Select Committee on Communications Minutes of Evidence

Examination of Witnesses (Questions 1980 - 1999)


Professor Tony Prosser, Professor Tom Gibbons and Professor Lorna Woods

  Q1980  Baroness Scott of Needham Market: I want to come back to the role of the Secretary of State. In general terms, I think one can characterise your response by saying that you think it is important to keep too much political interference out of the process; the job of a government department is to set a framework. Then, Professor Gibbons, you used the expression about the Secretary of State playing the trump card. What I want to do is to go through some of the bits of process and say at what point should he be playing the trump card or his cards. If we start with Ofcom, it has its statutory duty to promote the interests of the citizens but it does not have the power to initiate its own public interest investigations. First of all: do you think it should have or is it right that they rely on the Secretary of State to decide whether that should be taken forward?

  Professor Prosser: My view is that it should have this power. I think that again in the rest of competition law and in other areas of regulation the shift has been much more towards saying that independent regulators should have autonomy to initiate investigations themselves. We see this with the OFT for example. It seems to me that as long as you provide discretion at the end for the Minister and the Minister has publicly to justify how he uses that discretion, the early stage of deciding whether to investigate seems to be something which could be left to the independent regulator. That regulator will know the market better than the Minister, one hopes, or the civil servants, because it is the job of the regulator to keep the market under supervision. It would seem to me that that would be very desirable.

  Q1981  Baroness Scott of Needham Market: Would you all feel the same way?

  Professor Woods: I think it is odd that Ofcom does not have that power at the moment to do that. I wonder how we deal with a decision not to investigate then if we are leaving review right to the end.

  Professor Prosser: A decision by Ofcom not to initiate and investigate would be subject to the usual procedures for challenge by the Judicial Review Board.

  Q1982  Baroness Scott of Needham Market: Would you think in that case—that the Secretary of State would have another trump card, which would be to say: you decided not to investigate it but I think you should? Would it work that way round too?

  Professor Prosser: Like a call-in in the planning system? Yes, I think that would be an interesting proposal which I had not thought about before. It could be desirable.

  Professor Gibbons: Of course it would always be open to competitors and indeed members of the public to make a complaint or ask for an investigation. I would see Ofcom's initiative as being a backstop possibility if complaints were not coming out of the market or elsewhere.

  Q1983  Baroness Scott of Needham Market: Would it be your view that really Ofcom would have to have that power because the remit of the Competition Commission is too narrow? Is that narrowness an element?

  Professor Prosser: Yes.

  Q1984  Baroness Scott of Needham Market: If Ofcom raised a concern, then automatically referring it to the Competition Commission, would that in your view be helpful or not because they do not have the remit to deal with the broad issues?

  Professor Prosser: I think that would be helpful also. At that second stage of deciding, having done a preliminary investigation, whether or not it should go to the Competition Commission again is something that Ofcom as a regulatory body would be well placed to do. It seems to me that the public interest issues would come in at the end in deciding whether or not to accept Competition Commission proposals, but earlier at the stage of investigation that is again precisely something which independent regulatory bodies should be good at.

  Q1985  Baroness Scott of Needham Market: At that end stage, should the Secretary of State be bound to accept the use of the regulatory authorities, in this case at the moment the Competition Commission, or is it right that they have this discretion that they can use as their trump card?

  Professor Prosser: This is where I think we may differ somewhat. My view is that there should be a remaining discretion for the Minister, partly because of the formidable political difficulties of removing that. It is just not on the agenda in this context as opposed to ordinary competition law. Secondly, however, it seems to me that, given the importance for a democratic society of these issues, they could well raise considerations that are a bit broader than we could expect an independent regulatory body, particularly a competition commission type regulatory body, to take on board. The important qualification to what I have said is that of course the Minister's decision should be fully reasoned; it will be subject to judicial review, so it is not a matter of the Minister simply taking a decision which completely disregards anything that has been said earlier. It seems to me the role of the regulator is to inform, advise and propose and not take the final decision.

