Joint Committee on Draft Communications Bill Report


(VII) NEWSPAPER MERGERS

268. The establishment of a distinct merger regime for newspapers derives from the work of the Royal Commission on the Press which published its Report in September 1962. That Royal Commission recommended the establishment of an independent tribunal to adjudicate on newspaper ownership changes on the basis of published public interest criteria to be defined in statute. It was envisaged that the public interest criteria would include the consideration that the "transaction was not such as significantly to affect the accurate presentation of news and the free expression of opinion".[514]

269. Since the mid-1960s, a special merger regime for newspapers has been in place, reflecting particular public sensitivity about newspaper ownership.[515] The current provisions are set out in the Fair Trading Act 1973. The main distinctive elements of the regime are the requirement for prior consent for mergers, a procedure for mandatory reference to the Competition Commission and criminal sanctions (which have never been used) for breaches of the rules.[516]

270. The Government has been committed to consideration of a "lighter touch" merger regime for newspapers since the Communications White Paper was published.[517] Reform of the 1973 Act regime has almost become a necessity in consequence of the general changes in the merger system provided for by the Enterprise Bill. The new general merger regime takes away all powers from the Secretary of State; decisions and remedies are reserved for the Competition Commission. The Secretary of State may only intervene in respect of a specified public interest consideration; when she refers a case to the Competition Commission for that reason, the Commission shall examine both the specified public interest consideration and the standard factors concerning a substantial lessening of competition. The Secretary of State must accept the Commission's findings regarding competition. The Enterprise Bill leaves the newspaper merger regime broadly untouched, but this is recognised by the Government as a "holding arrangement".[518]

271. The Government's Policy document published on 7 May reflected the Government's commitment to a "less onerous and less pervasive" newspaper merger regime.[519] The requirement for prior consent was to be removed. Criminal sanctions were to be abolished, with reliance instead being placed on the same enforcement powers as for mergers under the Enterprise Bill regime.[520] Draft Clauses explaining the new regime were promised in due course, but were delayed and will not now be available until August. Instead, we have had to base our comments in this Report on an account of the Government's policies provided to us at our insistence on the eve of our taking oral evidence from certain newspaper organisations.

272. The Government's proposals are based on a mechanism whereby there will be an additional exceptional public interest consideration (in the terms of the Enterprise Bill) applying specifically to newspapers. This enables the Secretary of State to intervene in the merger process and seek an initial report by the OFT. She will be bound by the OFT's findings with regard to substantial lessening of competition, but will have discretion on reference to the Competition Commission or other courses of proceeding where no competition impact is foreseen. Where reference is made on either or both grounds, the Competition Commission shall report and may propose remedies. The Secretary of State must accept any conclusions by the Commission on competition, but may reach her own decision in respect of the public interest and may vary remedies accordingly.[521]

273. A number of our witnesses were concerned about the complexity of the process and the number of parties concerned. We return later to the specific roles of the two parties not involved in normal merger decisions - OFCOM and the Secretary of State. However, it is important to note that the apparent complexity of the regime is substantially mitigated by the time limits imposed on decisions by the key parties, namely the Competition Commission and the Secretary of State.[522]

274. The distinctiveness of the new newspaper regime hinges on the definition and interpretation of the newspaper public interest consideration. The Government proposes that this should encompass the public interest in

    (a)  "the accurate presentation of the news;

    (b)  free expression of opinion, and

    (c)  the maintenance of plurality of views

—  in the United Kingdom press".

—  Each of these concepts draws upon previous decisions by the Monopolies and Mergers Commission and the Competition Commission on newspaper mergers.[523] The definition will be amendable by means of statutory instrument.[524] Harvey Kass of Associated Newspapers identified two immediate possible improvements to this definition. He argued that it could encompass views expressed across all media and also suggested a test relating to the long-term interest of the newspaper subject to merger.[525]

275. A significant concern about the new regime related to the proposed de minimis provisions. In essence, the same lower limits are to apply to newspaper mergers as to the other mergers under the Enterprise Bill. In consequence, transactions will be excluded where the turnover of the company acquired is below £45 million and there is no share of supply of 25 per cent or more in the relevant market. "Share of supply" will be defined in this context to include pre-merger share of supply of 25 per cent or above for either party of newspapers or advertising in newspapers. The Newspaper Society felt let down by these proposals, arguing that these thresholds would "catch very small newspaper transactions that are not caught at all at the moment".[526] The Government has previously acknowledged that the newspaper merger regime has had a disproportionate impact on the acquisition of local newspapers, even though no such acquisition has recently been held to be against the public interest on freedom of expression grounds.[527] The Newspaper Society regretted the decision not to carry forward the current circulation threshold of 50,000 and argued that a circulation threshold of 100,000 would be even more desirable.[528]

