Examination of Witnesses (Questions 899-919)|
THURSDAY 4 JULY
899. You heard my last question on self-regulation.
It has cropped up and seized everyone's imagination quite a lot.
Are there any thoughts you might have as a group on how we can
move in that direction?
(Mr Graf) Sir, having just heard this for the first
time this morning, I would be very happy to go away and consider
the implications of that.
(Ms Clark) Can we ask for a little bit
more clarification? Are you talking about self-regulation of content,
or ownership issues, or in general?
Chairman: Basically there are two options, one
is increasing regulation and the other is increasing self-regulation
and Mr Kass made the point that a lot of it is to do with perception.
How do you create a self-regulatory framework which is sufficiently
credible that the public developments and, indeed, Parliament,
appeal to the faithful? We feel at the moment that we are in no
man's land. They know that they can do the job; they have the
capacity and the will to self-regulate but how do we create the
framework where that achieves credibility? Perhaps you could get
back to us on that.
900. We have all had this memorandum on newspaper
mergers. In your preliminary views on a new regime you both question
the expertise of OFCOM even to participate in an advisory capacity
regarding newspaper mergers, yet OFCOM has a brief that covers
the media sector and has an overriding duty to look at plurality
and diversity. Does OFCOM's role and duty not make it very well
placed to offer informed advice to the OFT on newspaper ownership
(Mr Hinton) First of all, we do not recognise that
the regime of OFCOM does and should encompass newspapers. The
basis of newspapers is that there is no scarcity of the spectrum.
There is wide availability, enormous diversity and great plurality,
and no basis upon which OFCOM can reasonably have either the expertise
or the right to encompass it. We believe that newspapers, as part
of a free press generating free discussion and free debate, should
not be subject to its scrutiny.
(Mr Graf) I absolutely share those views completely.
I think the nature of OFCOM, the nature of its constituents and
its background make it completely unsuitable for this. I would
also add to the general point made by Mr Kass: that this document
last night simply reinforces the view that, whilst the intentions
are deregulatory, the complexity of the process that is now being
introduced is considerable where we have three or four different
regulators, and I am not at all clear even from this document
what is envisaged for OFCOM. We discovered last night that in
this document it has a competition role which I must say slightly
surprised us as well in terms of advising on competition. I am
not quite sure what its role should be on that front, never mind
the content role which is there.
901. What are you afraid of in OFCOM giving
the benefit of its wisdom to competition regulators?
(Mr Hinton) "Afraid" is an interesting word
you should deduce from what we have said. Why should it be necessary
for a government regulator to need to pay attention to the content
of newspapers, is my question in reply to you. What would be the
benefit to the consumer?
(Mr Graf) Absolutely. If you like, the question is
almost the opposite. What benefit do you believe that OFCOM from
its background as a government regulator can bring to a newspaper
regime which is a very different type of regime, operating a very
different culture, a very different history and a very different
competitive set to that which the broadcast media operate in.
902. But you both represent companies that,
in other circumstances, are arguing the rationale of convergence,
and one of the rationales for creating OFCOM is the convergence
of both technologies and, indeed, of ownership. How can OFCOM
do its job in newspapers? Well, it is a communications organisation
and newspapers are part of the, to use the word, communications
ecology, and it would seem extraordinary to set up a communications
regulator and then say, "Newspapers are left outside its
remit", particularly when on your side of the fence you are
converging like mad and making judgments across the same landscape
that OFCOM has responsibility for.
(Ms Clark) The point now is that we have argued consistently
for normal competition law to be applied to all media and to mergers
in the media sector, and when it comes to the role of OFCOM and
its role in content, that is in a very different circumstance
to newspapers. In a licensed broadcasting area, where there is
a restricted access because of spectrum scarcity, there may well
be a role for a government regulator but that is not the case
for newspapers. This is not contradictory. We see the role of
OFCOM withering away as spectrum scarcity moves.
903. The Bill team will be extremely flattered
by the remarks of Trinity Mirror on the rigour and sophistication
of the Civil Service approach which will be more of educated and
helpful advice for the Secretary of State than advice from a body
such as OFCOM. However, at the moment when you are really both
arguing for deregulation and leaving it to the operation of the
market regulator, it is rather curious to find Trinity arguing
so passionately for an active role for the Secretary of State
in all this. With the new Enterprise Bill and so on here is the
Secretary of State I think trying to disengage from a lot of these
activities and I am not sure she will be entirely pleased to discover
you want her so deeply and actively involved in all these decisions.
Why this sudden surprising love-in with the Secretary of State?
Are you trying to get something out of it? What is it all about?
(Mr Graf) Of course we are not. I think our point
has been very clear. As with Associated Newspapers, DMGT and with
News International, we are of the view that this whole process
should be better left to competition law. We accept, however,
that this is not likely to happen: we are simply therefore looking,
within this context, for the best process we can get and we believe
it is much more preferable, clearer, and simpler. Again I draw
your attention to the diagram in the appendices which I think
illustrates it beautifullyone page presently, two pages
in future. So much for deregulation. Therefore, you know, from
that point of view we see a clarity, a simplicity, a direct line.
