By Rachael Craufurd Smith
The extraordinary events surrounding the closure of the News of the World and the withdrawal by News Corporation of its bid to take full control of BSkyB have cast a light on how journalistic standards, if not democratic government itself, can be corrupted by the ruthless drive for corporate profit and personal influence. At a more practical level, they have also highlighted some of the limitations of the ‘media plurality’ test contained in section 58 of the Enterprise Act 2002, a measure introduced to protect UK citizens from undue concentrations in media ownership. In 2003 the then Labour Government used the Communications Act to abolish many of the media specific rules in force that prohibited particular accumulations of broadcast licences, or combinations of press and broadcasting interests. Henceforth, media concentration was primarily to be dealt with on a case by case basis through the operation of the competition rules, supported, where necessary, by the new ‘media plurality’ test. As a result, where a media merger is now in issue, once competition concerns have been addressed, the final bulwark against further market consolidation will generally be the ‘media plurality’ test.
The importance of the plurality test is underscored by the passage of the Media Ownership (Radio and Cross-media) Order 2011 in June this year, which removed all remaining restrictions on media accumulations at the local level. Although Ofcom had concluded in 2009 that combined ownership of a Channel 3 regional television licence, local analogue radio licence and local newspaper all operating in the same area could confer ‘too much control over the local news agenda’ to one person or company, it later concluded, when the matter was referred back to it by the Conservative Government, that even concentrations of this scope might not be detrimental (Response to Sec. of State: Local Media – Cross Media Ownership Rules, 9 August 2010). In reaching this conclusion, Ofcom noted not only the presence of the BBC as an alternative news source and the Government’s plans for new local television stations but also the ‘media plurality test’. The existence of the test was also cited as an important reason for accepting the Order during discussion of the proposals in the House of Lords on the 9th June 2011.
The United Kingdom has thus placed considerable trust in the operation of the plurality test to address damaging consolidation, whereas many countries, even the United States, continue to employ specific media concentration rules at national and/or local levels. To date, the test has been applied fully only once, in relation to the BSkyB/ITV share acquisition in November 2006 (on which see British Sky Broadcasting Group plc v Competition Commission  2 All ER 907;  EWCA Civ 2) and, inconclusively, in the aborted News Corporation bid for BSkyB. These cases suggest that the trust placed in the media plurality test may not, in fact, be well founded and the test as presently formulated would indeed appear to be problematic on four main counts:
i) Failure to address endogenous growth and provide for ongoing monitoring.
The media plurality test can be triggered only where there is a media merger, whereas media companies can gain market share through technological innovation, first mover advantages, control of, and investment in, attractive content etc. Such endogenous growth cannot be addressed at present on plurality grounds, suggesting that ongoing monitoring and possibly even powers of divestiture in such circumstances may be necessary if we are to take media pluralism seriously. Paradoxically, Ofcom’s role in carrying out regular reviews of the media marketplace is currently being scaled back to cut costs, including its three yearly review of the media ownership rules.
ii) Failure to establish a coherent approach across all media sectors.
Section 58 of the Enterprise Act 2002 lists distinct media plurality considerations for mergers in the print sector and for those that involve broadcasting companies or combined print and broadcast mergers. In relation to print mergers, the Act focuses on the impact of the merger on content diversity, freedom of expression and accuracy, whereas in relation to mergers involving broadcasting companies, it identifies the need for source as well as content diversity, high quality content, and a commitment to meeting certain content standards set out in the Communications Act 2003. It is not, however, apparent why certain criteria have been adopted in one context but not the other. For example, if undue concentration of sources is a concern in the broadcasting sector, why is it not similarly of concern in the print sector?
There are at least three reasons for intervening in media markets to protect ‘media plurality’. Firstly, to ensure that a sufficiently representative range of viewpoints and opinions are expressed so that individuals can make informed political, social and economic decisions. Secondly, multiple distinct sources can help to ensure that bias or misinformation stemming from particular corporate or political affiliations is exposed. Thirdly, limits on media ownership may reduce the capacity of specific owners to influence politicians and thus distort the political process. The focus on content as opposed to source diversity in relation to print mergers speaks to the first of these concerns but does not address the latter two.
iii) Failure to establish a clear methodology, leading to consequent uncertainty.