276. The Newspaper Society's concerns about the de minimis provisions were related to the same organisation's worries about the size of the relevant market under consideration in the context of share of supply. The market that may be considered will be one that represents "a substantial part of the United Kingdom".[529] Competition case law suggested to the Newspaper Society that this would cover small provincial markets, where the Competition Commission would be most unlikely to find public interest concerns.[530]

277. An integral element in the Government's proposals is the preservation of the decision-making role of the Secretary of State. A number of newspaper groups object in principle to this political involvement.[531] Patricia Hewitt left us in no doubt that she saw a continuing role for the Secretary of State in these decisions.[532] The Government's proposals endeavour to reflect the spirit of the general merger regime of the Enterprise Bill in providing that the Secretary of State can only vary the Competition Commission's findings on public interest grounds rather than competition grounds. She can, however, vary the remedies as she thinks fit on public interest grounds, while having regard to the remedies proposed by the Competition Commission.[533] Associated Newspapers were concerned at the scope of the Secretary of State's powers to override the Commission's report.[534]

278. As far as the newspapers from whom we heard are concerned, the most controversial aspect of the Government's proposals is the intention that OFCOM will be the main source of advice to the Secretary of State in reaching a decision on public interest grounds. The newspaper groups argued that OFCOM had no business commenting on newspapers; OFCOM would be staffed to look at regulated sectors with spectrum scarcity; it would have no real understanding of the distinctive culture and character of newspapers, particularly at a local level.[535] Patricia Hewitt argued that OFCOM was well placed to carry out a limited advisory role and would have "considerable expertise" to comment on broader issues relating to access to news and information and "the broad health of our democracy".[536]

279. The plurality test which we recommended earlier will apply to newspapers insofar as issues of accurate presentation of news and freedom of expression of opinion are concerned. The diversity of newspaper ownership will be substantially protected by the normal application of competition rules. The de minimis provisions of the merger regime in the Enterprise Bill - £45 million turnover or 25 per cent share of supply - will not enable the plurality test to be applied in all the circumstances where it may be desirable to do so. While we have not been presented with the specific draft Clauses for the newspaper merger regime, we agree that the issue of newspaper ownership is sufficiently important to warrant extended jurisdiction beyond the de minimis limits contained under competition law. However, in doing so, we would wish the Government to have full regard to the need for a substantial deregulatory outcome for the newspaper industry, especially as regards local newspapers.

280. We have considered the concerns raised by newspapers about OFCOM's proposed role in the newspaper merger regime. We consider that OFCOM will be able to develop sufficient expertise in media markets and plurality issues to make it well-placed to perform the advisory role envisaged for it. This will be particularly the case if, as we recommended earlier, OFCOM's periodic review of media ownership can be the basis for a reference for market investigation on plurality grounds. We support the Government's proposal to give OFCOM a defined advisory role in respect of plurality considerations in the newspaper merger regime.


514   Report of the Royal Commission on the Press 1961-62, September 1962, Cmnd 1811. Back

515   Ev 386, para 1.2; Media Ownership Rules, para 6.4.2. Back

516   Ev 386, para 1.3; Media Ownership Rules, para 6.4.10. Back

517   Cm 5010, p 45. Back

518   Ev 412. Back

519   Policy, p 4. Back

520   Policy, para 9.7.3; Ev 394-395, section 6. Back

521   Ev 391, section 5. Back

522   Policy, para 9.7.3; Ev 389, para 3.20; Ev 394, para 5.20; Q 913. Back

523   Ev 390-391, paras 4.8-4.15. Back

524   Ev 391, para 4.16 Back

525   Q 889. Back

526   Ev 369, para 13; QQ 936, 937. Back

527   Media Ownership Rules, para 6.4.7. Back

528   Media Ownership Rules, para 6.4.2; Ev 176, para 3.1.5; QQ 937, 939. Back

529   Ev 389, para 3.13. Back

530   Ev 369, para 13; QQ 939, 943. Back

531   Ev 361, section 4; QQ 889, 891, 903. Back

532   Q 1006. Back

533   Ev 394, para 5.20. Back

534   Ev 353, para 7.2. Back

535   Ev 362, section 4; Ev 358, paras 5, 16; Ev 353, para 7.6; Ev 369-370, paras 15-17; QQ 889, 891, 900, 933. Back

536   QQ 1003, 1005. Back


 
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