Media Plurality - Communications Committee Contents

Chapter 5: Our proposal on media plurality policy

194.  In the previous chapters, we set out our analysis of the different models proposed in evidence for the scope, approach and decision-making arrangements of a plurality policy. In this chapter, we put forward our own view on the best way to proceed.


195.  In overview, our proposal is for a framework of two key elements. The first, which is new and similar to Ofcom's proposal, is the undertaking of a plurality review on a predictable periodic basis, which should set the context for the second: a significant modification of the existing arrangements for a review of specific transactions which occur in the interval between one periodic review and the next.

The periodic plurality review

196.  The centre-piece of our approach is that the Government should introduce a statutory periodic review of the plurality of the media markets to be undertaken by Ofcom on a 4-5 yearly basis, which will reshape the role for Government, Parliament, regulator and competition authorities in protecting the public interest.

197.  This approach is uniquely able to live up to the principle, stated in Chapter 3, that the assessment of plurality should drive the decision about which remedy or intervention is appropriate, not the other way around. Other approaches put to us were unable to meet this principle. For example, consider intervention based on statutory caps or on a hybrid model incorporating caps. It is inherent to these approaches that the decision about which remedy or intervention is appropriate (for its proponents, a cap) drives the way in which plurality should be assessed (an arbitrary and potentially misleading single metric in whose terms the level of the cap has to be set). In such approaches, the decision about how to assess plurality is hamstrung by a commitment to a particular intervention.

198.  The scope of periodic reviews should be as described in the chapter on Scope, summarised in the box below:

Box 2

Recap of conclusions from chapter 2 on scope
Periodic plurality reviews …

·  should be able to take into account media enterprises based in the UK as well as those outside UK jurisdiction to the extent that they are consumed by UK audiences if this is considered relevant to the overall assessment;

·  should encompass both local and regional media as well as national media in the devolved nations and UK-wide media enterprises.

·  should be limited to the activities of media enterprises engaged in news and current affairs content.

·  should not be limited by the media channel through which content is primarily delivered: print, broadcast and content delivered over the internet may all be relevant, as could be the influence of digital intermediaries on the consumption of this content It should, therefore, be open to an assessment of plurality to determine which media channels should be in scope based on whether they are relevant to the overall assessment of plurality at the time.

·  should take into account both the supply and consumption of content

·  should be flexible enough to take into account both the wholesale and retail provision of news and current affairs content. It should establish an approach to determining how to attribute content to media enterprises operating at different points in the value chain. This determination will require the location of editorial control in the value chain to be identified in each case.

199.  Ofcom's periodic assessment of plurality should be based on a limited number of different measures which address availability, consumption and impact.

200.  There should be a role for Parliament in setting guidance for this new framework of assessment, but the metrics themselves to be used in assessing plurality should not be set down in statute. Instead, there should be flexibility for Ofcom to interpret statutory guidance, design the assessment framework and select appropriate metrics according to the circumstances at the time of the review, but with an emphasis, wherever possible, on longitudinal consistency of the measures applied.

201.  The Government's stated intention, in their recent consultation on Media Ownership and Plurality, is to "commission the development of a clear measurement framework, to be worked up in partnership with industry."[195] The Minister clarified the potential risk, however, of setting this in stone while also recognising the need for market certainty:

    "As you quite rightly say, a set of measurement frameworks put together in 2014 may not be adequate even in 2016 or 2015, given the pace of change of technology. At the same time, I think the people working in this industry want an element of certainty."[196]

202.  We agree with the Minister's view. An important principle for any plurality policy is that the framework of assessment strikes a balance between providing certainty to the market as well as flexibility to the regulator—both are important. Flexibility is required to ensure that plurality is measured and promoted in the way that makes sense as the media market changes over time. It is unrealistic to expect to find a fixed measurement framework which can adequately assess the sufficiency of plurality as media enterprises' products and consumers' and citizens' behaviours change. However, the work which the Government plan to commission could very usefully inform Ofcom's decisions at the time of the first periodic review. At that point, market certainty can be provided by giving the responsibility to Ofcom, as far as possible, to strive to maintain longitudinal consistency in the measures it applies. This should not only provide the greatest possible certainty to the market but also serve the secondary purpose of making useful comparative analyses possible between successive periodic reviews.

