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Media plurality - competition law issues

The subject of media plurality is firmly back on the political agenda, with the announcement that the House of Lords Select Committee on Communications has launched an inquiry focussed on updating the current rules and regulations.

June 2013

Concerns about media plurality have been raised in recent months, following the well publicised attempted acquisition of BSkyB by News Corporation and then the Leveson Inquiry. It is clear that it is for Parliament to take steps to address the matters and issues outlined.

Just as in all industries, media ownership and regulation is subject to competition law. It has become more and more relevant as competition has increased over the last decade or so with the arrival of digital, cable and satellite channels. In practice, competition law is used relatively infrequently in this sector, as the regulatory process is time-consuming, complex and often the issues are hard to prove from an evidential point of view. However, with this inquiry by the Select Committee, it seems that competition law may be more readily utilised in order to ensure that the market remains competitive.

Background to competition law

European UnionThe Competition Act 1998 contains the UK's main competition provisions - the Chapter I and Chapter II prohibitions. Chapter I prohibits agreements/arrangements between undertakings that prevent, restrict or distort competition in the UK, while Chapter II prohibits the abuse of a dominant position. These provisions are replicated in Articles 101 and 102 of the Treaty on the Functioning of the European Union. If the effect on competition is in relation to trade between Member States then Article 101/102 TFEU applies, while the Competition Act applies where the effect on competition is in the UK only. It should be noted that the UK courts and regulators can also apply the EU provisions directly.

In addition, the UK's merger control regime can be used to examine the effect on competition of companies coming under new ownership and if necessary such acquisitions can be prohibited.

choice of coloured pencils

Media plurality and competition law

The rationale behind plurality is that the public should be exposed to a variety of sources of news, information and opinion. True plurality requires choice and the ability for consumers to make informed decisions, which is the fundamental principle behind competition law. The current regulations are designed to promote diversity and integration, and to preserve competition, by preventing dominance and ensuring new entrants are not foreclosed from the market. At the heart of the rules is the need to strike a balance between ensuring a degree of plurality on one hand and providing companies with the freedom to innovate, expand and invest. Multi-ownership is key to providing programmes of sufficient quantity and quality, and indeed, plurality is continually increasing as a result of the digital expansion and the variety of platforms that are available.

As demonstrated by the BSkyB/News Corp attempted merger, the State is able to intervene where it considers there is a public interest in doing so. The Secretary of State rarely uses this power, but it is worth noting that media is one of those areas that demands special attention. As companies expand across different platforms, their ability to reach people increases. It is therefore important that expansion does not have the effect of distorting competition.

In general, dominant companies have a special responsibility not to behave in certain ways that would harm the market. Behaviour that has been found to be abusive includes discriminatory behaviour (treating equivalent customers differently), predatory pricing (pricing below cost in order to drive competitors out of the market), excessive pricing (pricing significantly above cost price), refusal to supply (stopping competitors from accessing services or simply refusing to deal with certain customers) and margin squeeze (where a company that is present on both the upstream and downstream markets charges competitors on the downstream market prices whereby its competitors cannot sell the products profitably). As such behaviour may result from organic growth or acquisitions, regulators are obliged to keep a close eye on the sector to ensure that consumers' rights are not harmed.

Going forward

growthThere are therefore a number of potential pitfalls for companies that want to grow in the media sector and there is a real risk that certain types of behaviour may restrict competition and distort the market, in breach of Article 101/102 and Chapter I/II. Regulators will continue to review the market and welcome feedback from companies in relation to the effects on the market. In addition, we should watch this space in relation to the outcome of the Select Committee's inquiry, as the impact of any proposals may well be far reaching.

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Louisa Penny

Louisa Penny takes a look at the issue of media plurality in the context of convergence and some of the Competition law implications that may follow.

"As demonstrated by the BSkyB/News Corp attempted merger, the State is able to intervene where it considers there is a public interest in doing so."