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Jul 4, 2012

Conroy making history with public interest test

If the Gillard government stares down the nation's media bosses and introduces a public interest test for media ownership that's tough, effective and free from political interference, it will be the first government in the world to do so.

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If the Gillard government stares down the nation’s media bosses and introduces a public interest test for media ownership that’s tough, effective and free from political interference, it will be the first government in the world to do so.

So far, public debate on the proposed test — a key recommendation of the Convergence Review — has been heavy on righteous rhetoric but light on facts. Look no further than today’s letter from seven media bosses slamming the proposal as a “political interest test” that “has the capacity to be misused by politicians of all persuasions to block the acquisition of media companies by people they do not agree with or simply do not like”.

In the US, the independent Federal Communications Commission has, since its creation in 1934, assessed whether major media and telecommunications mergers would benefit or harm the “public interest, convenience, and necessity”. It’s a standard that sounds impressive but has done little to halt media concentration. As former FCC commissioner Michael Copps said last year, “The FCC has endorsed just about every merger and transaction that has come before it; we seldom meet one we don’t like.”

The FCC hasn’t blocked a major media transaction since 2002, though it does often impose conditions. Last year the body attracted heavy criticism for its decision to allow cable giant Comcast to merge with NBC-Universal.

Across the Atlantic, since Britain introduced a public interest test  in 2003 (as a last-minute sop to rebel MPs concerned about relaxed media ownership laws) it hasn’t been a Soviet-style menace to press freedom. Nor, for that matter, has it proved a boon for media diversity.

Those who’ve studied it closely describe the British test as a cumbersome and largely ineffectual model that Conroy & Co would be unwise to replicate.

“In theory it has many good attributes but in practice, it has been highly susceptible to political interference,” said Timothy Dwyer, a media studies lecturer at the University of Sydney, who has studied the UK experience closely.

The British test has no hard and fast percentage rules on what is and isn’t against the public interest. Instead, the regulators — OfCom and the Competition Commission — can be asked to take an objective look at how much share of “public voice” the merged company would have. In the case of newspaper mergers, issues such as the accurate presentation of news, free expression of opinion, and the plurality of views in each marketplace are canvassed. Similar tests are applied to broadcasting transactions.

There’s nothing wrong with such criteria, experts such as Dwyer say. The problem is that, unlike in the US, it’s government ministers — not the independent regulators — who have the first and final say on the question of public interest. If they don’t want the issue to be examined, it doesn’t happen. And if one, or both, of the regulators decides that a proposed merger or acquisition would be against the public interest, then the government can still waive it through. Even if the government does block a transaction, media companies can also apply for it to be overturned by a judicial review.

This helps explain why the British test has been used only twice since it was introduced nine years ago. In 2010, adverse findings forced pay TV giant BSkyB to reduce its share in rival station ITV from 17.9% to less than 7.5%.

Then again, in 2010, business secretary Vince Cable asked the regulators to assess whether News Corporation’s bid to lift its stake in BSkyB from 40 to 100% passed the public interest test. OfCom decided that it wasn’t. Nevertheless, as the Leveson inquiry has shown, culture secretary Jeremy Hunt was likely to waive the takeover through following energetic lobbying by well-paid News Corp lobbyists.

This shows that, despite protestations from media bosses, political interference can work for their interests — rather than against them.

“I don’t think that a Secretary of State can be sufficiently independent from media power pressure to take a decision on the public interest,” said Alison Harcourt, a communications regulation expert at the University of Exeter.

Harcourt says the British system should be overhauled so that government ministers have a say in the outcome — but not the final say. She says a body including regulators, politicians and lay people would be the best way to go.

All signs so far suggest that Conroy has no plans to legislate for a carbon copy of the British public interest test. First, the model proposed by the Convergence Review is broader than the British version because it would cover all changes in media ownership — e.g. a Gina Rinehart takeover of Fairfax — not just media mergers. The review also proposed that the public interest test should be administered by an independent body — not the government — and that it’s decision should be final. The idea of the Australian Competition and Consumer Commission administering the test is one idea that’s been floated in the media.

Dwyer said the government is using the wrong stick: “The best possible approach is to have very clear cross-media ownership laws so that we don’t need public interest tests in the first place. The best thing would be to extend cross-media ownership laws to online and subscription television.”

Federal cabinet is reportedly set to back a public interest test within the next six weeks.

Correction: This story has been updated to include reference to the US Federal Communications Commission.

Matthew Knot —

Matthew Knot

Crikey media editor

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12 thoughts on “Conroy making history with public interest test

  1. johnb78

    Point of order: the Competition Commission is based in London and has nothing to do with the EU.

    I think you’re thinking of the European Commission, which (confusingly) does also prepare competition reviews on mergers & acquisitions with significant cross-border European impact.

    You’re right on the effectiveness of the law, though.

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