Joint Committee on The Draft Communications Bill Minutes of Evidence

Memorandum submitted by the Newspaper Society

  1.  The Newspaper Society represents the regional newspaper industry. Its members publish around 1,300 regional and local newspaper titles throughout the United Kingdom, including morning and evening daily newspapers, weekly and Sunday titles, both paid for and free. The future regulation of newspaper transfers and mergers and the future cross media ownership regime are of crucial importance to the development of the regional newspaper companies.

  2.  The Newspaper Society has consistently put forward the view shared by all sectors of the regional newspaper industry that general competition law should replace out-dated media ownership controls. In particular, the industry wants the abolition of the unique controls that restrict the merger of newspaper companies and the transfer of newspaper titles. It supports further liberalisation of the cross-media ownership restrictions.

  3.  The Newspaper Society's response to the Communications White Paper included the independent report by NERA (National Economic Research Associates) which provided a strong case for wholesale reform of the newspaper provisions of the Fair Trading Act 1973, by substitution of general competition law, and for the progressive deregulatory reform of the cross-media ownership provisions of the Broadcasting Act 1996.

  4.  The Government has yet to produce the draft clauses and draft statutory instruments that will govern newspaper transfers and cross-media ownership. This submission is therefore limited to the policy paper, the draft Communications Bill—The Policy. Until the draft legislation is available, uncertainties remain about the precise effect of the somewhat complex proposals outlined.

  5.  The Government announced that its proposals would replace the opaque and discriminatory regime for newspaper transfers. It promised instead a streamlined and less burdensome regime, which will focus regulatory action on the newspaper transfers that appear to raise competition or plurality concerns. Indeed, it has repeatedly promised to release local newspapers from special regulation altogether.

  6.  Unfortunately, these promises remain unfulfilled, despite the deregulatory language in which the policy proposals are couched. The regime proposed will extend special controls and introduce new layers of regulatory authorities, before final newspaper merger decisions are taken by the Secretary of State.

  7.  Newspapers will not be left to competition law, despite the Government's previously expressed views that the current regime has placed a disproportionate burden upon the acquisition of local newspapers, and that they might be removed from the regime altogether. They will be subject to, as yet, undefined plurality tests, although the Government has also acknowledged that, under the current regime, in no case has the Competition Commission found that the acquisition of purely local newspapers titles would be against the public interest on freedom of expression grounds. Local newspapers will not be freed from the special regime, as promised.

  8.  Instead, more newspaper transfers will be at risk of intervention and control by competition authorities, by media authorities (broadcasting and telecommunications based) and by politicians, than are subject to the special controls or competition intervention at present. The Communications Bill will hardly be deregulatory if the old special regime of Ministerial prior consent, backed by criminal sanctions, for designated categories of newspaper transfers, and general competition law, is replaced by a special competition and plurality regime activated by any newspaper acquisition, large of small. The Government will be given unprecedented power to dictate the ownership of the regional and local press, even of the smallest newspaper titles.

  9.  The government's treatment of newspapers is in stark contrast to its proposal for other media and the rest of industry, save for the defence industry.

  10.  Magazines, books and new media remain untrammelled by ownership controls other than general competition law. The Communications Bill deliberately promotes the consolidation of radio and television. According to the Government, a single ITV company would produce benefits for consumers and companies, controlled by the competition authorities. The competition authorities will determine the appropriate limits on the accumulation of radio interests on a UK wide basis. Meanwhile, the Enterprise Bill is heralded as good news for business, consumers and the economy and promoting an enterprise culture, by taking decisions on mergers and markets against a new competition based test of "substantial lessening of competition," within a more transparent, predictable and accountable framework.

  11.  This needs to be contrasted with the position of newspapers. References will not only be triggered by the Enterprise Bill's two jurisdictional tests, but by an additional newspaper title specific test. Newspaper transfers do not simply have to pass the "substantial lessening of competition test" after examination by the competition authorities. They have to be evaluated with reference to the as yet undefined plurality test, in addition to competition scrutiny. Newspaper transactions will have to undergo a series of assessments, referrals, inquiries, public consultations, recommendations and decisions, with a great array of outcomes including approvals and refusals, that could culminate in competition and plurality disinvestments, undertakings and conditions. These will not be confined to the jurisdiction of the competition authorities, but will involve the OFT, Competition Commission, OFCOM (with its own set of advisers) and the DTI Secretary of State. The Secretary of State will retain the ultimate power to make any decision, although advice and recommendations will be required.

  12.  We find it difficult to accept that the new regime is deregulatory when the Government chooses to equate newspaper transfers with mergers affecting national security as an exceptional measure under the Enterprise Bill. Even then the jurisdiction triggers for the Exceptional Public Interest regime ("EPI") will be wider for local and regional newspapers than for any national security case, save that involving a government contractor.

  13.  Contrary to previous government declarations, the regime is clearly designed to catch regional and local newspaper mergers and acquisitions. No supplementary de minimis provisions have been proposed as originally promised. No attempt has been made to exclude more regional and local newspaper transactions from the regime. Indeed, the new regime will extend the ambit of the controls to small transactions involving newspaper companies with just one or very few titles, with low circulations, which are not subject to the special regime at present. As outlined above, it will not only be the general Enterprise Bill jurisdictional tests, that will determine whether newspaper transfers should be subject to the competition and plurality controls. The new restrictions could also apply to the acquisition of any newspaper that has a 25 per cent share of a market in a substantial part of the United Kingdom. Competition law jurisprudence shows that regions such as South Yorkshire and cities such as Cambridge, Lincoln and Norwich are considered to be a substantial part of the United Kingdom for competition purposes. The acquisition of single weekly local newspaper, paid for or free, perhaps owned by one of the many regional newspaper proprietors who only own a single title could lead to the complicated interaction, inquiries and powers of OFT, Competition Commission, DTI, OFCOM before the final decision by the Secretary of State. This is in complete contradiction of previous government proposals for removing local newspapers, weekly newspapers, paid for and free from the special newspaper regime.

