02 Jul 2012

(by Michael Harker) On 19 June, Ofcom published its . The process began in October last year, with the Culture Secretary, Jeremy Hunt asking the regulator a series of questions including: the metrics for the measurement of media plurality across platforms, the use of absolute limits on news market shares, and controversially whether there should be provision for a plurality review in the absence of a merger trigger. Against the backdrop of the , and the Leveson Inquiry’s probing of the Culture Secretary’s role in that bid, the Report and its recommendations may have important implications for the way in which media plurality is secured in the UK.

In a nutshell, the existing regime allows the Secretary of State to intervene in a media merger on the ground of media plurality (as was the case in the ). While he is advised by Ofcom (on whether to refer the deal) or the Competition Commission (where the deal is referred), the decision on whether to prohibit the merger or impose remedies on media plurality grounds is a matter ultimately for him. These public interest cases – which also include national security and financial stability – are narrow carve-outs from the general principle that merger decisions in the UK are taken by independent agencies at arm’s length from government. There are two key rationales for this: that the question of the public interest, including media plurality, is essentially a political one most appropriately taken by a politician accountable to Parliament; and, a related point, that independent agencies are ill-suited to determining questions which cannot be approached in a technocratic way. They require political judgement. Even the most casual observer, however, of the evidence heard by the Leveson inquiry on the relationship between politicians and the media will recognise the difficulty faced by a Minister to maintain impartiality, both actual and perceived, in determining questions over media ownership. This was previously .

Turning to the Report’s recommendations. Unsurprisingly, the regulator was most sure-footed when it came to metrics on the measurement of media plurality. In line with the approach it took in its report of the News Corp/BSkyB merger, it was of the view that consumption measures, particularly share of references (as a proxy for influence) and audience reach (as a proxy for diversity), were most appropriate for determining plurality levels across platforms (including online provision). Share of revenue, while relevant, was a less reliable indicator of plurality, given that there was no direct relationship between revenues and the ability to exert influence, and revenue figures did not disaggregate news from other genres. As to measuring the impact of news content consumption on how people’s opinions are formed, various proxies could be used, namely the importance people attached to particular sources of news, the level of perceived impartiality, and perceptions of impartiality. (A good table summary of the different measures suggested by Ofcom can be found at p.23.) Overall, the approach was to measure plurality using a “basket of measures”, but placing most weight on consumption metrics.

The regulator then considered the question of how a media plurality review should be triggered without a merger. Of the two options – either a metrics based trigger or a periodic review – it expressed a strong preference for the latter. It also cautioned against a discretionary approach to triggering a review on the basis that “such discretion has the potential to be subjective, lead to excessive lobbying, and create market uncertainty. Political discretion can bring perceived politicisation of the process, while regulatory discretion can risk confirmation bias” (para.5.81).

Ofcom also advised against the adoption of absolute limits on market shares. Despite having some support – notably by the leader of the Opposition and by the respected consultancy Enders Analysis – the regulator thought this approach was disproportionate. So without absolute limits on market shares, the Report then focused on the question of “sufficiency” of media plurality. This was an inherently subjective question, and there was little consensus on at what level it should be set. Nor was it realistic to seek an “absolute statutory definition” of sufficiency, given the dynamic and unpredictable nature of the market. Instead, Ofcom suggested a set of qualitative criteria (para 5.119). Ultimately, however, the question of what level of sufficiency was desirable could not be decided in isolation from the commercial environment in which media outlets were operating.

Overall, the Report represents a coherent set of recommendations. There are a number of important questions which were not asked, but demand answers. The first and most obvious relates to remedies. Even were the Government to implement the recommendations of this Report, what remedies could be imposed upon a finding that that there was insufficient media plurality? Divestment is the most obvious option. Given that the forces of consolidation in the press are related to the sharp decline in sales and advertising revenues, the presence of a willing and appropriate buyer cannot be assumed. Furthermore, any media group faced with divestment will seek to carve out its least profitable assets for sale. It is not difficult to see that interventions of this sort could do more harm than good. Even in the context of merger review, an overly restrictive approach to concentration may actually result in market exit. The second outstanding question relates to who should make the decision. To give politicians the power to impose structural remedies on the media brings with it serious risks. It is not difficult to see how the threat of such an intervention could be wielded to limit media freedom. The alternative is to vest such powers in an independent agency, but that raises a new set of issues, not least the question of political legitimacy.