203.  The work which the Government intend to commission relating to the development of a clear measurement framework should not seek to find a 'right way' of measuring media plurality which can then be set in stone. Instead its output should provide Ofcom with a starting point and input to the decisions it will have to make, at the time of the first periodic review, about how to design the assessment framework and select appropriate metrics in a way most likely to balance the twin objectives of delivering certainty to the market and sufficient flexibility for a proper assessment of plurality at the time.

204.  Ofcom should select the metrics to be used in a plurality assessment which are most likely to assist it, given the state of the market at the time of each periodic review, in reaching defendable conclusions about the following:

·  the sufficiency of diversity of viewpoints available and consumed across and within media enterprises; and

·  the extent to which any one media owner or voice may have too much influence over public opinion and the political agenda.

205.  The periodic plurality review report should contain both a narrative assessment of the sufficiency of plurality in specific media markets and across media; and a clear indication of where plurality may be under threat, which will guide the decisions over intervention in the event of any transaction.

206.  In producing the narrative description of the degree of sufficiency of plurality, Ofcom should be able to rely on new guidance relating to the definition of sufficient plurality to be set down in statute. This guidance should be qualitative and descriptive rather than quantitative and tightly prescriptive.

207.  The content of this guidance should be clearly stated in statute and might include certain key elements such as a diverse range of independent news voices; high overall reach and consumption with consumers actively multi-sourcing; sufficiently low barriers to entry and competition to spur innovation; economic sustainability and no single organisation accounting for too large a share of the market.

208.  The Government could, as part of the next phase in their work programme on media plurality, also begin to develop statutory guidance relating to the meaning of sufficiency of plurality upon which Ofcom can rely in making an assessment of plurality at the time of a periodic review.

209.  For the most part, we do not expect periodic reviews to result in any direct market intervention. Only in the most extreme circumstances should interventions in the interests of plurality be imposed outwith the context of a transaction.

210.  Not to respect this principle would create a risk of retrospectively penalising acquisitions and other past decisions made by media enterprises on an entirely legitimate basis. However, there is nonetheless a clearly identified need to correct the absence in the current arrangements of a mechanism to defend against severe plurality concerns which can arise through organic growth, entirely outside the context of transactions.

211.  Where immediate and pressing concerns resulting from organic change are discovered in a periodic review, it should be possible for Ofcom to order a media enterprise to divest. The bar for this imposition should be high and hinge on a demonstration of the following:

·  That there is a real problem now;

·  That the specific proposed divestment measure is the only way to remedy the problem;

·  That the specific proposed divestment measure will be effective in remedying the problem.

212.  Before making the recommendation that a media enterprise should be ordered to divest, Ofcom must ask those players affected to submit representations, in which they can put forward their own divestment measures in lieu of Ofcom's initial recommendation. Ofcom can then make a final recommendation if, in light of these representations, Ofcom believes there is a divestment measure, either of its own or of the media enterprise's design, able to pass the tests above.

213.  In a nutshell, Ofcom's task in conducting the periodic review will be to identify plurality concerns which exist in relation to specific media markets and across media, or with particular players. One sensible way in which Ofcom might do this is to list them in one of three categories, indicating an escalating level of concern. Of course, not being placed in any of these categories might be taken as good news, as an indication that Ofcom found no reason at the time of the review to express a concern.

(1)  Moderate concern. Describing a market or a media enterprise in this way would mean that Ofcom judges that any further consolidation would be a potential concern. A plurality review of any transaction either in this market or with the named players between the present and next periodic review could be merited.

(2)  High concern. Describing a market or media enterprise in this way would mean that Ofcom judges that any further consolidation would be very likely to result in a material lessening of plurality. A plurality review of any further transaction either in this market or with the named players between the present and next periodic review is all but guaranteed.

(3)  Severe concern. Placing a media enterprise in this category means that Ofcom's recommendation is that the enterprise be ordered to divest immediately. There must be a high bar to justifying this measure, as set out above in paragraph 210.

