House of Lords - Explanatory Note
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Clause 369: Adaptation of role of OFT in initial investigations and reports

780.     Under the public interest regime of the EA 2002, where the Secretary of State has intervened in a merger, the OFT is obliged to prepare a report for the Secretary of State under section 44 EA 2002. This clause amends section 44 EA 2002 to adapt the role of the OFT in relation to mergers where a newspaper public interest consideration has been specified in an intervention notice.

781.     Subsection (1) makes amendments to section 44(3)(b) EA 2002 to exclude a newspaper public interest consideration from the OFT's duty to provide the Secretary of State with a summary of relevant representations received in relation to public interest considerations mentioned in the intervention notice. This is to avoid duplication, as OFCOM will be under this duty where a newspaper public interest consideration has been specified in the intervention notice (see clause 370).

782.     Subsection (2) adds a new section 44(5A) EA 2002 that ensures that the OFT nonetheless has the power to include such a summary of representations. Such a power might be used, for example, if the OFT received representations after OFCOM had delivered its report, in order to ensure that representations were drawn to the Secretary of State's attention. It also clarifies that the OFT is not required to artificially separate out plurality and competition issues where this is unhelpful to the overall purpose of advising the Secretary of State.

783.     Subsection (3) inserts new sections 44(8), (9) and (10) EA 2002. Sections 44(8) and (9) contain the definitions of "newspaper public interest consideration" and "newspaper". The definition of "newspaper public interest consideration" encompasses the considerations in new section 58(2A) or (2B) EA 2002 that are inserted by virtue of clause 361 of this Bill or any other newspaper public interest consideration that the Secretary of State thinks should be specified in section 58 EA 2002. This latter aspect could encompass, for example, any changes to the newspaper public interest considerations that the Secretary of State may introduce in exercise of her powers in section 58(3) EA 2002. Any order made pursuant to section 58(3) to add, remove or amend a public interest consideration in that section is subject to an affirmative resolution procedure (see section 124 EA 2002). The definition of "newspaper" is the same as that currently used for the purposes of the special newspaper regime in the FTA 1973. This covers daily and Sunday newspapers (whether national or local) and local periodical newspapers.

784.     New section 44(10) EA 2002 sets out a power for the Secretary of State to amend the definition of a newspaper by statutory instrument. This power is designed to deal with future developments in the nature of the newspaper market that might mean that the scope of the newspaper public interest consideration should be redefined (for example, if it became more common for titles to circulate across national boundaries such that important UK titles did not necessarily circulate "wholly or mainly" in the UK). Any order under new section 44(10) can only be made after a draft has been laid before, and approved by a resolution of, each House of Parliament (see paragraph 24 of Schedule 16, which amends section 124 EA 2002).

Clause 370: Additional investigation and report by OFCOM

785.     This clause inserts a new section 44A in the EA 2002, which sets out OFCOM's reporting and related investigatory duties where an intervention notice has been served specifying any newspaper public interest consideration.

786.     New section 44A(2) provides that OFCOM is obliged to report to the Secretary of State within a deadline specified by the Secretary of State. There is nothing to prevent the Secretary of State from altering the deadline if the circumstances so require. New section 44A(3) ensures that the Secretary of State will receive information in the report on at least two areas:

  • OFCOM's advice and recommendations on any newspaper public interest consideration mentioned in the intervention notice.

  • OFCOM's summary of the relevant representations that it has received in relation to any such newspaper public interest consideration.

Clause 371: Extension of special public interest regime for certain newspaper mergers

787.     This clause amends section 59 EA 2002, which currently makes provision for the Secretary of State to intervene and serve a "special intervention notice" in relation to an exceptional category of mergers involving government defence contractors. These may be referred for investigation, on specified public interest grounds only, even though they do not meet the normal qualifying thresholds (i.e. 25% share of supply or UK turnover of the company being acquired exceeds £70 million, as set out in section 23 EA 2002).

