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Lord Inglewood: The amendments of the noble Lord, Lord Thomson, as he fairly said in his opening remarks, taken together would alter fundamentally the way in which we intend to regulate cross-holdings between newspapers and broadcasters. They would remove the market share limits which we intend to set for both national and local newspapers, and for broadcasters investing in newspapers. Instead, regulation would be reliant upon the application of the public interest test alone. Under these proposals, it would be for the Monopolies and Mergers Commission to determine whether a proposal was in the public interest. The revised public interest test would apply not just to the control of broadcasters by newspaper groups and vice versa, but also to participation by way of minority shareholdings.

With the agreement of the Committee, I wish to explain the Government's position and to comment on some of the points arising from the noble Lord's amendment. I wish to deal first with the removal of the newspaper market share thresholds. The current rules prevent any national newspaper group from owning more than a 20 per cent. stake in holders of licences to provide a Channel 3 service, a Channel 5 service, a domestic satellite service and national radio services. These restrictions will be relaxed in the Bill but the core concept at the heart of our policy allowing greater cross-holdings between media is that those who enjoy a position of dominance in the national newspaper market--we believe that this is a distinct phenomenon from local newspaper markets--should not also be allowed to become dominant broadcasters and vice versa. Uniting the leading sources of the national news agenda with the most potent sources for influencing opinion through broadcasting, carries the risk of concentrating too much power in the hands of one organisation. The proposed 20 per cent. market share threshold for national newspapers will continue to prevent those exceeding the threshold from controlling licences to provide a Channel 3 service, a Channel 5 service, a domestic satellite service and national or local radio services. The 20 per cent. and 50 per cent. thresholds for regional and local newspapers will prevent the most dominant newspaper groups from controlling broadcasters operating in the same region. They do not, however, prevent them from entering the television or radio market altogether.

I do not believe that it would be right to allow newspaper acquisitions of broadcasters to be entirely dependent on the judgment of the broadcasting regulators and the MMC. There must as a matter of public policy, which it is right for Parliament to decide,

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be a cut-off point above which a newspaper group is simply too big to be allowed to become one of the more powerful broadcasters as well. Similarly, it must be right that large regional newspaper groups should not be able to secure a more dominant position in a particular region through ownership of the regional Channel 3 service, or local radio licences, without Parliament setting an appropriate threshold.

I am not persuaded, therefore, that it is right for us to abandon the market thresholds for newspapers and simply to rely on the public interest test. Clear thresholds provide a measure of certainty for the industry, which the simple reliance on a public interest test would remove. They will also insulate the regulators from special pleading and other pressures that may be brought to bear on them if there is no threshold.

On the public interest itself, the Government concluded, after consultation, that it was right for the broadcasting regulators to retain their role in determining whether a company should become a licence holder. Both the Independent Television Commission and the Radio Authority have a considerable understanding of the media industry. We concluded that they would best be able to judge where the public interest lies in protecting plurality and diversity, which is at the heart of the test we propose. We would expect that, in applying the other elements of the test, which involve economic considerations, the broadcasting regulators will consult the Office of Fair Trading. We have not made this a requirement in drafting the test because we understand that in practice, the ITC, the Radio Authority and the OFT keep in touch with one another on matters of policy involving broadcasting and economic considerations. We did not therefore need to compel them to do what is already their standard practice.

I am also concerned that these amendments would extend the public interest test to participation by way of minority shareholdings. In the Government's view, this would only add bureaucracy and reduce transparency. If there is a case for applying the public interest test to participation, and I am not persuaded that there is, there is little point in applying it to stakes below the level at which shareholders might be regarded as being able to exert a material influence. We intend to bring forward revised proposals for regulating secondary holdings, but these will be based on absolute limits and will not involve a public interest test.

I should also add that the noble Lord's amendment envisages a number of circumstances in which a group's holdings in newspapers and broadcasters could be referred to the MMC for consideration; namely, if it increases its levels of participation, its aggregate share of the newspaper market, or its aggregate share of audience time. This would mean that even where a company had acquired a licence or a newspaper it would still face the continuing uncertainty of having to satisfy the public interest test as its circulation or audience levels rise. That would undermine the ability of media companies to plan their business. The test proposed in the Bill is intended to be a one-off test, applied on the

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acquisition of a newspaper or broadcaster, not one which can be applied continually as and when market shares increase.

We do not see that the sole authority which the noble Lord proposes for the MMC in applying the public interest test is desirable. We consider that the ITC and the Radio Authority are better able to judge matters of plurality and diversity in broadcasting, which are central to the objectives of this Bill and to the separate broadcasting industry ownership regime. The formal involvement of the MMC in this process would, in the Government's view, serve only to complicate the regulatory structure through the addition of another regulatory body in the process of determining whether a newspaper group should be allowed to become a licence holder.

I wish to turn to a point raised specifically by the noble Lord, Lord Thomson; that is, that media ownership regulation in no way inhibits the normal operation of competition legislation. That is absolutely clear. In responding to a point raised by the noble Lord, Lord Desai, we believe that, first, we have competition legislation which is intended to regulate competition and is based on economic considerations of what is involved in a commercial sense. In addition--and I have made this point on a number of occasions in this Chamber--we believe that the media are so important, because of their effects on the way in which people in this country obtain information and the relationship between the media and democracy and so forth, that it is appropriate to have a different set of rules which overlie the generally applied competition policy rules for the reasons I have just described.

Should a merger between a newspaper group and a broadcaster fall to be considered under competition legislation then, of course, the Secretary of State for Trade and Industry and the Office of Fair Trading and, where appropriate, the MMC will have a role in determining whether that merger should proceed. But in such a case, the OFT and MMC would primarily be concerned with the economic consequences of the proposal and not with questions of plurality and diversity.

The amendment also provides the Secretary of State with powers to determine the method by which newspaper market share is to be calculated. In bringing forward this Bill we have made it clear how we think newspaper market share should be calculated by including the method on the face of the Bill. I see no advantage in leaving this to be determined by order. On the contrary, I can envisage that winners and losers would be constantly lobbying the Secretary of State to change the method of calculation for the benefit of their newspaper business. I think it is better that such rules for calculation remain on the face of the Bill.

In this rather long contribution to the debate I have endeavoured to set out the Government's stall. It is important to have an upper threshold beyond which the most dominant newspaper groups should be prevented from also becoming dominant broadcasters, while at the same time remaining free to develop broadcasting

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interests in emerging markets. It is right that Parliament should set that threshold rather than leaving it for the regulators to determine.

The ITC and the Radio Authority are best placed to consider matters of pluralism and diversity which are at the heart of the public interest test and, where appropriate, they will consult the OFT on economic considerations. We see no need to have the formal involvement of the MMC in applying the public interest test. But where a merger falls to be considered under normal competition legislation, the MMC will continue to consider medium mergers where appropriate.

The noble Lord's amendments would effectively remove the distinctive role which the ITC and the Radio Authority play in policing ownership in the broadcasting industry and the distinctive system of controls which recognises the uniqueness of that industry.

6 p.m.

Lord Wyatt of Weeford: Perhaps the noble Lord will allow me to intervene. I listened with great interest to what he said. His government is the champion of deregulation, the market knows best and free competition. Why, then, does he propose to shackle one of the most successful competitors in the country instead of leaving it to carry on in the way described by the noble Lord, Lord Thomson, and leaving it to the public interest? Why should he also shackle the Daily Mirror? That is an unreasonable point of view too.

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