214.  There are three aspects to the rationale for setting out the review's conclusions in this way. First, it would send very clear signals and guidance to all concerned about the prospects of future possible transactions. Second, it provides a mechanism for dealing with organic change that has resulted in unacceptable concentration but creates a significant hurdle for the regulator to cross if they wish to recommend it. As such, it is able to deliver some of the benefits which proponents argue in favour of a statutory cap: a way of being able to say that a level of consolidation identified in the review is such a severe concern for democracy that there may be an appropriate basis on which to oblige divestment. Finally, it provides a running, longitudinal account of the state and sufficiency of media plurality in the UK, ensuring so far as possible the definition of sufficiency does not become removed from the realities of a changing industry and is able to evolve in a way around which there can be consensus.

215.  The first of these points—that the review should act as a form of forward guidance—deserves emphasis. The report to result from the periodic review should be written so as to limit the need for transactional plurality reviews, by sending very clear signals and guidance to all concerned about the prospects of consolidation in future possible transactions before they are formally proposed.

216.  As suggested in Chapter 2 on Scope, although it is conceivable that a periodic review could conclude that there are concerns with respect to the influence of digital intermediaries on plurality, there is a question about whether digital intermediaries, generally speaking, are within the jurisdictional reach of any remedies or interventions which the regulator could impose. We considered a similar issue in our previous Report on Media Convergence,[197] and recommended there that Ofcom should be required to establish and publish on a regular basis the UK public's expectations of major digital intermediaries. The rationale for this approach is contained in that Report, but lies inter alia in applying positive pressure on digital intermediaries to take responsibility to work with the Government and regulators here to help achieve our wider societal goals. As Robert Madelin, DG Connect, European Commission put to us during that inquiry:

    "if the big players have a view as to how much regulation they would like, they ought to embrace the opportunity to take responsibility. It is then up to us; it is up to legislators and societies around the world to decide whether that is good enough."[198]

217.  Ofcom should publish in its periodic plurality report any plurality concerns associated with digital intermediaries. Indeed this might be the vehicle through which Ofcom could on a regular basis express the UK public's expectations of major digital intermediaries, as recommended in our previous Report on Media Convergence.

218.  Finally, once complete, Ofcom's report on the periodic plurality review must be submitted to the Secretary of State.

219.  The process for agreeing a final report should proceed as follows: The Secretary of State should have an obligation to accept the content and recommendations of the periodic review report or publish good reasons for not doing so. Ofcom should be permitted to submit an amended report in the light of the reasons given by the Secretary of State but should not be able to submit a third report. If agreement cannot be reached, the Secretary of State should have the final say, and accordingly, if this arises, the Government rather than the regulator should revise and publish the final version of the periodic plurality report.

220.  There are a number of reasons why Ofcom should submit its review to the Secretary of State. First, it ensures a high bar is in place should Ofcom choose to recommend divestment of any media enterprise, as these recommendations can only proceed with the Secretary of State's approval. Second, it ensures politically accountable endorsement and weight is given to the signals Ofcom's conclusions send to stakeholders; that there is as wide an acceptance as possible and political authority behind Ofcom's narrative description of media plurality and its categorisation of specific media enterprises. Finally, it provides a mechanism for the Secretary of State to have a say about media plurality, and to be accountable for doing so, outwith the often more contentious context of evaluating specific media transactions.

221.  This represents an evolutionary development of the Levson hybrid described in chapter 4. The rationale for the Leveson hybrid is as stated in that chapter; it provides a mechanism by which democratic accountability can be combined with appropriate transparency and expert advice. The rationale for our development is simply to allow for the possibility that Ofcom might wish to acknowledge the Secretary of State's reasons for challenging the report, and see fit to clarify or amend its report in that light.

222.  Finally, although we haven't heard this expressed in evidence, we note the legitimate possible concern that periodic plurality reviews could entail an additional public cost. However, we would expect Ofcom to approach this in a way that limited costs beyond what is already incurred by them in other data gathering exercises and so on.

The transactional review

223.  The periodic plurality review should send clear signals to all concerned about the prospects of future possible transactions. Still, when any such transactions arise, a process must exist for determining its specific impact on plurality as well as of course on competition, and hence whether it is in the public interest overall for it to proceed.

224.  For this, our proposal is for a review to be undertaken on specific transactions which occur in the interval between periodic plurality reviews. This transactional review should consist of two distinct processes: one concerned with plurality, to be conducted by Ofcom, the other concerned with the competition aspects of the transaction, to be conducted by the competition authorities. In reality, we would expect this to be an infrequent occurrence.

