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The development of a media plurality test in the UK: Criteria and competence Rachael Craufurd Smith University of Edinburgh

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1 The development of a media plurality test in the UK: Criteria and competence Rachael Craufurd Smith University of Edinburgh

2 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, Technological developments, especially scope for enhanced transmission capacity from move to digital terrestrial TV, Policy goal to create internationally competitive UK firms. Policy goal to create internationally competitive UK firms.

3 Communications Act 2003 The Act did, however, retain restrictions on: Cross media (print/tv/radio) concentration at the local level – now under review, 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 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. National news on Channel 3 is to be by an appointed news provider.

4 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, ss

5 Enterprise Act 2002, Section 58 Print merger considerations: accurate presentation of news, and free expression of opinion, 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. 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.

6 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, 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, 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). genuine commitment to specific standards in the 2003 Act (standards).

7 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.

8 Procedure II - Appeal Appeal from the Secretary of States decision to the: Competition Appeal Tribunal Competition Appeal Tribunal and then, with leave, to the Court of Appeal in England and Court of Session in Scotland, Court of Appeal in England and Court of Session in Scotland, Final appeal to the Supreme Court. Final appeal to the Supreme Court.

9 Two Recent Cases BSkyBs acquisition of a 17.9% shareholding in ITVplc, the holder of the Channel 3 terrestrial broadcasting licence (the BSKyB/ITV case). BSkyBs acquisition of a 17.9% shareholding in ITVplc, the holder of the Channel 3 terrestrial broadcasting licence (the BSKyB/ITV case). News Corporations bid to take full control of BSkyB, in which it currently owns a 39% stake (the BSkyB/NewsCorp case). News Corporations bid to take full control of BSkyB, in which it currently owns a 39% stake (the BSkyB/NewsCorp case).

10 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. 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 Case revealed uncertainty over how to interpret a sufficient plurality of persons with control of media enterprises in s. 58 of the Enterprise Act 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 Skys shareholding would not enable Sky to exert sufficient power internally to influence ITVs news agenda, a view supported by the Court of Appeal. 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 Skys shareholding would not enable Sky to exert sufficient power internally to influence ITVs news agenda, a view supported by the Court of Appeal.

11 BSkyB/News Corp Proposed Acquisition European Commission cleared on competition grounds. European Commission cleared on competition grounds. Sec. of State sought OFCOMs 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. Sec. of State sought OFCOMs 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. Both external and internal plurality concerns relevant.

12 BSkyB/NewsCorp Acquisition: OFCOM Report OFCOM when considering internal plurality held: Impartiality requirements on TV were not enough to keep News Corps print/tv content distinct. Impartiality requirements on TV were not enough to keep News Corps 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. New online media were primarily aggregators or replicators not additional news sources and did not, therefore, guarantee a sufficient diversity of voices.

13 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 Corps Potential ability to influence as a result of its share of reference would increase from 12% to 22%, 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%. And its reach would increase from 32% to 51%. OFCOM concluded that the acquisition may be expected to operate against the public interest. OFCOM concluded that the acquisition may be expected to operate against the public interest.

14 Present state of play Forceful rejection of OFCOMs findings by NewsCorp. Forceful rejection of OFCOMs 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. 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.

15 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.

16 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. 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).

17 An Alternative Objective Test? Hirschmann-Herfindahl (HHI) Index: Hirschmann-Herfindahl (HHI) Index: sum of the squares of the market shares 1,800 highly concentrated market 1,800 highly concentrated market Application to Ofcoms share of reference: Application to Ofcoms share of reference: Wholesale before: 1,941 after: 2,181 Retail before: 1,812 after: 1,941 Difference 240 and 129 respectively Difference 240 and 129 respectively

18 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. 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. Participants could name any news source. Recognises importance of wholesale sources. Recognises importance of wholesale sources. Lower HHI threshold for the media? Lower HHI threshold for the media? Alternatives – Noam Index, Hill Index… Alternatives – Noam Index, Hill Index…

19 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. 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? 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?

20 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.

21 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 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? 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?

22 Selected sources and case references Craig Arnott, Media Mergers and the Meaning of Sufficient Plurality: A Tale of Two Acts, Journal of Media Law Craig Arnott, Media Mergers and the Meaning of Sufficient Plurality: A Tale of Two Acts, Journal of Media Law Rachael Craufurd Smith, Media Ownership and the Public Interest: The Case of Virgin Media, British Sky Broadcasting and its ITV Shares, Journal of Media Law 23-38, Rachael Craufurd Smith, Media Ownership and the Public Interest: The Case of Virgin Media, British Sky Broadcasting and its ITV Shares, Journal of Media Law 23-38, Lesley Hitchens, Broadcasting Pluralism and Diversity: A Comparative Study of Policy and Regulation, Hart Publishing, Oxford, Lesley Hitchens, Broadcasting Pluralism and Diversity: A Comparative Study of Policy and Regulation, Hart Publishing, Oxford, Eli Noam, How to Measure Media Concentration, FT.com, 30 August Eli Noam, How to Measure Media Concentration, FT.com, 30 August Natascha Just, Measuring Media Concentration and Diversity: New Approaches and Instruments in Europe and the US 2009 Media, Culture and Society, vol 31(1), , Natascha Just, Measuring Media Concentration and Diversity: New Approaches and Instruments in Europe and the US 2009 Media, Culture and Society, vol 31(1), , Maurice Strucke and Allen Grunes, Towards a Better Competition Policy for the Media: The Challenge of Developing Antitrust Policies that Support the Media Sectors Unique Role in our Democracy University of Tennessee College of Law Legal Studies Research Paper Series, January 20, Maurice Strucke and Allen Grunes, Towards a Better Competition Policy for the Media: The Challenge of Developing Antitrust Policies that Support the Media Sectors Unique Role in our Democracy University of Tennessee College of Law Legal Studies Research Paper Series, January 20, 2009.

23 British Sky Broadcasting Group plc v Competition Commission [2010] 2 All ER 907; [2010] EWCA Civ 2. 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 commission.org.uk/inquiries/ref2007/itv/ Competition Commission report on the BSkyB/ITV case and related documents are available at commission.org.uk/inquiries/ref2007/itv/ Competition Appeal Tribunal cases are available at Competition Appeal Tribunal cases are available at OFCOM Report on Public Interest Test on the Proposed Acquisition of British Sky Broadcasting plc by News Corporation, 31 December OFCOM Report on Public Interest Test on the Proposed Acquisition of British Sky Broadcasting plc by News Corporation, 31 December News Corporation submission to the Secretary of State for Culture, Olympics, Media and Sport of the 14 January 2011, available at report-news-corp-bskyb. News Corporation submission to the Secretary of State for Culture, Olympics, Media and Sport of the 14 January 2011, available at report-news-corp-bskyb.


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