Letter and memorandum by Trinity Mirror
plc
SECOND CALL FOR EVIDENCE
I refer to your letter of 20 December 2007 to
our Chief Executive, Sly Bailey, and to our conversation on the
telephone yesterday. Please find attached a short paper containing
our written evidence in relation to three of the five questions
asked by the Committee.
INTRODUCTION
The Select Committee will know from evidence
submitted by the Company in response to the First Call for Evidence
that Trinity Mirror is one of the UK's foremost publishers of
national, regional and local newspapers which also operates a
large number of newspaper related and advertising driven (eg.
property, recruitment) websites.
In consequence, the comments of Trinity Mirror
in this Response focus primarily on the application of news and
ownership regulations to newspapers.
1. Are the requirements in the Communications
Act 2003 relating to the quality, quantity, scheduling and impartiality
of national and regional broadcast news appropriate? Are they
sufficient? Will they be appropriate and will they be sufficient
after digital switchover?
1.1 Trinity Mirror does not wish to submit
evidence on this question.
2. Are the public interest considerations
for media mergers set down in section 58 of the Enterprise Act
2002 strong and clear enough to protect a diverse and high quality
news media? Are the conditions under which the Secretary of State
can order a public interest investigation appropriate?
2.1 In relation to newspaper mergers, the
public interest considerations specified in Section 58 of the
Enterprise Act 2002[1]
(the "Act") are the need for:
(a) accurate presentation of news;
(b) free expression of opinion; and
(c) to the extent that it is reasonable and
practicable, a sufficient plurality of views in newspapers in
each market for newspapers in the United Kingdom (or part of the
United Kingdom).
2.2 The UK is exceptionally well served
at present by the diversity and quality of its news coverage,
news being provided by television, radio, newspapers, magazines
and the internet. The question posed by the Select Committee is
whether that situation may be at risk as a consequence of media
concentration that cannot be controlled under current powers;
and whether additional or clearer powers are required to protect
the current diversity and quality of news coverage.
2.3 The powers of the Secretary of State
under Section 58 of the Act come into play whenever a merger meets
the jurisdictional thresholds under the Act. There are two alternative
thresholds. Either the target must have annual sales of at least
£70 million— or the merging parties between them must
account for 25% or more of the supply of particular goods or services
in the UK (or in a substantial part of it). The latter threshold
may be met if the merger parties between them supply more than
25% of newspapers or newspaper advertising (or newspaper advertising
of a particular type) whether nationally or locally. In practice
the low turnover threshold and the 25% share of supply rule mean
that any newspaper merger of significance will be caught under
the Act such that the Secretary of State would have power to invoke
the public interest powers under Section 58. Accordingly, there
does not appear to be any need for additional powers in this regard.
2.4 There may be an issue, however, about
the clarity of the current powers and the manner in which they
should be applied.
2.5 Until 2003 newspaper mergers were subject
to a special, mandatory ex ante regime under the Fair Trading
Act administered by the Department of Trade and Industry. That
regime required most newspaper mergers to be referred to the Competition
Commission (the "Commission"). The Commission was required
to have regard inter alia to implications of a newspaper
merger for the accurate presentation of news and free expression
of opinion. Thus the Commission has experience under the old regime
of considering and assessing these particular considerations.
Moreover, the Commission's conclusions on these issues under the
old regime have not generally given rise to any concern[2]
and there is no obvious reason why the Commission should not be
equally capable of assessing these issues under the current regime.
2.6 By contrast the issue of plurality was
not one that the Commission was required to consider under the
old regime and there are a number of unanswered questions about
the concept of "plurality", how it should be assessed
and benchmarked.
2.7 The recent report on BSkyB/ITV was
the first occasion on which the Commission had to consider these
issues. In the event it concluded that BSkyB's minority stake
in ITV did not give rise to a concern about plurality. In arriving
at its conclusion, the Commission set down a methodology that
it is reasonable to assume will be applied in future cases. In
particular:
(a) the Commission drew a distinction between
the plurality of persons with control of media enterprises and
the implications of that plurality for the range of information
and views made available to audiences;
(b) the Commission distinguished between
the range of information and views provided across separate independent
media groups ("external plurality") and the range provided
within individual media groups ("internal plurality");
(c) the Commission also noted a distinction
between plurality and impartiality.
The Commission appears to have adopted a reasonable
methodological approach.