225.  The Government should revise the present system of transactional reviews, in order to clarify the relationship between competition and plurality policy when dealing with specific transactions.

226.  To that end, plurality assessments and competition assessments of transactions should be conducted as two distinct processes, by regulators with the appropriate set of priorities, expertise, methods and ultimately ethos for each. Competition authorities should remain responsible for the assessment of a transaction's impact on competition, but Ofcom should be given a new statutory responsibility for the assessment of a transaction's impact on plurality.

227.  This separation of the competition assessment from the plurality assessment is a notable difference between our proposal and the existing arrangements for the evaluation of a media transaction engaging plurality concerns. Our argument for this separation begins with the observation we made in Chapter 1: that competition policy and plurality policy are actually different concepts, quite radically so. While a competition assessment will promote the interest of the consumer, a plurality assessment must focus on the interest of the citizen.

228.  There are two reasons to think Ofcom better placed than the generalist competition authorities to promote the interests of the citizen: first, its statutory obligation to further the interests of the citizen, not just the consumer;[199] second, and by extension, its expertise in regulating the media not only to serve legitimate commercial but also important social and collective ends. The rationale, therefore, for separating the competition assessment from the plurality assessment lies in the fact that this allows each to be undertaken by a regulator with the appropriate set of priorities, expertise, methods and ultimately ethos.

229.  While the plurality and competition assessments of a transaction should be made distinct and be undertaken by appropriate reviewing bodies, this is not to say that that either assessment need necessarily be undertaken on any single transaction at all. With regard to competition assessments, we have heard no evidence to suggest that the decision as to whether these proceed or do not proceed should be taken in a different way than at present. Currently, transactions falling beneath certain thresholds set out in the Enterprise Act 2002 are not investigated. We have, however, heard evidence to suggest that the way in which the competition assessment is conducted should be modified, and we address this below under the heading: the "Kent Messenger Group scenario."

230.  The plurality assessment of a transaction should proceed on the basis of a judgement by Ofcom. Right at the outset, Ofcom will have to form a reasonable belief prima facie that a specific transaction may be expected to result in a material and unacceptable lessening of plurality, and that it therefore merits closer assessment.

231.  In reaching a decision about whether there may be a material and unacceptable lessening of plurality as a result of a transaction and therefore whether to proceed with a plurality assessment, Ofcom should draw on the most recent periodic plurality report, and consider the relevance of any readily observable changes to plurality in the UK since.

232.  In most cases, it should be straightforward for Ofcom to decide not to investigate further.

233.  In conducting a plurality assessment of a specific transaction, Ofcom should reach a decision about whether or not the transaction should go ahead based on an assessment of the likelihood of its leading to a material and unacceptable lessening of plurality as compared to a scenario in which the transaction does not go ahead, taking into account in both scenarios:

·  the sufficiency of diversity of viewpoints available and consumed across and within media enterprises; and

·  the extent to which any one media owner or voice may have too much influence over public opinion and the political agenda.

234.  The final step in the transactional review should be the submission of the competition assessment and the plurality assessment to the Ofcom Board who should be responsible for reconciling the recommendations of the two reports and implementing them as a single Public Interest Decision.

235.  We recognise that, having undertaken the plurality assessment, Ofcom will need to ensure that its board is open to consider both competition and plurality reports without any kind of conflict and we address this point below.

236.  Where the two reports reach the same conclusion, the Ofcom Board must be responsible for ensuring the implementation of the regulators' mutual view either to block or allow the transaction, but there must be a clear mechanism in place for resolving potential conflicts between plurality and competition assessments of transactions.

237.  Further, this mechanism should be designed to resolve such conflicts on the very clear principle that, where plurality is concerned, the citizen interest should have greater weight than at present in relation to the consumer interest, and a democratic and informed society should have greater importance than at present when weighed against the cost of advertising.

238.  Responsibility for resolving such conflicts and as such for making a final Public Interest Decision should therefore be given to the Ofcom Board, rather than the competition authorities, as at present.

239.  The Ofcom Board, mindful of its twin statutory duties to further the citizen and consumer interest should publish this Public Interest Decision, having weighed up the merits of each case and determined whether overall it is in the public interest for the transaction to proceed.