If this is going to be a matter of public interest then there
is a direct accountable line to the Secretary of State. We do
not always agree, dare I say it, with what we find from the DTI
civil servants but we respect their knowledge, their rigour and
approach, and their impartiality.
904. Perhaps you are better able to bully and
chase the Secretary of State than the independent commission?
(Mr Graf) I think that that overstates our ability
and understates the rigour of the Civil Service in this particular
matter and I have to say that this process we know, because we
have been through it a number of times, is a process which is
a very much a process conducted in a regulatory environment within
the Civil Service and operates in that manner.
905. From Miss Clark's comments on competition
law and your own references to competition law, can the Committee
take it you are both against, even in principle, the Secretary
of State having the power to apply an extended public interest
test to newspaper mergers?
(Ms Clark) I think our comments on this latest document
that came out last night we will have to come back in more detail
to you on. I was interested to see that this was published at
the request of the Committee. We still do not have the clauses,
as you pointed out earlier. This is a very technical, detailed
area and we are very grateful the Committee requested it because
there is some concern about when we were going to see this, and
as soon as we have digested it we will come back in writing with
some comments, if that is okay with you.
(Mr Graf) Again, we have made our position clear:
that we would prefer not to be involved but we probably accept
there is involvement. In the context of the particular involvement
that is laid out in the document, News International and others
would like to come back to you on that when we have had a chance
to really digest its implications.
906. As long as it is fairly promptly.
(Mr Graf) Absolutely.
907. In the meantime, have you thought of publishing
this graph at the back in time for the Christmas games market,
because anybody that can find their way through can make quite
(Mr Graf) It is tempting!
908. My question arises from Trinity Mirror's
evidence on radio ownership rules because we have had a variety
of advice from different organisations. The Commercial Radio Association,
having initially endorsed the three plus one local radio rule
wants to remove that now. We have had a small radio operator,
Saga, saying that three plus one gives them a chance to get into
the market, and your position is interesting and I would like
you to expand upon it. You, I think, endorse two plus one. Is
that pragmatic or, in principle, do you think there should be
that additional safeguard? Does it depend, for example, on the
different size of the market? I think three plus one in London
would allow you to own seven FM stations but in a rural market
might have very different effects.
(Mr Graf) Our thoughts come from the position that
at present, in effect, and this is more to do with cross media
ownership than pure radio ownership, the environment is such that
there is a two plus one in the commercial sector that applies
to local newspapers, and we just again find it slightly odd that
here we are going backwards in a situation. Reference has been
made earlier today to the fact that local commercial radio is
about entertainment; the news provision, the speech provision;
in local radio is by and large fulfilled by BBC local radio which
is vigorous and has expanded considerably, and therefore we believe
that the cross media and the plurality side of this and the diversity
can be maintained on the two plus one regime quite satisfactorily,
and in the context of regulation we think this is a sufficient
909. You think three plus one would seriously
restrict your chance to grow?
(Mr Graf) Not "seriously restrict", but
the question is almost the opposite: why should it not be more
than two plus one?
910. Personally I thought Lord Crickhowell made
a good point this morning: that, irrespective of what this Committee
feels, there are deep sensitivities within the House of Commons
about the ownership of radio. I accept what you say, that it is
essentially entertainment, but driving to the west country last
week and listening to the guy putting the records on, in between
the records it was the school of Richard Littlejohn; his remarks
may have been entertaining but they certainly were not apolitical,
and in an era of segregation politics it is perfectly reasonable
for MPs of all parties to be very concerned about the impact of
what ostensibly might be entertainment but which would have tremendous
(Mr Graf) I take that point. The general point I would
make which has been made in the context of groups such as ours,
and it also refers to a question asked earlier of the DMGT about
influence, is that nobody in their right mind would impose, if
you like, common editorial policies across regional and local
newspapers: indeed, within the context of the regulatory environment
which is very different from radio anyway, nobody in their right
mind would do that centrally. A radio station and a local newspaper
will only work if they respond to what goes on in the local market
place, and respond effectively and continuously to that and understand
and relate and be part of that community, and it does not matter
what any of us saythat is what happens in the real world.
911. But you can respond to local need and demand
and everything and still, as the Chairman has suggested, express
very strong political views in between. I no longer have to win
elections but I do tell you that very strong views have been expressed
to this Committee by those who do that this is a really effective
and strong threat to political positions in the locality, so I
think the idea that, "Oh, yes, we are giving people the right
music or the right programmes but at critical moments we suddenly
start putting over a particular view" is a fear that I was
not really aware of until quite recently, but it has come through
very strongly to the Committee.
(Mr Graf) I hear what you say. I come back I suppose
in a general sense to the point that there is a radio regulatory
environment which is different from the newspaper one, and I would
be surprised if that has not been dealt with within that regulatory
environment, but I am not an expert on the radio regulatory environment.
