The issue of the future regulation of cross-media ownership is a perhaps less populist, but nevertheless significant, aspect of the Leveson Inquiry, and was highlighted by the Culture Secretary Jeremy Hunt’s recent appearance at the inquiry. Mr Hunt indicated that the planned overhaul of the Communications Act 2003 will provide the opportunity for the necessary review of this area, although the timing remains uncertain.
The issue of the future regulation of cross-media ownership is a perhaps less populist, but nevertheless significant, aspect of the Leveson Inquiry, and was highlighted by the Culture Secretary Jeremy Hunt's recent appearance at the inquiry.
Mr Hunt indicated that the planned overhaul of the Communications Act 2003 (2003 Act) (the communications review) will provide the opportunity for the necessary review of this area, although timing for the overhaul remains uncertain. The much-delayed Green Paper that should have marked the formal start of this process will now be replaced with a series of seminars that will feed into a White Paper to be published in "early 2013", with a Communications Bill (the Bill) to be introduced before the end of the current Parliament in 2015.
The Leveson Terms of Reference (ToR) include the need for recommendations to be made for a more effective regulatory regime which supports the plurality of the media (broadly, the need to maintain diversified sources of information), and how future concerns about media policy, regulation and cross-media ownership should be dealt with by all the relevant authorities.
Indeed, Lord Justice Leveson in his opening statement highlighted the breadth of the ToR, indicating his immediate intention to focus on press regulation, and to hold seminars in due course dealing with future concerns about media policy regulation, the plurality of the media and cross-media ownership.
It seems reasonably clear that the Leveson Inquiry will be key to the formulation of government policy on these areas, and that the White Paper will therefore reflect the relevant Leveson recommendations.
In Mr Hunt's appearance at the Leveson Inquiry, he responded to the charge of possible partisan handling of News Corporation's bid to acquire 100% of BSkyB by maintaining that he acted at all times consistently with his legislative functions and powers under the Enterprise Act 2002 (2002 Act) in assessing whether the proposed merger should be referred to the Competition Commission due to public interest concerns, including plurality.
However, in the course of his evidence, Mr Hunt also highlighted several areas in existing media ownership regulation (see box "Existing media ownership") which could well be subject to change in the forthcoming White Paper and the Bill:
Definition of plurality. Mr Hunt will consider whether a new formal definition of plurality should be set out in the Bill. He indicated that he shares the implicit view of guidance issued by the Secretary of State for Business, Innovation & Skills (BIS) on public interest intervention in media mergers, also supported by Ofcom (the Office of Communications), that plurality should principally be concerned with the provision of news and current affairs, as it can influence views and control the political agenda.
Measuring plurality. Mr Hunt asked Ofcom to look at the options for measuring media plurality in October 2011 (see "Ofcom's plurality advice" below). Any change would need to balance the introduction of further regulation to protect the public interest against the need to maintain both flexibility in a rapidly evolving technological environment and business certainty to encourage investment.
Independent decision-making. While maintaining that decision-making in the News Corporation's bid was undertaken fairly and transparently, in line with his quasi-judicial role, Mr Hunt intends to explore the possibility that media mergers should no longer be handled by politicians in order to strengthen public perception of the impartiality of these decisions, and has recently asked Ofcom to comment on this.
Broadening Ofcom's role. Mr Hunt raised the question of whether Ofcom should be allowed to start investigations even in the absence of a merger, allowing assessment of dominant positions arising from organic growth. However, any such approach should not stifle innovation or growth in the sector, which is a concern of regulators in the current climate.
The "fit and proper person" test. The communications review will provide an opportunity to debate whether the requirement that a company holding a broadcast licence must be a "fit and proper person" is the right approach, and whether the levels are set appropriately. Mr Hunt considers that the current approach of Ofcom assessing this, rather than politicians, is the right one (for background, see News brief "Fit and proper person: what line can Ofcom take? (www.practicallaw.com/2-507-0044)").
Following Mr Hunt's request that Ofcom consider options for measuring media plurality, and respond to certain specific questions on this, Ofcom published its report in June 2012 (see box "Measuring media plurality").
Interestingly, Ofcom has rejected one of the most controversial options relating to fixed or absolute limits on news market share (most recently backed by Ed Miliband, leader of the Labour Party) as running contrary to innovation. It has also backed away from making changes to the current cross-ownership rules, leaving this to Parliament.
Ofcom has, however, responded to calls to broaden market reviews to non-merger situations in order to catch organic growth, although Mr Hunt has asked Ofcom to carry out further analysis by September 2012 on exactly how these reviews would operate in practice so as to avoid a "chilling effect on investment and innovation" through lengthy implementation periods and any overlap with merger reviews.
There is an inherent difficulty in tackling reform of the media ownership rules to ensure that a sufficiently diverse range of viewpoints reaches a suitably broad range of people across a wide range of media enterprises, while continuing to incentivise investment and innovation in a constantly evolving sector.
It remains to be seen whether this government will have the appetite or ability to do so, or whether we may end up with regulation which is essentially retrofitted to address particular perceived failings highlighted by the News Corporation case.
Dhana Doobay is a partner and Head of the Communications and Media group and Caroline Easter is a senior regulatory consultant at Ashurst LLP.
Cross-media merger rules. In addition to the usual competition law test applicable to all mergers under the Enterprise Act 2002, the public interest considerations that may be taken into account for broadcasting and cross-media mergers are the need for:
A sufficient plurality of persons with control of the media enterprises serving a UK audience.
The availability throughout the UK of a wide range of broadcasting which (taken as a whole) is both of high quality and calculated to appeal to a wide variety of tastes and interests.
Media enterprises to have a genuine commitment to the broadcasting standards objectives set out in the Communications Act 2003 (2003 Act).
Limits on cross-media ownership. The 2003 Act (amending the Broadcasting Act 1990) prevents parties from acquiring significant holdings across media platforms, including newspapers. In particular, no person may acquire a Channel 3 licence (directly or indirectly) if he runs one or more national newspapers having an aggregate market share of 20% or more, and vice versa in relation to the holder of a Channel 3 licence acquiring an interest of 20% or more in a national newspaper (the 20/20 rule).
Ofcom's report on measuring media plurality recommends the following:
Periodic market reviews. Plurality should be measured not just in merger/de-merger situations, but also at fixed dates every four to five years (further consideration to implementation to be given).
Measuring plurality. Availability, consumption and impact are key metrics and should also be periodically reviewed.
No market share cap. Absolute limits are not advised for prohibited market shares or transactions as broader contextual issues also need to be considered, although guidance or indicative levels could be used (to be explored further). Ofcom notes that it is for Parliament to decide whether the 20/20 rule remains (but will consider the impact of periodic reviews) (see box "Existing media ownership").
Who is caught? Any plurality review should include online news providers (criteria to be determined) and the BBC (although the BBC's current position as a leading news provider should not trigger a separate plurality review).