240.  The rationale for giving responsibility to the Ofcom Board for the resolution of potential conflicts between plurality and competition assessments is straightforward: it should have the effect of promoting, more than has been the case, the role of the citizen's interest in these decisions. At present, these challenging judgements, in which the public and citizen's interest must be weighed with the consumer interest, are made based on recommendations from the competition authorities. The competition authorities have no founding statutory duty to the citizen's interest. By contrast, Ofcom has statutory duties to further and thus balance both the citizen and consumer interest. The transfer of the responsibility for making these challenging judgements from a body without these duties to one with them should have the effect of promoting, more than has been the case, the role of the citizen's interest in reaching a final decision. Its twin duties mean that the Ofcom Board is better placed to make a judgement about how the public interest will best be served.

241.  There are two possible concerns about handing this role to the Ofcom Board: first, the conflict of interest in weighing recommendations made by Ofcom against those made by another regulator; and second, the level of independence of the Ofcom Board from Government. On the latter point, Dr Tambini, for example, told us that:

    "Ofcom would have to think hard if it were going to take on more of the discretion that the Secretary of State has, with advice from Ofcom and the Competition Commission, currently. Ofcom would need safeguards on its independence … It may need a specialist media plurality panel within Ofcom, with security of tenure and some independence of operation, for example. This is not something that Ofcom could take on without thinking about it seriously and being reformed in some way."[200]

242.  This concern is founded, presumably, on the appointment mechanisms in place for the Ofcom Board. The Board's Non-Executive Members including the Chairman are appointed jointly by the Secretaries of State for Business, Innovation and Skills and for Culture, Media and Sport, while the Chairman and other non-executive members of the Board appoint the Chief Executive subject to the approval of the Secretary of State and also appoint any other executive Board members.

243.  The recent debates over press regulation and the independence from Government of a "recognition body" to oversee it have revealed a rich array of mechanisms and notional intermediary bodies by which independence might be secured. We are not persuaded that these are required in this case, but we do note that such mechanisms can be introduced should they prove to be.

244.  With regard to the concerns which might be raised about a conflict of interest on the Ofcom Board, there are two ways in which it should be possible to guard against this. First it will be important, for the Ofcom Board Members to have had no involvement with the team conducting Ofcom's transactional plurality assessment, and for the Executive Members of the Board to remove themselves from the Public Interest Decision if they have. Second, it will be important for the Ofcom Board members to be mindful of the potential for judicial review; and we expect that this should act as sufficient stimulus for the Ofcom Board to conduct its responsibility towards the final Public Interest Decision on media transactions in an appropriate manner.

245.  We note that one conspicuous difference between our overall approach to the transactional review and the current arrangements lies in the role of the Secretary of State. In our model, there is a justifiable role for the Secretary of State in approving the periodic plurality review report which represents the centre-piece of our proposal, and sets the context in which media transactions are proposed and assessed. The absence of a role for the Secretary of State in exercising discretion over specific transactions follows from the discussion on this point in Chapter 4 on Decision; the evidence we have received points clearly towards the conclusion that it is impossible for the Secretary of State to do so without the appearance of being influenced by political motives. By contrast, the Ofcom Board should be in a position to reach a defendable Public Interest Decision on specific transactions for the range of reasons we have already given. Accordingly, we have concluded that revisions to plurality policy should be guided by the following statement of principle:

246.  As a whole, plurality policy should be revised to strike a new balance between the regulator and Government in terms of decisions to be made about intervention: there should be accountability for politicians where appropriate but the onus should be on Ofcom to balance the consumer and citizen interests.

The 'Kent Messenger Group scenario'

247.  Where a transactional review does arise, there is a scenario to guard against which is potentially problematic with regard to plurality: how to avert what might be called a "Kent Messenger Group scenario;" see Box 3 below.

Box 3

The relevance of the Kent Messenger Group case
The current arrangements for a transactional competition assessment prescribe a two phase process. Phase 1 involves a decision by the OFT about whether to refer a case onto the Competition Commission for Phase 2, a full investigation. In 2011 the OFT was faced with a decision about whether to refer the proposed acquisition in 2011 of the Northcliffe titles in Kent by the Kent Messenger Group. To help inform this decision, the OFT asked Ofcom to provide a Local Media Assessment (LMA), a formalised way for Ofcom to assist the OFT in its assessment of mergers involving local media.