788.     Subsection (2) replaces sections 59(3) and (4) EA 2002 with new sections 59(3), (3A), (3B) and (3C) (3D). These incorporate the existing criteria set out in section 59 EA 2002 for establishing a "special merger situation" in cases involving government defence contractors, together with new provisions providing that a special merger situation also arises where:

  • all of the criteria for a relevant merger situation within section 23 EA 2002 have been met except for the share of supply or turnover thresholds in sections 23(1)(b) and (2)(b) EA 2002 - that is, where two or more enterprises have ceased to be distinct within the relevant time limits (see sections 24-27 EA 2002); and

  • at least 25% of the supply of newspapers of any description in the UK, or in a substantial part of the UK, was supplied by persons carrying on one of the enterprises concerned in the merger. Unlike the general jurisdiction test in section 23(2)-(4) EA 2002, there is no requirement that the share of supply is created or enhanced by the merger.

789.     Intervention in relation to cases that fall within the special public interest regime is limited to the public interest grounds specified in section 58 EA 2002 They cannot be scrutinised on competition grounds.

790.     Subsection (3) inserts new subsections (6A)-(6E) in section 59 EA 2002. These replicate for the new newspaper share of supply provisions in the special public interest regime the provisions on the calculation of share of supply already included for the standard regime in section 23 EA 2002. Subsection (6A) makes it clear that, for the purposes of applying the newspaper share of supply test in new section 59(3C) the authorities can apply such criteria (such as value, cost, quantity etc.) as they consider appropriate to determine whether the 25% threshold is satisfied and new subsection (6B) allows the authorities to consider whether goods or services taken on their own, or with others or in groups, make up this proportion. Subsections (6C) and (6D) give the competition authorities the discretion to decide when goods or services are the subject of different forms of supply. Subsection (6E) gives the Secretary of State a power to amend the newspaper share of supply provision. This is to ensure that in the event that there is any exercise of the powers in section 123 EA 2002 in relation to the share of supply test in section 23 EA 2002, the changes can be carried across to section 59 EA 2002, such that the share of supply test remains consistent throughout Part 3 EA 2002.

Clause 372: Adaptation of role of OFT in special public interest regime

791.     Under the special public interest regime of the EA 2002, where the Secretary of State has intervened in a merger under this regime, the OFT is obliged to prepare a report for the Secretary of State under section 61 of that Act. This clause amends section 61 EA 2002 to adapt the role of the OFT in relation to mergers under the special public interest regime where a newspaper public interest consideration has been specified in a special intervention notice.

792.     Subsection (2) makes amendments to section 61(3)(b) EA 2002 to exclude any newspaper public interest considerations specified in sections 58(2A) and (2B) EA 2002 from the OFT's duty to provide the Secretary of State with a summary of relevant representations received in relation to public interest considerations mentioned in the special intervention notice. This is to avoid duplication, as OFCOM will be under this duty (see clause 373) where a newspaper public interest consideration, which is specified in section 58 at the time, has been mentioned in the special intervention notice. The clause is restricted to considerations specified in section 58(2A) or (2B) at the time of the notice because the special public interest regime has no equivalent to the provisions in the standard public interest regime by which a new or modified newspaper public interest consideration introduced under section 58(3) EA 2002 can be finalised during the investigation of a merger.

793.      Subsection (4) adds a new section 61(4A) EA 2002 to ensure that the OFT nonetheless has the power to include such a summary of representations. Such a power might be used, for example, if the OFT received representations after OFCOM had delivered its report, in order to ensure that representations were drawn to the Secretary of State's attention.

Clause 373: Additional investigation and report by OFCOM: special public interest cases

794.     This clause inserts a new section 61A in the EA 2002, which sets out OFCOM's reporting and related investigatory duties where a special intervention notice has been served mentioning any of the newspaper public interest considerations that are specified in section 58(2A) or (2B) EA 2002. The clause is restricted to considerations specified in section 58(2A) or (2B) at the time of the giving of the special intervention notice because the special public interest regime has no equivalent to the provisions in the standard public interest regime by which a new or modified newspaper public interest consideration introduced under section 58(3) EA 2002 can be finalised during the investigation of a merger.