  Professor Woods: I have concerns with plurality issues being determined in the final instance by the Competition Commission, merely because with its focus it has a very narrow view. I suppose the public interest is different in different contexts, and also the level of threat we are prepared to accept. The standard position in European competition law and now the Competition Act is that power in itself is not bad; it is the abuse. So we are waiting for an abuse to happen almost in a competition assessment. I am not sure I am so happy to wait for somebody to abuse their power in a media context before we feel there is a problem. I think there is a lower level of acceptable risk to plurality in that context. For that reason I think I am not happy to see plurality issues being the job of the Competition Commission. I think in that context the Secretary of State can take in broader issues. I do have concerns about, I suppose, independence and what Professor Prosser has said about fully reasoned decisions maybe carrying some weight. I am slightly uneasy.

  Q1986  Baroness McIntosh of Hudnall: Can we perhaps look at that by example because we have an example in front of us now of a very recent decision that was taken by the Secretary of State on advice from the Competition Commission; Ofcom were also involved. There is a remedy that has been proposed by the Secretary of State which may or may not please any of the parties involved but it was taken by the Secretary of State. If you take that example, is that for you a good example of how these various regulatory pressures work? Is it textbook? Is it faulty in some way? I know we have already discussed this but just in terms of the procedure, the processes, how does it rate?

  Professor Prosser: We are talking here about ITV and BSkyB?

  Q1987  Baroness McIntosh of Hudnall: Yes. I should have said that.

  Professor Prosser: It is a very unusual case. Remember that the Secretary of State found that there were no plurality issues involved, as did the Competition Commission, given those protections that it believed existed. In a sense, it was very similar to an ordinary merger case concerned with a non-media institution. That seemed to me the sort of case where there would be no problem in saying the Competition Commission can take the final decision and decide on remedies because the issue was one of maintaining competitive markets. Had there been plurality issues involved and had this been accepted by the investigatory bodies, then I think we would have moved into the territory which we have just discussed where it seems to me that the Minister's role would be important and where you would need to have a responsible Minister taking the final decision on an informed and public basis.

  Q1988  Baroness Scott of Needham Market: Could I ask your colleagues because you are the ones who are slightly more sceptical about the role of the Secretary of State? If we had the situation that you have all agreed that you would like where Ofcom could initiate investigations, it could become more commonplace that they would find on their public interest test that something was not all right and the competition authorities would find on their economic framework that it was. If you do not have role for the Secretary of State, who would arbitrate between the two views?

  Professor Gibbons: If we had that position, I think it would have to be built into the legislation somehow that one consideration dominated the other. Other things being equal, I would tend to go toward the plurality test being dominant. It is interesting that we have not really had the relationship between the two properly tested, as Professor Prosser said. One could almost imagine a convention beginning to develop that the Minister would have to show really good reasons why he or she would depart from the recommendation of a regulator. In some ways, it is easier for that kind of expectation to start to develop when you have had a negative decision such as we have had—there was no plurality problem—because for all that, the reasoning was very close. There were good reasons offered for why the Minister decided to accept the recommendation that there was no plurality problem and one could see that carrying through into future decisions. I think we might in any event be getting to a situation where the political manoeuvrability is going to be limited by developing expectations that even these kinds of what ought to be political decisions have to be fully rational.

  Q1989  Baroness McIntosh of Hudnall: I had something chasing through my mind while you were talking there, which was about some evidence that Ofcom gave to us when they were before us a few weeks ago. Ed Richards, speaking about this issue, expressed some surprise to us that the plurality issue did not seem to have been accepted as being relevant in relation to the BSkyB thing. I think that surprise was probably not limited to him; that there were a lot of people looking in on that issue who probably took a similar view. Were you surprised that plurality was not deemed to be an issue there?

