a wide range of broadcasting which … is both
of high quality and calculated to appeal to a wide
variety of tastes and interests,
 genuine commitment to specific standards in the
2003 Act (standards).
Procedure 1
1.Secretary of State has competence to trigger
investigation where merger is of a sufficient scale
and Secretary believes one of more of the public
interest considerations applicable – discretionary,
2.Office of Fair Trading reports on competition
issues, OFCOM on media plurality,
3.Sec. of State decides whether or not to refer to
Competition Commission – discretionary,
4.Competition Commission report binding on
competition issues but Sec. of State free to decide
whether merger contrary to public interest and the
terms, if any, on which it might proceed.
Procedure II - Appeal
Appeal from the Secretary of State’s
decision to the:
 Competition Appeal Tribunal
and then, with leave, to the
 Court of Appeal in England and Court of
Session in Scotland,
 Final appeal to the Supreme Court.
Two Recent Cases
► BSkyB’s
acquisition of a 17.9% shareholding
in ITVplc, the holder of the Channel 3
terrestrial broadcasting licence (the
‘BSKyB/ITV case’).
► News
Corporation’s bid to take full control of
BSkyB, in which it currently owns a 39%
stake (the ‘BSkyB/NewsCorp case’).
BSkyB/ITV case
Took more than 3 years to resolve, with appeal to the
Court of Appeal. BSkyB required to reduce shareholding to
below 7.5% on competition grounds.
 Case revealed uncertainty over how to interpret ‘a
sufficient plurality of persons with control of media
enterprises’ in s. 58 of the Enterprise Act 2002.
 The Competition Appeal Tribunal adopted a precautionary
approach, and emphasised external plurality, that is the
number of distinct owners, whereas the Competition
Commission considered that Sky’s shareholding would not
enable Sky to exert sufficient power internally to influence
ITV’s news agenda, a view supported by the Court of
Appeal.

BSkyB/News Corp Proposed
Acquisition
► European
Commission cleared on
competition grounds.
► Sec. of State sought OFCOM’s view as to
whether there would be ‘a sufficient plurality
of persons with control of media enterprises’
under s 58 (2C) EA 2002 after the merger.
► Both external and internal plurality concerns
relevant.
BSkyB/NewsCorp Acquisition:
OFCOM Report
OFCOM when considering internal plurality
held:
Impartiality requirements on TV were not
enough to keep News Corp’s print/tv content
distinct.
New online media were primarily aggregators or
replicators not additional news sources and did
not, therefore, guarantee a sufficient diversity
of voices.
External Plurality: How Many
Speakers?
OFCOM when examining external plurality
considered:
Audience share of reference (news sources used
regularly at least once a week) and reach.
It found that News Corp’s
 Potential ability to influence as a result of its share
of reference would increase from 12% to 22%,
 And its reach would increase from 32% to 51%.
 OFCOM concluded that the acquisition ‘may be
expected to operate against the public interest’.
Present state of play
► Forceful
rejection of OFCOM’s findings by
NewsCorp.
► Sec. of State has not to date referred
proposed acquisition to the Competition
Commission and is considering whether Sky
News can be structurally separated from the
rest of News Corporation, though not
divested, with sufficient guarantees to
preserve editorial independence.
Outstanding Questions and Concerns
1. Length of proceedings, cost, uncertainty.
2. Focus on news provision.
3. Can divestiture or behavioural modifications
adequately address media plurality
concerns?
4. Endogenous growth.
5. Regulatory independence and expertise.
1. Length of Proceedings, Costs and
Uncertainty
Present ‘ex post’ case by case approach takes time, is
costly, and uncertain in terms of the ultimate ruling.
How can we tell, for example, whether a 22% share of
reference (potential influence) identified by OFCOM in the
News Corp/BSkyB case as giving rise to concern is too
much? This uncertainty is arguably bad for business and
citizens.
Are there alternatives? US Federal Communications
Commission attempts to render issue ‘formulaic’ through a
diversity index: Prometheus Radio Project v FCC 373F.3d
372 (2004).
An Alternative Objective Test?
► Hirschmann-Herfindahl
(HHI) Index:
sum of the squares of the market shares
► 1,800 ‘highly concentrated’ market
► Application to Ofcom’s share of reference:
Wholesale
before: 1,941 after: 2,181
Retail
before: 1,812 after: 1,941
► Difference 240 and 129 respectively
Could the HHI be applied in the UK?
► OFCOM
share of reference responds to
some of the concerns raised in Prometheus
– does not weight different media differently
leading to absurd results.
► Participants could name any news source.
► Recognises importance of wholesale
sources.
► Lower HHI threshold for the media?
► Alternatives – Noam Index, Hill Index…
2. News Focus and the Role of
Company Divestiture/Separation
► Focus
on news, not other genres - but other
programmes may have wider social and cultural
influence, eg scientific programming.
► Scope
for divestiture/separation of the news
provider as a solution to plurality concerns?
Weakened economic position of news provider,
self-censorship if linked company…
and still a need for external diversity?
3. Endogenous Growth
Review only triggered by a merger situation
but a company may become the dominant
news provider without market consolidation.
Is there a need for more continuous
monitoring, possibly by OFCOM, and scope
for further remedial action?
Coalition government propose a new
Communications Act during its term of
office, which could address this problem.
4. Regulatory Independence and
Expertise
Who should decide media plurality issues?
► Regulatory
independence and potential for
politicisation. Policy decisions may be
appropriately devolved to the executive but
questionable role of Secretary of State in this
context given potential value of media coverage
for politicians and political parties.
► Regulatory expertise. Is the Competition
Commission a suitable body to evaluate media
pluralism cf OFCOM, the specialist media regulator
– or scope for a new media tribunal?
Selected sources and case
references
►
►
►
►
►
►
Craig Arnott, ‘Media Mergers and the Meaning of Sufficient Plurality: A Tale of
Two Acts’, 2010 2 Journal of Media Law 245-275
Rachael Craufurd Smith, ‘Media Ownership and the Public Interest: The Case
of Virgin Media, British Sky Broadcasting and its ITV Shares’, 2009 1 Journal of
Media Law 23-38,
Lesley Hitchens, Broadcasting Pluralism and Diversity: A Comparative Study of
Policy and Regulation, Hart Publishing, Oxford, 2006.
Eli Noam, ‘How to Measure Media Concentration’, FT.com, 30 August 2004.
Natascha Just, ‘Measuring Media Concentration and Diversity: New
Approaches and Instruments in Europe and the US’ 2009 Media, Culture and
Society, vol 31(1), 91-117,
Maurice Strucke and Allen Grunes, ‘Towards a Better Competition Policy for the
Media: The Challenge of Developing Antitrust Policies that Support the Media
Sector’s Unique Role in our Democracy’ University of Tennessee College of Law
Legal Studies Research Paper Series, January 20, 2009.
►
British Sky Broadcasting Group plc v Competition
Commission [2010] 2 All ER 907; [2010] EWCA Civ 2.
►
Competition Commission report on the BSkyB/ITV case
and related documents are available at
http://www.competitioncommission.org.uk/inquiries/ref2007/itv/
Competition Appeal Tribunal cases are available at
http://www.catribunal.org.uk/
OFCOM Report on Public Interest Test on the Proposed
►
►
►
Acquisition of British Sky Broadcasting plc by News
Corporation, 31 December 2010.
News Corporation submission to the Secretary of State
for Culture, Olympics, Media and Sport of the 14
January 2011, available at
http://www.guardian.co.uk/media/2011/jan/25/ofcomreport-news-corp-bskyb.
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