795.     New section 61A(2) provides that OFCOM is obliged to report to the Secretary of State within a deadline specified by the Secretary of State. There is nothing to prevent the Secretary of State from altering the deadline if the circumstances so require. New section 61A(3) ensures that the Secretary of State will receive information in the report on at least two areas:

  • OFCOM's advice and recommendations on any newspaper public interest considerations specified in section 58(2A) or (2B) and mentioned in the special intervention notice; and

  • OFCOM's summary of the relevant representations that it has received in relation to any such newspaper public interest consideration.

Clause 374: Public consultation in relation to newspaper mergers

796.     This clause introduces a new section 104A EA 2002, which applies only to references to the Competition Commission that specify a newspaper public interest consideration. In conducting its inquiry into such cases the Competition Commission is specifically required, so far as it is practicable, to have regard to the need to consult the sections of the public that may be affected by the merger. The duty can be discharged by consulting such representative sample of the public as the Commission considers to be appropriate for this purpose. This duty applies in addition to the Commission's normal duties of investigation in relation to merger references in public interest cases (see sections 50(3) and 65(4) EA 2002).

Clause 375: General information duties in relation to newspaper mergers

797.     This clause amends section 105 EA 2002 to ensure that, where a newspaper public interest consideration is invoked, OFCOM, as well as the OFT and Competition Commission, will have general information duties vis-...-vis those that might be affected by the merger, each other and the Secretary of State.

798.     Subsection (2) inserts a new section 105(1A) EA 2002 to ensure that where OFCOM is required to produce a report on any newspaper public interest consideration, it will act, if practicable, to bring cases that it is investigating to the attention of those that might be affected by the transaction. The effect of the amendment to section 105(2) in subsection (3) is that this duty does not apply to merger notice cases, which carry their own publicity requirements (see section 99 EA 2002).

799.     Subsections (4) and (6) amend section 105(3) and 105(4) EA 2002 to ensure that OFT has the same obligations to give relevant information to OFCOM as it already has for the Competition Commission.

800.     Subsections (5) and (7) insert new sections 105(3A) and (4A) EA 2002 to provide that OFCOM will give relevant information to the OFT and the Competition Commission.

801.     Subsections (8) and (9) amend sections 105(5) and (6) EA 2002 to ensure that OFCOM has the same obligations as the OFT and the Competition Commission to give information and assistance to the Secretary of State in order to enable her to carry out her functions in relation to cases that raise public interest considerations.

802.     Subsection (10) amends section 105(7) EA 2002 to extend the duties of the Competition Commission and the Secretary of State to have regard to information given to them under sections 105(3)-(6) so as to encompass information supplied to them under those sections by OFCOM.

803.     Subsection (11) inserts a new section 105(7A) EA 2002, which provides that OFCOM must have regard to any information given to it by the OFT under sections 105(3) or (4) EA 2002 and that OFT must have regard to any information given to it by OFCOM under new sections 105(3A) or 105(4A).

Clause 376: Advice and information in relation to newspaper mergers

804.     This clause inserts a new section 106A EA 2002, which provides that the Secretary of State may publish advice and information to explain the newspaper public interest considerations specified in section 58(2A) and (2B) EA 2002 and to indicate how the Secretary of State expects the merger provisions of the EA 2002 to operate in relation to them. If the Secretary of State chooses to publish such advice she will be required, in preparing the advice, to consult the OFT, OFCOM, the Commission and such other persons as she considers appropriate.

Clause 377: General advisory functions of OFCOM in relation to newspaper mergers

805.     This clause inserts a new section 106B EA 2002 setting out the general advisory functions of OFCOM. In any case where the newspaper public interest consideration has been invoked, OFCOM may give advice to the Secretary of State on any Competition Commission's report on the case and the taking of enforcement action by the Secretary of State.

806.     There is also a general power for OFCOM to give advice where the Secretary of State has requested this, which could be used, for example, in the event that the Secretary of State required supplementary advice on a particular aspect of a case. Except for the specific cases mentioned in new section 106B(1), this clause does not empower OFCOM to give advice unless the Secretary of State has requested it.

807.     Any advice that is given will be published (subject to compliance with the provisions of Part 9 EA 2002 relating to disclosure of information, in particular section 244 EA 2002), but not before the publication of the Competition Commission's report on the case.