The Enterprise Act 2002 itself provides little guidance as to how the media plurality considerations should be interpreted. As a result, considerable discretion has been passed back to those bodies required to implement section 58, leading to contested decisions and uncertainty for the companies involved. The BSkyB/ITV case took more than three years to resolve and involved references to both the Competition Appeal Tribunal and Court of Appeal. In order to apply the ‘sufficient plurality of persons’ criterion it is, for example, necessary to determine the relevant market or markets and audience, yet resolution of these issues is likely to be controversial. Should, for example, the Internet, cable and mobile services be included in the market definition; should the media be weighted depending on their perceived capacity to influence the audience; and should attention focus solely on news and current affairs programmes or scientific and cultural programmes more generally?
In the BSkyB/News Corporation case, Ofcom developed an innovative ‘share of reference’ approach, based on what consumers stated to be their main regular source of news (Report on public interest test on the proposed acquisition of BSkyB by News Corporation, 31 December 2010). This could be a useful starting point for future analysis, in that it does not exclude a priori particular media or services, such as Internet blogs, but instead examines what consumers themselves consider to be relevant sources and thus potentially influential. It was also used by Ofcom to consider concentrations in both the wholesale and retail provision of news. Nevertheless, there remains considerable uncertainty as to how ‘sufficient plurality’ should be determined and thus a need for further guidance as to the appropriate methodology to be adopted in such cases. Ofcom concluded that a 22% share of reference in relation to the provision of news and current affairs programming was probably too great – but it is not clear why this was thought to be so.
iv) Procedural failures: regulatory expertise and political influence.
One striking aspect of the plurality test is that Ofcom, the specialist communications regulator, provides largely preliminary advice, while it is a general regulator, the Competition Commission, which takes the investigation forward if so requested by the Secretary of State. It is doubtful whether the involvement of both Ofcom and the Competition Commission constitutes an efficient deployment of resources and, given Ofcom’s expertise, consideration could be given to entrusting application of the test to Ofcom alone, subject to suitable arrangements for appeal and review.
Of more concern is the central role in the procedure played by the Secretary of State. He or she decides whether or not to initiate the test; which of the various plurality considerations should be raised; whether the matter should be referred to the Competition Commission after receiving Ofcom’s advice; whether undertakings should be accepted; and whether or not to adopt the Commission’s findings. Although policy decisions are frequently devolved to the executive without controversy, because of the importance that politicians ascribe to positive media coverage, government approval of media mergers presents an opportunity for political gain, thus bringing into question the integrity of the evaluation. For this reason, the test should be entrusted entirely to an independent body, such as Ofcom.
In countries such as Italy, media interests have colonised the political field, whereas in Britain the existence of rules prohibiting political parties and politicians from owning broadcast licences has made such infiltration more difficult. Nevertheless, the events of the last two weeks highlight the capacity of powerful media groups to influence the political process from the outside and such influence can be expected to be most pronounced where the interests of media institutions themselves are at stake. Over the last decade both Labour and Conservative administrations have pursued a vigorous policy of media ownership deregulation, even in areas where regulatory bodies such as Ofcom have voiced concerns. The key protection offered the public is the ‘media plurality test’, yet this was never intended to be a part of the regulatory landscape and was introduced, reluctantly, in response to pressure from a number of influential Labour peers, notably Lord Puttnam, during passage of the 2003 Communications Act. As a result, the test has not been afforded the regulatory consideration and attention its importance merits.
With Government plans for a new communications green paper, it is now time to redress these failures. One possibility would be to enunciate a statutory ‘precautionary principle’, cautioning against market liberalisation where significant risks to media pluralism can be identified. But whatever the outcome, let us hope that media pluralism will be at the centre of deliberations, no longer an inconvenient afterthought.
Rachael Craufurd Smith from University of Edinburgh, SCRIPT and Europa Centres, partner in the EU funded MEDIADEM project focussing on media freedom and independence
Posted: 15 July 2011