248.  From a public policy perspective, the issue that arose in the case of the Kent Messenger Group's proposed acquisition of the Northcliffe titles in Kent in 2011 boiled down to what appears to be the underweighting of the local media plurality concerns and the advice given in Ofcom's LMA, especially on the relevant counterfactual, in the decision about whether to refer the case onto a full Phase 2 investigation by the Competition Commission. Further it did not seem to be a relevant consideration that the costs which this sort of investigation imposes on local media enterprises may have to be drawn from resources, the lack of which provided the impetus for consolidation in the first place.

249.  We believe that a clear principle should guide the development of a solution: the interests of the citizen should have greater weight than at present in relation to the interests of the consumer; and the interests of plurality and a democratic and informed society should have greater importance than at present when weighed against the cost of advertising. We have considered a number of routes to realising this principle in the context of transactional competition assessments. It seems to us that the most proportionate response at this stage would be to give greater weight than is presently the case to Ofcom's Local Media Assessment (LMA), the mechanism by which Ofcom is able to feed into the competition authorities' decision about whether to refer the case onto Phase 2.[201] In view of the fact that only two LMAs have been produced, and this procedure is clearly still a relatively new one, the competition authorities should be given an opportunity to show they have learned from the past before more radical measures are considered.

250.  Ofcom's Local Media Assessment (LMA) should be given greater weight than at present in the competition authorities' decision about whether to refer a specific local media transaction onto a full Phase 2 investigation. The competition authorities should make this change clear in their guidance on mergers, before the new competition authority, the Competition and Markets Authority, comes into existence, at present anticipated in April 2014.

251.  We note that this recommendation bears a striking resemblance to one we made in a previous Report, The Future of Investigative Journalism, paragraph 161. We urge the competition authorities, in cooperation with Ofcom, to make greater progress towards implementing this recommendation following the present Report. Should the competition authorities fail to act on this recommendation, we urge the Secretary of State to consider the introduction of a measure by which the relevant section of the competition authorities' merger assessment guidance would have to be approved by the Secretary of State.

252.  Following on from this, we note the possibility of other media markets emerging, for example, perhaps online, in which moving a competition assessment from phase 1 to phase 2 could be so onerous on its players as to deter transactions which may be in the public interest. We, therefore, make the following recommendation:

253.  One of the outcomes of Ofcom's periodic plurality review might be a consideration of whether there is a case for the more in-depth assessment of media-specific considerations provided by the LMA procedure to apply more widely to players in other fragile or emerging media markets.

254.  In overview, the model we put forward for a transactional review is summarised in the graphic below.

Figure 2

Transactional Review

Other features of the 'plurality landscape'

255.  One feature of the 'plurality landscape' which we have not yet addressed in this chapter is the "20/20" rule. We discussed the merits and demerits of its removal in Chapter 3 and conclude, with the evidence, that there may be weakening arguments to keep it in place. Indeed it would appear as something of a curiosity and an anachronism within the approach we are arguing for because its formulaic automaticity succumbs to the criticism we have made on caps. However, as long as an approach able to live up to the principles we have set out in this Report remains unimplemented, it seems sensible to keep the "20/20" rule in place as a safeguard.

256.  We do not recommend the removal of the "20/20" rule, but equally would not argue for its retention. Were the Government to implement a revised plurality policy which lives up to the principles contained in this Report, there may be a case for its removal. However, absent such a policy, it remains a potentially important safeguard which should be kept in place.

257.  Finally, during the course of this inquiry we have found that certain policies and interventions which may be seen by some to have an indirect bearing on the core concerns of plurality policy but which are, as a matter of fact, separate policies can become unhelpfully entangled in discussion of plurality policy.

258.  The relationship should be clarified between the public interest and plurality as we have defined it in our Report and other related but separate policies and interventions such as licensing, PSB reviews, fit and proper person tests and so on.

195   Department for Culture, Media and Sport, July 2013. Op. Cit. Back

196   Q 424. Back

197   Select Committee on Communications, Media Convergence (2nd Report, Session 2012-13, HL Paper 154). Back

198   Ibid. Back

199   Communications Act 2003, section 3(1). Back

200   Q 9. Back

201   IbidBack

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