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Convergence Review: diversity and a public interest test

The Convergence Review has issued several papers this week, including one on media diversity. For those of us who’ve been calling for ages for a proper focus on media diversity and wondered how much attention the review was going to pay the issue, it’s a welcome development.

The paper does a good job of articulating the case for and against a public interest test, which is likely to receive considerable attention as a tool to repair, or at least preserve the last shreds of, our media diversity.

What’s a public interest test in the diversity context? It’s an assessment process for determining whether a media transaction is in the public interest. It could work by itself or in addition to existing diversity rules. It parallels the basic test the ACCC administers in relation to whether mergers substantially lessen competition under what is now the Competition and Consumer Act.

Lots of people like the idea of a public interest test. They can imagine themselves in the position of the decision maker, airily waving the arguments of a Rupert Murdoch or a James Packer away and declaring “sorry, your acquisition of this or that company isn’t in the public interest.” Even the hard heads of the Productivity Commission liked a public interest test back when they looked at broadcasting in 2000, probably the most ignored report in the history of the Howard government and certainly the only PC report to ever quote Roy and HG.

There’s a strong crossover between a public interest test and a fit and proper person test, another proposal that has received coverage following the phone hacking. Arguably, a fit and proper person test would be an automatic criterion under a public interest test, for it presumably is not in the public interest that someone not fit to hold a broadcasting licence holds one. As the review paper points out, there’s still a “suitability” test in the Broadcasting Services Act. But it’s so vague that it’s hard to imagine what gross and depraved crimes one would have to be convicted of to make one unsuitable in the eyes of the regulator.

The virtue of a public interest test is that it enables a case-by-case consideration of mergers. We rely on objective, one-size-fits-all rules to regulate media diversity, usually involving numbers — 75% reach, two out of three influential media, five media groups per capital city and so on. A public interest test enables assessment of cases that might fit the rules but are problematic in other ways.

That’s its virtue, and its fatal flaw. A public interest test is subjective, even if carefully drafted to relate to a limited number of criteria. Ultimately it relies on the individual judgment of a decision maker. You can minimise the potential for political considerations in that judgment (a problem for the public interest test as applied in the UK, where a minister makes the decision) by handing it to a bureaucrat, or regulator, or some regulatory structure such as a joint panel of the ACCC and ACMA. But ultimately it leaves the protection of diversity unresolved and uncertain.

The uncertainty applies to business, of course — media proprietors currently know whether an acquisition will breach diversity rules or not, but wouldn’t know their fate when they go into a public interest test. That’s OK — media proprietors are big enough to look after themselves, and they already face the same sort of uncertainty with the ACCC in the context of competition law. The worse uncertainty is for the rest of us, not knowing how diversity will be protected, whether a merger would be waved through by a tame regulator, or a prohibition would be overturned by the courts on a technicality. In any event, how many people would be satisfied by any public interest decision-maker who didn’t block every major merger?

Still, many people support the idea of a public interest test as a backstop hurdle to media mergers. Let us know your thoughts at boss@crikey.com.au. We’ll share the best of them later this week.

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