(VII) NEWSPAPER MERGERS |
268. The establishment of a distinct merger regime
for newspapers derives from the work of the Royal Commission on
the Press which published its Report in September 1962. That Royal
Commission recommended the establishment of an independent tribunal
to adjudicate on newspaper ownership changes on the basis of published
public interest criteria to be defined in statute. It was envisaged
that the public interest criteria would include the consideration
that the "transaction was not such as significantly to affect
the accurate presentation of news and the free expression of opinion".
269. Since the mid-1960s, a special merger regime
for newspapers has been in place, reflecting particular public
sensitivity about newspaper ownership.
The current provisions are set out in the Fair Trading Act 1973.
The main distinctive elements of the regime are the requirement
for prior consent for mergers, a procedure for mandatory reference
to the Competition Commission and criminal sanctions (which have
never been used) for breaches of the rules.
270. The Government has been committed to consideration
of a "lighter touch" merger regime for newspapers since
the Communications White Paper was published.
Reform of the 1973 Act regime has almost become a necessity in
consequence of the general changes in the merger system provided
for by the Enterprise Bill. The new general merger regime takes
away all powers from the Secretary of State; decisions and remedies
are reserved for the Competition Commission. The Secretary of
State may only intervene in respect of a specified public interest
consideration; when she refers a case to the Competition Commission
for that reason, the Commission shall examine both the specified
public interest consideration and the standard factors concerning
a substantial lessening of competition. The Secretary of State
must accept the Commission's findings regarding competition. The
Enterprise Bill leaves the newspaper merger regime broadly untouched,
but this is recognised by the Government as a "holding arrangement".
271. The Government's Policy document published on
7 May reflected the Government's commitment to a "less onerous
and less pervasive" newspaper merger regime.
The requirement for prior consent was to be removed. Criminal
sanctions were to be abolished, with reliance instead being placed
on the same enforcement powers as for mergers under the Enterprise
Bill regime. Draft
Clauses explaining the new regime were promised in due course,
but were delayed and will not now be available until August. Instead,
we have had to base our comments in this Report on an account
of the Government's policies provided to us at our insistence
on the eve of our taking oral evidence from certain newspaper
272. The Government's proposals are based on a mechanism
whereby there will be an additional exceptional public interest
consideration (in the terms of the Enterprise Bill) applying specifically
to newspapers. This enables the Secretary of State to intervene
in the merger process and seek an initial report by the OFT. She
will be bound by the OFT's findings with regard to substantial
lessening of competition, but will have discretion on reference
to the Competition Commission or other courses of proceeding where
no competition impact is foreseen. Where reference is made on
either or both grounds, the Competition Commission shall report
and may propose remedies. The Secretary of State must accept any
conclusions by the Commission on competition, but may reach her
own decision in respect of the public interest and may vary remedies
273. A number of our witnesses were concerned about
the complexity of the process and the number of parties concerned.
We return later to the specific roles of the two parties not involved
in normal merger decisions - OFCOM and the Secretary of State.
However, it is important to note that the apparent complexity
of the regime is substantially mitigated by the time limits imposed
on decisions by the key parties, namely the Competition Commission
and the Secretary of State.
274. The distinctiveness of the new newspaper regime
hinges on the definition and interpretation of the newspaper public
interest consideration. The Government proposes that this should
encompass the public interest in
(a) "the accurate
presentation of the news;
(b) free expression of opinion, and
(c) the maintenance of plurality of views
in the United Kingdom press".
Each of these concepts draws upon previous
decisions by the Monopolies and Mergers Commission and the Competition
Commission on newspaper mergers.
The definition will be amendable by means of statutory instrument.
Harvey Kass of Associated Newspapers identified two immediate
possible improvements to this definition. He argued that it could
encompass views expressed across all media and also suggested
a test relating to the long-term interest of the newspaper subject
275. A significant concern about the new regime related
to the proposed de minimis provisions. In essence, the
same lower limits are to apply to newspaper mergers as to the
other mergers under the Enterprise Bill. In consequence, transactions
will be excluded where the turnover of the company acquired is
below £45 million and there is no share of supply of 25 per
cent or more in the relevant market. "Share of supply"
will be defined in this context to include pre-merger share of
supply of 25 per cent or above for either party of newspapers
or advertising in newspapers. The Newspaper Society felt let down
by these proposals, arguing that these thresholds would "catch
very small newspaper transactions that are not caught at all at
The Government has previously acknowledged that the newspaper
merger regime has had a disproportionate impact on the acquisition
of local newspapers, even though no such acquisition has recently
been held to be against the public interest on freedom of expression
grounds. The Newspaper
Society regretted the decision not to carry forward the current
circulation threshold of 50,000 and argued that a circulation
threshold of 100,000 would be even more desirable.
