Digital Economy Bill

Lord Stevenson of Balmacara Excerpts

Report: 3rd sitting (Hansard - continued): House of Lords
Wednesday 29th March 2017 Lords Chamber

[Lord Clement-Jones]

My Lords, I would not expect the Minister to make commitments at this stage, just to listen to the arguments that we have already made and will no doubt make again in the meeting. I am very grateful to the Minister. We have Third Reading where we can—

[Lord Stevenson of Balmacara (Lab)]

I am abusing the system. I apologise for interrupting. I am grateful to the noble Lord for giving way. My question is directed at the Minister through the noble Lord, to maintain some semblance of protocol. I think the question my noble friend was trying to ask was, given that the Minister has committed to bringing back an amendment which covers much of the ground that has been discussed today, because there are issues he wishes to solidify, the assumption is that the points that have been raised may be raised again at Third Reading. He is not asking him to concede any additional work. I make it absolutely clear, because of the need for the clerks to be sure about this, that there will be a discussion at Third Reading on the substantive points that have been made so far.

[Lord Ashton of Hyde]

What the noble Lord, Lord Collins, asked me to do was to meet to discuss these issues before Third Reading. I agreed to meet him and the noble Lord, Lord Clement-Jones, if he wants to do that. I said that we were going to bring forward two amendments and we will continue to do that. I think it is the other one, where we have agreed not to do that, that he wants to talk about, but I am happy to talk about all of them. We will bring forward the two amendments at Third Reading. Obviously, I can make no commitment about any extra amendments but I am happy to talk about it.

--- Later in debate ---

[Lord Stevenson of Balmacara]

My Lords, it is clear that we have saved the best till last. It has been a terrific debate. The hour is late and I shall not delay the House too long, but it is worth reflecting that a 14 year-old speech can be brought out, dusted down, given the once-over and realised to be fit for purpose and continue to have relevance today.

I support the amendments tabled by the noble Lords, Lord Lansley, Lord Puttnam and Lord McNally. They are absolutely right; they are on the mark. They are matters that need to be addressed now but also for the long term. The Government need to take them away and come back with some proposals as soon as possible.

The noble Lord, Lord Lansley, was right that the existing legislation, stemming from a variety of sources but crystallising around the Enterprise Act 2002, is strong, but it needs to be looked at in light of technological change, of developments and of the new way in which the world receives its information. Many things have not changed. We want to be sure that by moving around some of the architecture, we do not lose something, but it is clear that we need to widen the definition of a media enterprise—as the noble Lord said, broadcasting is far too narrow a definition for the way in which we consume and rebroadcast our information today. Ofcom needs powers equal to those of the CMA, in terms of getting papers and material in front of it so that it can have exactly the same authority in its work. It is not clear that it has those at the moment.

We need to think about the term “broadcasting standards” and make sure that it is fit for purpose in respect of the various companies now operating, which are definitely media companies and not technology companies, as many would argue. Certainly, all those involved in the current merger arrangements need to be considered closely in terms of the impact both of individuals and of the corporate structures which they employ.

The questions raised in our amendments to Amendment 33J, as was picked up by the noble Lord, Lord Lansley, are based closely on the model offered by the FCA in its fit and proper person test. If the noble Lord detected a similarity, it is because 90% of the words are the same—and well spotted. However, it shows that there is a commonality of approach which would repay some discussion and debate. Everyone will say that it is different in financial regulation, but some of the words copied out in Amendment 33L, for instance, which are taken straight from the FCA with only a couple of points lost, are appropriate. There are other examples and I commend them to the Minister when she comes to consider this matter, perhaps away from this sitting.

A point well made by the noble Lord, Lord Lansley, was that the work done in 2010 and 2011 is worth revisiting in some detail. In particular, a section on page 15 of the Report on Public Interest Test produced by Ofcom and published in 2011—to no significant media comment at that time because, by that stage, the Milly Dowler case had broken and the merger then in proposal had gone, so the public’s attention moved away—deals with:

“Concerns about wider market developments and sufficient plurality”.


It is incredibly relevant for today—I shall not read it all; I want to touch on just a few things. The point is made that,

“the current statutory framework may no longer be equipped to achieve Parliament’s policy objective of ensuring sufficient plurality of media ownership”.

The market developments have changed so much and some consideration of that broader issue must be given. The report identifies the problem that, at present, the regulations require that,

“a public interest consideration can only be triggered by a specific corporate transaction”,

such as merger proposals, but that can be done by organic growth and change. It is important that we have something in the regulations which allows Ofcom to use judgment over whether it is time to intervene, particularly on the fit and proper person test.