2.8 Importantly, however, the Commission
noted that there is little guidance as to what constitutes a "sufficient
plurality of persons". The basis of the Commission's
findings in the BSkyB/ITV case meant that the absence of
such guidance did not give rise to a problem on that occasion.
However, it is not difficult to envisage possible media mergers
in future where the absence of such guidance could prove critical;
and it is unlikely to be possible—or indeed desirable—for
the Commission to seek to develop policy in relation to such a
complex issue in the context and limited time frame of an individual
newspaper merger reference.
2.9 In the case of mergers involving national
newspapers there may be some implicit understanding of what would
not be acceptable in terms of a "sufficiency"
of plurality, but there is uncertainty about what further concentration
might be permitted, especially "at the margin". Moreover,
in the case of mergers involving regional or local newspapers
there is no implicit understanding of the boundaries or of what
would be regarded as a "sufficiency" of plurality.
There is clearly a case for greater clarity in this area.
2.10 As the Select Committee will be aware,
most national newspapers have certain party-political tendencies.
For that reason, there is a strong case for ensuring plurality
of ownership of national newspapers in order to maintain plurality
of information and views for readers. By contrast, only in very
few, wholly exceptional cases (such as The Belfast Telegraph
and the Newsletter in Northern Ireland, and the Yorkshire
Evening Post) do regional or local newspapers have a party-political
bias. Regional and local newspapers are generally looking to appeal
to the entirety of the communities they serve, without any party-political
bias. Indeed, any such tendencies risk alienating readers and
advertisers. In these circumstances—and without further
guidance on this issue—it is difficult to see on what basis
the Commission or others will assess "sufficiency"
of plurality in relation to regional and local newspapers.
2.11 In Trinity Mirrors view, such clarity
is especially important because the current regime appears to
be placing unnecessary obstacles to further mergers involving
regional and local newspapers.
3. Do current national and local cross-media
and single sector media ownership rules set out in UK legislation
do enough to ensure a high quality and diverse news media? Or
now that most news organizations are moving towards multi- platform
operations, have these rules outlived their usefulness and relevance?
In this context are there effective actions that can be adopted
by news organizations to protect the public interest?
3.1 As noted above, the UK is exceptionally
well served at present by the diversity and quality of its news
coverage. The national and local cross-media and single media
ownership rules may well have provided a structural framework
that has allowed the current situation to evolve. More difficult
to assess is the extent to which those rules—rather than
the dynamics of the market—can be said to have facilitated
the current diversity and quality of news coverage; and if the
rules have had such an effect, which of them have had the most
impact in this regard.
3.2 The recent BSkyB/ITV inquiry
suggests that there is still a place for national cross-media
rules. Although there was no adverse special public interest finding
by the Commission in that case, it is difficult to imagine that
the Commission would have reached the same conclusion if the rules
had been relaxed to permit BSkyB to acquire a controlling interest
in 1TV (rather than an interest of no more than 20%).
3.3 The fact that certain exceptional circumstances
may justify retaining one such prohibition does not mean
that all such prohibitions should be retained. As noted
above, Trinity Mirror has a particular concern about the application
of the current regime to mergers between regional and local newspapers.
The current law has evolved from a regime put in place over 30
years ago. It was primarily devised in order to control mergers
between national newspapers, many of which at that time were still
controlled by old-style, politically active, press barons. In
practice the old regime was rarely applied to control mergers
involving such newspapers, because most of the mergers were waived
through under the failing newspaper exception. Instead—and
somewhat ironically given the apolitical nature of such newspapers—the
law has mainly been applied to mergers involving regional and
local newspapers. In relation to such mergers there is now real
concern that the "competition-based" analysis of the
current merger control regime focuses on short-term reductions
in competition in very narrowly defined markets for local advertising,
without adequate regard for the longer term implications of the
increasingly competitive market in which such newspaper operate.
In particular, such analysis does not pay sufficient regard to
the importance to local communities and to society at large of
maintaining the longer term viability of local titles and their
ability to continue to deliver news to the local communities that
they serve.
3.4 It is instructive that Ofcom itself
has acknowledged in its evidence to the Select Committee that
it is not well equipped to offer advice to the Secretary of State
on the special public interest aspects of newspaper mergers. That
being so, it is unreasonable to expect that the broader public
interest protections built into the current system will operate
well in relation to newspaper mergers. In Trinity Mirror's view,
that is especially true of mergers involving local and regional
newspapers.