  Professor Gibbons: I was initially; then, when I looked at it more closely, I thought that the reasoning seemed quite strong. However, I said earlier that I have one reservation; that is, I think that the Competition Commission did not really have a sense of the long term and the kinds of resources that might be put into news organisation. Related to that is the issue of the viewers' or the end users' experience—the sense of trust. Because, no matter what might be said about this, I think there will be an underlying suspicion that, if BSkyB were to have that kind of interest in ITV, can we really trust ITV to be the kind of organisation that it was? There may be no rational basis for that, but I think that trust is quite an important element of the relationship between the journalist and the readership and audience. The Competition Commission took a rather formal view of measuring that trust, I thought. With that reservation, it was perhaps a little odd that it did not, on balance, find there was more of a risk.

  Q1990  Lord Maxton: Do you think if they had not done that and the Virgin takeover of ITV had gone ahead, Sky would have insisted on that being referred to the Competition Commission?

  Professor Gibbons: I do not know.

  Q1991  Lord Maxton: Surely that raises even greater issues of control, plurality and all the rest of it? Would there not have been an equal case for that to have gone to the Competition Commission and to Ofcom? Do you think it would have happened? I know that you are guessing.

  Professor Gibbons: I am guessing, but it should work both ways.

  Q1992  Lord Maxton: That is what academics are for, is it not?

  Professor Gibbons: Yes, indeed.

  Q1993  Chairman: There is perhaps a danger in our building a whole structure on one case, is there not? This is not the only case that we have had over the years, under different Governments as well. The dilemma remains. We have received a lot of evidence on politicians wooing proprietors, owners, and on the face of it there does seem to be a dilemma—I would not put it more strongly—in having the politicians who are wooing proprietors also deciding, in the end, about what the final disposition will be of a proposal to merge. Is that not the essential dilemma on the independence point you are putting?

  Professor Gibbons: Yes.

  Q1994  Baroness Scott of Needham Market: There is a final question on that which is that, having made the decision, there is the question of remedy. At the moment, if there is not a plurality issue then it is straightforward: it is a competition issue. If there is a plurality issue, however, it is the secretary of state. Is that a situation that you think is right, or is it one of the reasons why you thought Ofcom should also have an ability to launch an investigation?

  Professor Prosser: On the remedies issue it seems to me that there is no reason why you should not leave the remedies decision to Ofcom. The minister's role in my view is to take the final public interest decision of substance. The minister will not have a particular role, it seems to me, where you have the details of the remedies, because the body that is closer to the market—the regulator—will be better able to decide on remedies, particularly given that that is the body that should be responsible for monitoring observance of the remedies as well. I think that we could therefore leave that for the regulator.

  Q1995  Chairman: I do not know if things have changed but, certainly when I was in the Cabinet, this did not come to Cabinet because it was a decision for the secretary of state, sitting in a quasi-judicial position. Is that still the position?

  Professor Prosser: In general competition law, no; it is for the competition authorities. That was one of the changes made by the Competition Act and the Enterprise Act. In this area, because of the public interest considerations, it is still for the minister.

  Q1996  Chairman: In effect what it means is that one secretary of state actually makes a decision, at the end of the day.

  Professor Prosser: Yes.

  Q1997  Chairman: But you are saying, "That's fine. It can be subject to judicial review".

  Professor Prosser: That is one potential means of accountability.

  Q1998  Chairman: It is not much of a safeguard, is it—judicial review? It is simply a matter of opinion, in a way. I am not quite sure how he could be challenged on judicial review successfully.

  Professor Prosser: Judicial review has developed extensively recently. Certainly I can imagine a court asking the secretary of state to justify his reasons publicly as part of that process. It seems to me here that, as we are dealing with issues that are value-based, it will be very hard to say that there is a simple rule that can provide the outcome. If we are talking about values, it is for the minister. The important thing is that the minister has to justify those values publicly, and that is the sort of process that I would envisage.

  Q1999  Chairman: At the moment the position is ... ?

  Professor Prosser: The position at the moment is that judicial review would apply to a remedies decision, I think. It has not been used because we have not had opportunities to see it, given that we only have this one decision. The substance of the ITV/BSkyB decision is likely to be appealed to the Competition Appeal Tribunal, given the nature of the decision anyway. We will therefore have scrutiny of the substance there.

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2008