Examination of Witnesses (Questions 2367
- 2379)
WEDNESDAY 2 APRIL 2008
Mr John Hutton MP and Andy Burnham MP
Q2367 Chairman:
Good morning and welcome. I think it is the first time we have
had two secretaries of state together; I will not make any cracks
about having to move in pairs but it is very good of you both
to come and we appreciate it very much indeed. Before I start
I would just like to deal with one question and that is to remind
members of the Committee and witnesses as well that the BSkyB/ITV
case is currently before the Competition Appeals Tribunal and
as a result the case is covered by the resolution of the House
on sub judice and that means that this case should not be and
cannot be directly referred to today during today's session. I
should announce, as always, that the declarations of interests
of members of the Committee are on the side table. You know we
are looking at ownership, we are looking at consolidation of the
media and we are looking at what impact that has upon news. We
are basically interested in news and its impact, how it reaches
the public and the effects it has. Mr Hutton, some say that media
mergers should be left to the market and ordinary competition
law; what is the rationale for subjecting media mergers to greater
scrutiny than others?
Mr Hutton: The answer to that question probably
goes back to the 1962 Royal Commission chaired by Lord Shawcross
which I think laid the essential foundations for the current legal
and regulatory framework. The argument was put particularly well
in the Royal Commission report as to why we needed this layer
of regulation and layers of potential areas for intervention given
the importance of the press for our democracy and given the importance
that our press and media outlets should enable a free and open
expression of ideas. There is a strong case for arguing—this
has been accepted since the early 1960s—that in addition
to regulating mergers through competition there should be an opportunity
to challenge the concentration of ownership of the media in certain
hands. That is essentially the intellectual underpinning for the
current regime which is reflected in the Communication Act 2003
which amended the Enterprise Act. That gave to the secretary of
state the power to refer to the Competition Commission on public
interest grounds issues relating to plurality of ownership of
the media. I think the argument is a democratic one, that market
forces alone—even though they might be properly regulated
through competition law—would probably not be sufficient
to deal with the unique public sensitivity that I think attaches
to some of these issues. I would say in relation to the powers,
it is worth reflecting on one rather important fact. I know there
was controversy and concern at the time, but it is worth reminding
ourselves that since the Competition Act was passed and this power
of the secretary of state to intervene was consolidated it has
only been used in one case and that is the case you referred to
in your opening remarks. During that period of time there have
been 17 other issues to do with the application of competition
or merger law to media acquisitions and I hope that serves to
put this power, which is very much a reserve power, in its proper
context. I think it should be used rarely; we have a proper regulatory
framework dealing with the competition aspects of media mergers
and acquisitions. However, I do think as a sort of backstop, given
the sensitivity that the Shawcross Commission identified in relation
to media ownership, the secretary of state who ultimately is responsible
to elected members in this House should have this reserve backstop
power which should be exercised rarely and properly and which
is subject to a series of constraints that perhaps we can go into
in a minute.
Q2368 Chairman:
Thank you, I think that is a very clear exposition. We will come
back to the scope of the public interest test, but before that
you mentioned the reserve power. As it stands at the moment you,
as secretary of state, are the only person with the power to ask
Ofcom to investigate.
Mr Hutton: That is right.
Q2369 Chairman:
Do you think that there is a case for saying that Ofcom should
also have that power? Why do you want to keep it just to yourself?
Mr Hutton: Ofcom have the power to apply the
rules about media ownership as set out in the Competition Act
and there are extensive provisions made in that piece of legislation.
Q2370 Chairman:
They do not have the power to initiate.
Mr Hutton: They do not have the power to refer
to the Competition Commission on the public interest sense; that
is a power specifically referred to the secretary of state to
exercise. This of course was subject to extensive debate at the
time the legislation was going through. I think it does reflect
the unique public sensitivity around this particular area of law
and policy, that there is a political dimension to this and it
is sensible that that should be reflected. However, given the
constraints that are attached to the exercise of this power—the
duty to consult, the clear and obvious obligation to act only
on the basis of clear and demonstrable evidence and subject to
the jurisdiction of the Competition Appeals Tribunal—I think
we have a sensible balance of measures here. The unique role of
the press in our democracy has long been recognised in Parliament
and outside and therefore the need for vigilance around the concentration
in the hands of a few of the ownership of the critical mass media.
There should be a route through into the investigative process
that is set up by Parliament.
Q2371 Chairman:
I do not think anyone is challenging that. This Committee would
not in any way wish to challenge that but what I am asking is
whether there is any particular reason why the secretary of state
is the only person who can actually initiate proceedings. I can
see at the end of the day it may be the secretary of state who
makes the final decision when the Competition Commission has made
its report and you could say he is accountable to Parliament and
therefore it is he who should make that final decision. I cannot
quite see the same arguments applying to initiation.