  14.  The Newspaper Society is concerned by the complexities of the proposed scheme. This will not assist business certainty. Clearly, some unified system of prior confidential guidance from all potential regulatory bodies and the DTI will be necessary from the onset of the new regime.

  15.  The Newspaper Society has consistently expressed concern about the role, power and size of OFCOM. Our anxieties have been deepened by the Government's proposal to give OFCOM a role in newspaper transfers and mergers. OFCOM must advise the Secretary of State on whether a newspaper transfer warrants an EPI reference to the Competition Commission and, if so referred, it must again advise the Minister on the Competition Commission's recommendations on the EPI aspect of the transfer. It has been made clear to us that OFCOM's advice will be an essential component in ministerial decision-making, over and above recommendations of the competition authorities.

  16.  OFCOM will have no previous experience of the newspaper industry. Its constituents' traditions will be drawn from the broadcasting and telecommunications regulatory regimes, including statutory controls over accuracy, impartiality and fairness. This is different both from the requirements of the Fair Trading Act 1973 considered by the newspaper panel of the Competition Commission or the freedom of expression permitted to newspapers, as any private person or public corporation, under the general law and self regulatory system. It seems highly unlikely that high priority will be given to acquisition of expertise in the newspaper industry. We fear that OFCOM could promote stricter controls rather than deregulation.

  17.  We are also wary of OFCOM's potential role in content control and is potential capacity to erode freedom of expression, if satisfactory distinctions are not made between broadcast and non-broadcast content, and the full extent of OFCOM's power to prescribe new controls is exploited.


  18.  Such draft clauses as are available, suggest that the cross media controls will largely be contained in secondary legislation, which has yet to be drafted. We believe that this will have to be closely examined as the policy paper suggests that the Government's proposals might yet again introduce greater restrictions at regional and local level upon local and regional newspapers, instead of deregulation.

  19.  Under the current regime, a local of regional newspaper proprietor can own a local radio station outright within his titles' core circulation area, provided that there is at least one other commercial radio station, aside from the BBC, and subject to a public interest test. The Government's policy paper indicates that it will adopt the Radio Authority's recommendations that the public interest test should be abolished, in favour of the three different owners, plus BBC test. In its submission to Government, the Radio Authority made clear that where there were only two commercial radio stations, in future the local or regional newspaper should still be eligible to own one outright, as under the current regime, in addition to the safeguard of a grandfather clause to protect past acquisitions made in such circumstances under the current regime.

  20.  The policy paper omits any explicit reference to this point. The Newspaper Society's members should continue to be allowed to own radio stations outright in such circumstances. The draft clauses must address this point.

  21.  In any event, the draft grandfather clause should be extended to cover renewals of licences.

  22.  We would also be concerned if OFCOM were to discriminate against local and regional newspaper owners with radio interests in undertaking its new duty to promote local content of local radio services and in exercising its new powers to vary licence conditions, as well as its existing powers in respect of impartiality.

  23.  The Newspaper Society also questions why restrictions need be introduced over digital multiplex ownership at local level.

  24.  The Newspaper Society wants the further liberalisation of cross-media ownership controls to produce true deregulation for regional and local newspapers at regional and local level.

  25.  The new regime must produce fair and thorough liberalisation, so that regional newspaper companies enjoy the same freedom as their competitors, instead of additional restraints.

  26.  Regional and local newspapers are in fierce competition, both editorially and commercially, with national, regional and local newspapers, (paid for and free), magazines, (paid for and free), national, regional and local radio stations, national regional and local television, terrestrial and digital, online publications and other electronic services, direct mail, other material delivered to households and business premises and other forms of editorial and advertising media. New editorial, advertising and other commercial services continue to develop. Moreover, the Government must also consider the privileged position of the BBC. The BBC enjoys great freedom, denied to regional and local newspapers, to pursue its strong, varied and ever developing commercial and editorial activities, licence funded and otherwise, across broadcast, print, electronic and other media, with which regional and local newspapers compete.

  27.  Our members are also concerned that local authorities will be allowed to own media companies and by the wide terms under which they will be allowed to operate local radio services. We draw your attention to the reservations recently expressed by the DTI on local authorities' website and other activities. There is unease at the prospect of extension of government controlled broadcasting, at local and regional level, perhaps funded by public money and carrying advertising, and the potential for commercial and other conflicts of interest.

  28.  Once again, the Government's treatment of regional and local newspapers adversely contrasts with its proposals for broadcast media, against which the regional press competes for audiences and advertisers, which is to be allowed to consolidate.

  29.  The Government must now recognise the reality of the fiercely competitive editorial and commercial environment in which regional and local newspaper companies operate. Instead of imposing new, unwarranted ownership restrictions upon regional newspaper companies, the Government must bring forward legislation that gives regional and local newspaper companies the freedom to evolve, develop and fairly compete with their many competitors at every level.

June 2002

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