276. The Newspaper Society's concerns about the de
minimis provisions were related to the same organisation's
worries about the size of the relevant market under consideration
in the context of share of supply. The market that may be considered
will be one that represents "a substantial part of the United
Competition case law suggested to the Newspaper Society that this
would cover small provincial markets, where the Competition Commission
would be most unlikely to find public interest concerns.
277. An integral element in the Government's proposals
is the preservation of the decision-making role of the Secretary
of State. A number of newspaper groups object in principle to
this political involvement.
Patricia Hewitt left us in no doubt that she saw a continuing
role for the Secretary of State in these decisions.
The Government's proposals endeavour to reflect the spirit of
the general merger regime of the Enterprise Bill in providing
that the Secretary of State can only vary the Competition Commission's
findings on public interest grounds rather than competition grounds.
She can, however, vary the remedies as she thinks fit on public
interest grounds, while having regard to the remedies proposed
by the Competition Commission.
Associated Newspapers were concerned at the scope of the Secretary
of State's powers to override the Commission's report.
278. As far as the newspapers from whom we heard
are concerned, the most controversial aspect of the Government's
proposals is the intention that OFCOM will be the main source
of advice to the Secretary of State in reaching a decision on
public interest grounds. The newspaper groups argued that OFCOM
had no business commenting on newspapers; OFCOM would be staffed
to look at regulated sectors with spectrum scarcity; it would
have no real understanding of the distinctive culture and character
of newspapers, particularly at a local level.
Patricia Hewitt argued that OFCOM was well placed to carry out
a limited advisory role and would have "considerable expertise"
to comment on broader issues relating to access to news and information
and "the broad health of our democracy".
279. The plurality test which we recommended earlier
will apply to newspapers insofar as issues of accurate presentation
of news and freedom of expression of opinion are concerned. The
diversity of newspaper ownership will be substantially protected
by the normal application of competition rules. The de minimis
provisions of the merger regime in the Enterprise Bill - £45
million turnover or 25 per cent share of supply - will not enable
the plurality test to be applied in all the circumstances where
it may be desirable to do so. While we have not been presented
with the specific draft Clauses for the newspaper merger regime,
we agree that the issue of newspaper ownership is sufficiently
important to warrant extended jurisdiction beyond the de minimis
limits contained under competition law. However, in doing so,
we would wish the Government to have full regard to the need for
a substantial deregulatory outcome for the newspaper industry,
especially as regards local newspapers.
280. We have considered the concerns raised by newspapers
about OFCOM's proposed role in the newspaper merger regime. We
consider that OFCOM will be able to develop sufficient expertise
in media markets and plurality issues to make it well-placed to
perform the advisory role envisaged for it. This will be particularly
the case if, as we recommended earlier, OFCOM's periodic review
of media ownership can be the basis for a reference for market
investigation on plurality grounds. We support the Government's
proposal to give OFCOM a defined advisory role in respect of plurality
considerations in the newspaper merger regime.
514 Report of the Royal Commission on the Press
1961-62, September 1962, Cmnd 1811. Back
Ev 386, para 1.2; Media Ownership Rules, para 6.4.2. Back
Ev 386, para 1.3; Media Ownership Rules, para 6.4.10. Back
Cm 5010, p 45. Back
Ev 412. Back
Policy, p 4. Back
Policy, para 9.7.3; Ev 394-395, section 6. Back
Ev 391, section 5. Back
Policy, para 9.7.3; Ev 389, para 3.20; Ev 394, para 5.20;
Q 913. Back
Ev 390-391, paras 4.8-4.15. Back
Ev 391, para 4.16 Back
Q 889. Back
Ev 369, para 13; QQ 936, 937. Back
Media Ownership Rules, para 6.4.7. Back
Media Ownership Rules, para 6.4.2; Ev 176, para 3.1.5;
QQ 937, 939. Back
Ev 389, para 3.13. Back
Ev 369, para 13; QQ 939, 943. Back
Ev 361, section 4; QQ 889, 891, 903. Back
Q 1006. Back
Ev 394, para 5.20. Back
Ev 353, para 7.2. Back
Ev 362, section 4; Ev 358, paras 5, 16; Ev 353, para 7.6; Ev 369-370,
paras 15-17; QQ 889, 891, 900, 933. Back
QQ 1003, 1005. Back