Clause 378: Other general functions of OFCOM in relation to newspaper mergers

808.     This clause inserts a new section 119A EA 2002 that gives OFCOM the function of obtaining and reviewing information relating to any of its functions in relation to the newspaper public interest consideration. This information-gathering role, which may involve research, is with a view to OFCOM having the information it needs to make decisions and carry out its functions under Part 3 EA 2002.

809.     Subsection (4) of new section 119A EA 2002 excludes the general duties of OFCOM provided for in clause 3 of this Bill from OFCOM's functions under the newspaper merger provisions of the EA 2002 (see also clause 3(7) of this Bill). In practice the newspaper merger provisions will operate as part of the EA 2002, and this Act has its own provisions setting out the functions and responsibilities of the different authorities.

Clause 379: Monitoring role for OFT in relation to newspaper mergers

810.     This clause inserts a new section 119B EA 2002, which gives the OFT the function of obtaining and reviewing information that may be relevant to the Secretary of State's decision on whether or not to intervene on the basis of the newspaper public interest considerations set out in section 58(2A) or (2B) EA 2002. In particular, the OFT in carrying out this function will ensure that the Secretary of State is made aware of cases where (in the OFT's opinion) she may wish to consider issuing a special intervention notice. The OFT will not be under any obligation to carry out a detailed analysis of any newspaper public interest consideration that may be relevant.

811.     This clause only applies to such cases where they may fall within the special public interest consideration regime in relation to a newspaper public interest consideration. The OFT's duties in relation to public interest cases falling within the standard regime are already fully set out in the EA 2002 (see section 5 and Chapter 2 of Part 3 EA 2002).Clause 380: Enforcement powers in relation to newspaper mergers

812.     This clause inserts a new paragraph 20A to Schedule 8 EA 2002, which contains the list of matters that can be included in final orders for the purpose of remedying, mitigating or preventing any adverse public interest effects which have resulted, or may be expected to result, from a newspaper merger. This applies only to orders made in cases where any of the newspaper public interest considerations were specified in the intervention/special intervention notice and remain relevant at the point of a decision on remedies.

813.     Remedies to an adverse finding on the basis of the newspaper public interest consideration may be different in character to the remedies directed at competition detriments with which Schedule 8 is principally concerned. Accordingly, paragraph 20A allows the Secretary of State to make such provision, in relation to these cases, as she considers appropriate in all the circumstances. Sub-paragraph (4) sets out a non-exhaustive list of the type of steps that might be taken in exercise of this power. These are remedies that experience in dealing with newspaper transfers under the FTA 1973 has shown it would be useful to be able to call upon.

Clause 381: Alterations to newspaper panel of Competition Commission

814.     This clause amends the definition of "newspaper merger reference" in paragraph 1 of Schedule 7 to the Competition Act 1998. Schedule 7 to that Act makes provision about the Competition Commission and includes provisions on the appointment of newspaper panel members to the group selected to carry out an inquiry following a reference. The effect of this amendment is that the provisions on the appointment of newspaper panel members to any constituted group will only apply where a merger reference is made specifying a newspaper public interest consideration.

Clause 382: Further provision in connection with newspaper mergers

815.     Subsection (1) of this clause gives effect to Schedule 16, which contains further amendments in connection with newspaper mergers.

816.     Subsection (2) extends to the provisions of this Chapter of the Bill and its related repeals the provisions of section 276(2) and (3) and 277 EA 2002, which gives the Secretary of State the power to make by order supplementary, incidental or consequential provisions for the purposes of, or in consequence of, or for giving full effect to, the EA 2002. Subsection (3) clarifies, for the avoidance of doubt, that this includes the power to modify the EA 2002.

PART 6: MISCELLANEOUS AND SUPPLEMENTAL

Clause 383: Annual report on the Secretary of State's functions

817.     This clause requires the Secretary of State to prepare and lay before Parliament annual reports about the performance of her functions under the following legislation: this Bill, the enactments relating to the management of the radio spectrum not part of this Bill, the Office of Communications Act 2002 and the Broadcasting Acts 1990 and 1996. The first report must be prepared as soon as reasonably practicable after the first anniversary of the first order under clause 2 transferring functions to OFCOM. The enactments relating to the management of the radio spectrum, in addition to Chapter 2 of Part 2 of the Bill, are the Wireless Telegraphy Acts 1949, 1967 and 1998, the Marine, &c., Broadcasting (Offences) Act 1967 and Part 6 of the Telecommunications Act 1984.

