Should Ofcom have the power to block or approve media and news deals?

A 4 February 2014 report published by the House of Lords communications committee has urged for changes to the regulation of media ownership.  It finds that the UK communications regulator, Ofcom, should take a more prominent and leading role in deciding whether media transactions or concentration should be approved. 

Merger control in media transactions be a complex area given the relationship between merger control review by the UK competition authorities on competition grounds and the potential for political/ public interest intervention on newspaper and/ or media public interest grounds.  Currently, the UK Government is able to intervene in a newspaper or a broadcasting/ media merger where the Secretary of State believes that a merger may raise a relevant public interest consideration and the transaction constitutes a relevant merger situation under the standard UK merger control rules.  There are specific public interest considerations for newspaper cases and also broadcasting and cross-media cases. 

When the UK sought to develop its laws in relation to public interest scrutiny of media mergers the relevant Government minister said in 2003 that:  “[media] plurality is important for a healthy and informed democratic society.  The underlying principle is that it would be dangerous for any person to control too much of the media because of his or her ability to influence opinions and set the political agenda” (Hansard, Lord McIntosh of Haringey (Parliamentary Under Secretary, DCMS) 2 July 2003). 

In relation to broadcasting and cross-media mergers, the principal media plurality considerations are set out in section 58(2C) of the UK Enterprise Act 2002 and include: “the need, in relation to every different audience in the United Kingdom or in a particular area or locality of the United Kingdom, for there to be a sufficient plurality of persons with control of the media enterprises serving that audience.” 

UK communications regulator Ofcom conducted a significant research study and extensive stakeholder consultation on plurality matters between November 2011 and June 2012.  In October 2011 Ofcom stated that: “We have defined plurality as a) ensuring there is a diversity of viewpoints available and consumed across and within media enterprises and b) preventing any one media owner or voice having too much influence over public opinion and the political agenda.” 

The committee now recommends that Ofcom should undertake periodic reviews of media plurality every four to five years to examine the sufficiency of plurality at the relevant time.  This power to examine and ultimately require divestments in tightly defined circumstances would arise independently of any structural change in the market such as a merger or acquisition. 

As a further change from the current rules, the committee recommends that Ofcom rather the Secretary of State should have final decision making power over whether specific media transactions should be approved, based on a balancing of the effect on competition and plurality. 

The committee’s report comes following an extensive public consultation.  Media plurality issues have come under scrutiny recently.  In the decade since the current regime was put into operation, only three cases have raised plurality “issues” such as to warrant a further inquiry.  Critically, there has been no final UK determination in a case involving only plurality issues.   

In BSkyB/ ITV, BSkyB had acquired material influence over ITV, an important UK broadcast news provider.  The Competition Commission concluded that sufficient media plurality remained for each major audience in the UK, both for a TV audience and a cross-media audience (taking into account the readership of News International’s newspapers).  BSkyB was required to divest its shareholding in ITV to below 7.5 per cent, for reasons connected with competition and not media plurality. 

The second case involved News Corporation’s proposed acquisition of the shares in BSkyB that it did not already own.  This was a highly unusual case which is unlikely to have many if any counterparts. The case did not reach a final decision by the Secretary of State so provides no definitive support for the efficacy or otherwise of plurality controls.  Quite the contrary, the case contributed to a full review of whether the existing media plurality test in the UK is workable in practice. 

A third case involved Global Radio’s acquisition of the entire issued share capital of GMG Radio Holdings Limited, the third largest UK commercial radio operator and operator of several radio stations across the UK.  On 3 August 2012 the Secretary of State issued a public interest intervention notice.  The intervention notice was issued on the basis that the media plurality public interest test might be relevant to consideration of the merger.  Despite the issue of the intervention notice, the Secretary of State announced that, on the advice of Ofcom, she would not refer the acquisition to the Competition Commission on media plurality public interest grounds.  The case was nevertheless referred but only on competition grounds.  The Competition Commission published its final report on 21 May 2013.  Global was required to partially divest some of the acquired or its own stations in each of the overlap areas to address the substantial lessening of competition found by the Competition Commission. 

Against this background, it appears that giving greater powers to Ofcom is intended to serve as a check on political interference that most ‘mainstream’ (i.e. non-media) media are insulated from. However, whether the Government will relinquish determinative power to Ofcom in the review of often high profile media transactions remains to be seen.   

The proposal to allow Ofcom to intervene even outside a specific transaction is highly controversial, albeit there would be a higher bar to intervention in such cases. 

The recommendations also propose to maintain a clear distinction between competition and plurality. Pluralism is designed to capture issues other than those that are covered by competition inquiries into market concentration.  The analysis has to encompass also the capacity of an entity to unacceptably influence public debate quite separately from any competition issues.   

Whether the recommendations will be implemented at all or in their proposed form is a matter of debate.  The recommendations also sit rather uncomfortably with the mandate of the new Competition and Markets Authority which will replace the Office of Fair Trading and the Competition Commission from April 2014. Its remit will be to have tighter reins on the sector regulators rather than giving them a wider berth. 

This post was prepared in consultation with Suzanne Rab, independent barrister specialising in competition and regulation at a leading chambers in Lincoln’s Inn.  Suzanne provided evidence to the House of Lords Select Committee review of media plurality.

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