3.5 Trinity Mirror believes there is a strong
case for changing the current approach to the control of mergers
involving regional and local newspapers and its excessive focus
on narrowly defined markets and short term reductions in competition
for advertising—and for placing greater emphasis on the
need to safeguard the long term future of such newspapers and
their ability to continue to deliver news to their local communities.
3.6 Trinity Mirror recognises that this
is a period of profound change for all forms of media in the UK.
This may caution against other wide-ranging changes in the rules
at this stage. Equally, however, it argues strongly in favour
of maintaining a three yearly review by Ofcom.
3.7 Trinity Mirror is concerned that the
Competition authorities have applied very narrow definitions to
advertising markets when reviewing mergers at a local newspaper
level. There has been little recognition that both consumers and
advertisers increasingly view "the media" (Television,
radio, magazines, the internet, ambient and outdoor advertising,
direct mail) as almost interchangeable. If it were ever true,
which is doubtful, that local newspapers had monopolies of local
advertising markets and could impose whatever pricing policy that
they chose, it is certainly not the case today. An advertiser
who believed that he was being charged too much would simply move
his custom to the internet, advertise in a specialist magazine,
or buy a local radio spot..All these alternative media act as
a very real constraint on pricing.
4. Do any problems arise from having four
bodies involved in the regulation of media markets (the OFT, Ofcom,
the Competition Commission and the Secretary of State)? Are there
any desirable reforms that would improve the effectiveness of
the regulatory regime?
4.1 Self-evidently the involvement of four
different bodies in the regulation of media markets implies a
degree of complexity in the process; it also has implications
for the duration of the process.
4.2 That said, the roles of Ofcom and the
Secretary of State are limited to special interest considerations.
If Parliament considers that mergers involving the media and other
areas (eg national security) require consideration of specific
issues that go beyond a possible diminution of competition (as
many other jurisdictions do), it is almost inevitable that the
review process will be longer and more complex. That is part of
the price to be paid for ensuring that the public interest is
properly protected. This only becomes a legitimate issue of concern
if the processes are unnecessarily complex or lengthy. There is
as yet insufficient experience of the current regime to make any
assessment on that score.
4.3 Moreover, as long as the UK's mainstream
merger control system retains the involvement of both the OFT
and the CC (and does not collapse their roles into one), in practice
the only scope for reducing the number of bodies involved would
be to exclude either Ofcom or the Secretary of State. To exclude
Ofcom would cause the Secretary of State once again to become
directly involved in taking decisions on potentially sensitive
issues—which would be directly counter to one of the key
objectives of the changes introduced by the Enterprise Act. On
the other hand, to exclude the Secretary of State would preclude
any political involvement in such decisions. Not only is it the
objective of the special media interest provisions to retain political
involvement in such (limited) cases, but there is little to suggest
that any such change should be a necessary or immediate objective.
4.4 As noted above, Ofcom itself recognizes
that it is not well equipped to offer advice to the Secretary
of State on the special public interest aspects of newspaper mergers;
and it is not clear that the Secretary of State is well equipped
to take such decisions in the absence of external advice. In this
one limited respect, therefore, Trinity Mirror believes that there
may well be some merit in limiting the involvement of Ofcom and
the Secretary of State.
4.5 That might be achieved by means of an
appropriate Guidance Notice (or equivalent). The Notice might
at the same time seek to re-balance the analysis of mergers involving
regional and local newspapers, to enhance the importance attached
to safeguarding the long term future of such newspapers and putting
into its proper perspective the effect of such a merger on local
advertising.
5. Has the lifting of all restrictions on
foreign ownership of UK media affected the quality and independence
of the UK news media, or will it affect it in the future? Has
the UK industry benefited, or does in stand to benefit in the
future?
5.1 Trinity Mirror does not wish to submit
evidence on this question.
Trinity Mirror is happy to provide further evidence
or to amplify any of its previous responses.
8 February 2008
1 As amended by section 375 of the Communications Act
2003. Back
2
The Commissions report on the proposed acquisition of the Nottingham
Evening Post by DMGT was something of an exception and recognised
as such at the time. The merger was eventually approved subject
to conditions by the Secretary of State. It seems unlikely that
the approach adopted by the Commission in that case would be followed
today. Back
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