Baroness Cohen of Pimlico
912. I would like to take on cross media ownership
from a slightly different angle. News International argues that
controls on cross media ownership are a blunt instrument and points
to difficulties in measuring influence. Well, quite. What we are
struggling with and what the whole system struggles with is, assuming
that this is what is wanted, how do you regulate? Where do you
go? We wondered whether the danger of a system that relied exclusively
on Competition Act powers makes regulatory behaviour less rather
than more predictable; more difficult for companies to judge which
way the Competition Commission is going to come out than it would
be if you built up experience which way OFCOM is going to come
(Mr Hinton) First of all, our principal objection
to the bluntness of the present instrument is it sets in place
immutable threshold of ownership beyond which cross ownership
is not possible, and that is wrong in a world where the media
is changing, the nature of the media, and the number of outlets
is changing. That is wrong and is inflexible. What is needed is
a regime which can constantly review what is a rapidly changing
climate in media and a rapidly increasing and altering means by
which people are accessing information and entertainment. It is
our view that properly constituted, flexible, continually updated
competition regulation is by far the best way to achieve this.
913. We have received repeated evidence from
other sectors that the one thing it is not is rapid. We have had
continual complaints about delays, sometimes very long ones, which
we have been told crippled sectors of not only your business but
others simply because the Competition Commission has not been
able to respond speedily.
(Ms Clark) That has not been our experience.
(Mr Hinton) Certainly in cases when we have been face-to-face
it has been handled very expeditiously, but nor are we experts
in the process of accomplishing regulation, but we still believe
that is an important principle.
(Mr Graf) Our experience of the Competition Commission
has been the same. There is a timetable: it is a timetable which
works and which is held to. We are pleased that within the changes
in here the way the process is going to work is that all people
who may be involved in merger transactions are involved in that
timetable. That is the word we have had. But again, when you look
at the present Competition Commission structure and timetable
and process and compare it to what is being proposed, you can
see why we have an affection for the present one in relative terms.
914. Like it or not, the government has written
in some very specific cross media ownership rules on the face
of the Bill. The one area where it has not is in radio to give
effect to the three plus one or, if you have your way, two plus
one. What justification is there for that exceptional treatment
of radio? Why should those rules not apply to other media as well?
(Ms Clark) They should not apply to other media either.
Radio rules are where they got it right.
(Mr Graf) I have nothing to add to that.
915. News International say they welcome the
lifting of foreign ownership restrictions as "bold and forward
thinking". I have to say that quite a lot of people we have
had evidence from are rather more worried about it than that.
We have been running an on-line forum and, if I may, I will quote
a typical example of feedback we have had: Richard McBrien feels
very strongly that ". . . the UK broadcast industry is unique
in the world and we are about to destroy this by selling out to
the highest bidder . . . why . . . change a system that works
well in the first place? Secondly, why . . . open our industry
to the US when they do not reciprocate?" News International
say, "We do not know what developments will follow from the
removal" of these. Is not precisely that uncertainty the
main reason why the decision to lift those restrictions was perhaps
(Mr Hinton) That is quite a big question. We are a
bit surprised by the almost xenophobic mood of some of the responses
given that this is the country that is the European champion in
encouraging inward investment, one of the great global champions
of the free flow of capital markets, a country that has allowed
satellite television to thrive through foreign investment, and
cable to thrive through foreign investmentin fact, the
most well established and very successful media industry being
newspapers which have been largely created by foreigners, Canadians
and one Australian I can think of. I cannot imagine why we would
not extend that encouragement of foreign investment and foreign
enterprise into this country. The issue of reciprocity and the
Americans I think is not one that should handicap the decision.
At the moment Vivendi Universal, which is kind of French and kind
of American, Mediaset and Bertelsmann are all able to invest here,
and I see no reason why we should not welcome as a confident culture
the investment from countries such as the United States and Australia.
916. That is pretty robust but you really think,
as you put it, that there is no reason at all for anyone to have
(Mr Hinton) Well, if you let your imagination run
wild about which foreigners might possibly acquire British media,
then clearly there have to be safeguards. I dare say if, through
some quirk of freakiness, some offshoot of Al Quaeda plc were
able to acquire Channel 3, first of all advertisers and viewers
would abandon it by the millions and it would go broke pretty
quickly, but I am sure there would be quite reasonable safeguards
already in place to prevent that happening.
917. Do you not think in equal measure it is
an absolute travesty that a certain Australian had to get an American
passport to be able to invest over there?
(Mr Hinton) I think he was happy to do it in the circumstances.
Lord Pilkington of Oxenford
918. We cannot legislate against that anyhow!
(Mr Hinton) I am not engaging in that discussion.
919. I am not sure there is that much disagreement
with you on ultimately foreign ownership but you are a pretty
good negotiator in this area: would you not think it is a good
idea to invite foreign ownership into that situation, to use it
as some form of negotiating tool to seek the things that you do
want for your domestic market place?
(Mr Hinton) I think the benefit of allowing in particular
American investment here can be good for consumers, and I think
to make a condition of it an impediment of our reciprocity is
wrong. It is also of course, as you know, possible for the US
to make exemptions in foreign ownership matters and it may well
be, having done what we seem to be about to do, that the Americans
might well respond favourably, although in a practical way I am
not sure that Granada or any other media company here is about
to try and buy a US network.