Mr Hutton: My answer goes back to what I said
in relation to your initial question which is about the unique
circumstances of the issue that we are discussing here and the
public sensitivity of it. My own attempt to understand the structure—I
should make clear I had no part in putting this in place but it
is now my responsibility to defend—is a reasonable one.
You can clearly make the argument for others to have the power
to initiate such an investigation but I think it is worth bearing
in mind that although we should not and must not discuss the detail
of the BSkyB case, if you actually look at the sequence of events
it was essentially the Competition Commission itself who did the
actual examination of the facts in relation to the public interest
referral. In other words, did what was happening constitute an
unacceptable concentration of ownership? They concluded that it
did not and I accepted that decision which I think was incumbent
upon me to do so because they had done the detailed investigation.
We should not assume that because the secretary of state has the
power to refer that he or she also is the judge and jury at the
same time. That is not how I see the role of the secretary of
state. The secretary of state is acting in the public interest
as he or she must do in a variety of different contexts.
Q2372 Chairman:
If you go back to 1981 the crucial decision on The Times
and The Sunday Times was a secretary of state's decision
not to send it to what was then the MMC, so you can have a political
decision being taken which actually has a major impact upon merger
policy.
Mr Hutton: I am not aware of the detail of that
particular reference and I was of course not the secretary of
state that decided to make the reference in relation to the BSkyB
case although I do think it was right and proper that it should
have been so referred. I think the ultimate safeguard lay in the
process that Parliament has established because it is not the
secretary of state who actually makes these decisions. Ultimately,
although he or she has discretion to act in a public interest
case, he or she is bound to accept the findings of the Competition
Commission in relation to competition issues that any referral
has made. Speaking personally I think it would be exceptionally
difficult to imagine a set of circumstances where, having intervened
and referred to the Competition Commission and the Competition
Commission makes recommendations on these public interest grounds,
that any secretary of state would say, "I am sorry, I am
not accepting the findings of the Competition Commission".
I think that would have to be a unique set of circumstances. I
would find it very hard to envisage that actually coming about.
The power of the secretary of state is not, therefore, to be judge
and jury in the public interest but to act to defend the public
interest by referring the case for a proper examination by the
appropriate competition authority.
Q2373 Chairman:
So when the Competition Commission reports to you do you sit in
a quasi judicial capacity?
Mr Hutton: I think that is right, yes. It is
absolutely true in theory that the secretary of state, once he
or she has made a reference to the Competition Commission and
has intervened under the powers given to him or her by the Competition
Act, then in relation to the public interest issues the decision
is that finally of the secretary of state.
Q2374 Chairman:
Would you discuss your findings or your thoughts with Cabinet?
Mr Hutton: No.
Q2375 Chairman:
Would you discuss it with the prime minister or Number 10?
Mr Hutton: No, there were no such discussions.
Q2376 Lord Maxton:
Would you discuss it with Mr Burnham?
Mr Hutton: I did not discuss it with Mr Burnham
because he was not there at the time.
Andy Burnham: I do not believe our predecessors
discussed it.
Q2377 Lord Maxton:
Why would this be your decision and not the decision of the secretary
of state for Culture, Media and Sport who, after all, has the
overall responsibility for the media?
Mr Hutton: The legislation deposits that responsibility
with the secretary of state who has had historic responsibility
for competition issues and that has not been the responsibility
for the secretary of state for Culture, Media and Sport.
Q2378 Chairman:
You also have a conflict of interests; you are a politician as
well. The evidence we have received is, not surprisingly, that
prime ministers and ministers spend a tremendous amount of time
trying to influence the media, trying to influence the press.
You are doing that on one side but on the other side you are actually
sitting in an entirely independent way. There is a potential conflict
there, is there not?
Mr Hutton: You can always hunt out a potential
conflict of interest. I genuinely believe that there was no such
conflict of interest in this case. I would defend that not just
by reference to what happened on the facts of this case and the
way the decision was taken, but also by the way the legislation
has been constructed. The secretary of state does not make decisions
in these cases; the secretary of state refers cases to the Competition
Commission, that is his way into this issue, that is the way he
discharges his duty.
Q2379 Chairman:
He has a power at the end of the day to say to the Competition
Commission, "I do not agree with you" but basically
what you are saying is that that will never take place.
Mr Hutton: I think it is impossible to imagine
a set of circumstances where, having referred to the Competition
Commission, the secretary of state then overrules the decision
after months of inquiry by the Competition Commission and makes
a separate determination. It is inconceivable that that could
happen.
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