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.
CROSS-MEDIA
OWNERSHIP
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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