Clause 384: Review of media ownership

818.     OFCOM are required to carry out regular reviews of the operation of all media ownership and news provider provisions. OFCOM will provide a report on every review to the Secretary of State, including recommendations on whether the Secretary of State should exercise the powers available to modify, repeal or revoke rules contained in enactments and by secondary legislation. OFCOM must publish every report in such a manner that it is brought to the attention of those persons who OFCOM feel are likely to be affected by it. The first review must be carried out no more than 3 years after the commencement of this clause, and subsequent reviews must be carried out at least every 3 years.

Clause 385: Penalties imposed by OFCOM

819.     This clause requires OFCOM to prepare, publish and keep up-to-date guidelines for determining the penalties to be imposed by them under the Bill or any other enactment except the Competition Act 1998. Before publishing any guidelines, OFCOM must consult the Secretary of State and other appropriate persons. When determining the amount of any penalty to be imposed OFCOM must have regard to their published guidelines.

Clause 386: General restrictions on disclosure of information

820.     With the exception of information obtained in accordance with section 196 of the Broadcasting Act 1990 (powers of entry and search, under which stricter rules apply), this clause imposes limits on the disclosure of information relating to the affairs of any particular business obtained under this Bill, the other enactments relating to the management of the radio spectrum and the Broadcasting Acts 1990 and 1996. Subsection (1) prohibits the disclosure of such information while the business in question is still being carried on, unless consent has been obtained from the person carrying on that business.

821.     Subsections (2) to (5) provide for a limited number of exemptions from this prohibition where the disclosure satisfies certain criteria. Examples of exempt disclosures include those required to facilitate the carrying out by OFCOM of their duties; disclosures necessary for the carrying out by Ministers, the OFT, the Competition Commission, the Consumer Panel or the Welsh Authority of duties under this Bill or other specified enactments; and disclosures made in connection with civil proceedings brought under this Bill or other specified enactments.

822.     In addition, subsection (6) provides that this clause will not (i) limit information that may be published by OFCOM under clauses 14 and 23 as results of research or as information or advice, in the Secretary of state's annual report under clause 380 or in reports by OFCOM under any other provision of this Bill or the Office of Communications Act 2002; (ii) prevent the disclosure of information for the purposes of a report of legal proceedings or (iii) apply to any information that has already been published or made public under (i) or (ii).

823.     Subsection (10) makes it an offence for any person to disclose information in contravention of this clause.

Clause 387: Service of notifications and other documents

824.     When any person is authorised or required to send a notification and/or document to another person under this Bill, the Office of the Communications Act 2002, the enactments relating to radio spectrum management not contained in this Bill, Schedule 2 to the Telecommunications Act 1984 or the Broadcasting Acts 1990 and 1996, it may be delivered, left at the proper address or sent by post.

    *The meaning of proper address is given in subsection (7) and (8).

825.     When the recipient is a company, a partnership or unincorporated association, the notification and/or document must be addressed to the person(s) specified, respectively, in subsections (4), (5) and (6).

Clause 388: Notifications and documents in electronic form

826.     This clause applies where a person is authorised under clause 387 to give or send a notification or other document by delivering it to another person and does so either by transmitting it electronically by means of an electronic communications network or transmitting it by other means but in a form that means that other apparatus must be used to make it intelligible (e.g. sending a computer disk by post). If the intended recipient is not OFCOM, he must have agreed with the sender to that the notification and/or document may be delivered in that way and form (and not have withdrawn his agreement), and must have provided the sender with his address and other information needed to send them.

827.     If the intended recipient is OFCOM, OFCOM must have indicated their agreement to receive the notification and/or document in the form in question and the thing transmitted and the means of transmission must comply with any conditions and procedures determined and published by OFCOM. When transmitting a notification and/or document, OFCOM may determine the means of transmission used and the form in which they may be transmitted.

 
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Prepared: 6 March 2003