The report expresses concern about the differential arrangements for remedying competition concerns. Such concerns are not carried forward into considerations about whether transactions are operating in the public interest depending on plurality. In other words, the narrow competition concerns largely operated through the CMA are on one side of the calculation, but those that deal with media mergers are not given the same weight. Therefore, there is a discrepancy of approach.

Finally, the point is made that,

“a more fundamental review and possible reform of the current … framework”,

is probably necessary. This was said in 2010 and published in 2011. I do not think much work has been done on this since then. It is overdue time for us to look at it.

Specifically on Amendment 33L and the questions it raises, it is important that we think harder about what this phrase, a “fit and proper person”, should aim for. As I said, the wording of Amendment 33L is not necessarily perfect but it points us further down this track. I have heard it said that the problem with the fit and proper person test and the work operated under Ofcom is that precedents in relation to media come from earlier times under earlier regimes, such as the old ITC regime, which must be nearly 30 years old. Since it is not used very often, there are only occasional examples of it. We have a problem in ensuring there is a join-up between the considerations that should be brought into play today and what happened in the past. It was said—perhaps slightly light-heartedly but it makes the point—that it would be difficult in today’s world if one were using the tests provided by the ITC in the early 1980s and 1990s, as you would be able to prove that someone was not a fit and proper person to hold a broadcasting licence only if they had been not only charged with a crime of murder but also put away for it. That is probably too high a standard. Generally, most people would accept that. If it is true, there is a bigger question here.

It may be that the territory is such that we must be a bit more concerned about fit and proper persons in a more generic sense. In a time of fake news and with what is happening across America, we have difficulties enough coming our way. We also read in today’s papers that Andy Coulson, no less, is about to be hired as the PR consultant for a well-known daily newspaper on the very far right of the political spectrum. If it is right that his brief is to make people believe that the paper is authoritative and truthful, we have problems.

[Baroness Buscombe]

My Lords, I agree that the best is left until last. I start by thanking my noble friend, Lord Lansley, and the noble Lords, Lord Puttnam and Lord McNally, for the constructive way they engaged in discussions with the Secretary of State and me, and with the department’s officials, on seeking a common understanding on the very important issues raised in this debate.

As noble Lords said, in particular the noble Viscount, Lord Colville, the Secretary of State issued a European intervention notice in relation to the Fox/Sky merger on 16 March. She did so on two grounds: media plurality and commitment to broadcasting standards. Ofcom also announced on 16 March that it will conduct its fit and proper assessment at the same time as it will consider the public interest considerations raised in the intervention notice.

It is now time to leave the independent regulators, Ofcom and the Competition and Markets Authority, to carry out their reviews as set out in legislation. Under the terms of the intervention notice, both will report back to the Secretary of State within 40 working days—by 16 May. For the avoidance of doubt, the Secretary of State’s quasi-judicial role in respect of that merger continues and it would therefore be inappropriate for me to comment on the merits of that case. I am able to address the important issues raised by these amendments on future mergers.

As my noble friend Lord Lansley made clear, the purpose of these amendments is to future-proof the issue when it comes to media mergers. I listened carefully to the noble Lord, Lord McNally, talk about the changes over the past 14 years in terms of social mores and societal changes. The noble Lord, Lord Puttnam, referenced the need to talk about trust in each other, truthfulness, justice, compassion and tolerance. Of course, there was the reference to my noble friend Lord Crickhowell, whom I well remember speaking in those debates on foreign ownership. They were controversial at the time. There were some real difficulties in accepting what my noble friend sought to achieve but times have changed. We have moved on and learned a lot, and we have built a great deal of trust in the ability of Ofcom to do its work and do it well.

The first point I want to deal with is the amendment on Ofcom’s powers. In a phase 1 assessment of any media merger, Ofcom’s role is not to conclusively decide whether concerns about the merger have been established but rather to advise on whether or not they warrant a more thorough, phase 2 review. In our view, the timing and nature of Ofcom’s phase 1 review simply do not necessitate the powers that Amendment 33G is proposing. Phase 2, if this is needed, is a more in-depth review that the CMA carries out over a longer period of 24 weeks. At this stage in the process, the CMA does need more extensive powers and this is already provided for under the Enterprise Act 2002. It is at the end of this review that a decision is made by the relevant Secretary of State on whether the merger operates against the public interest and whether it should be able to proceed.

If a party to a merger does not co-operate with Ofcom in its phase 1 review, Ofcom can, and indeed should, draw out that point—and the behaviour of the parties—in its report and conclusions, which will be published. The provision of false or misleading information by anyone to Ofcom or the CMA is a criminal offence under Section 117 of the Enterprise Act. Our conclusion, therefore, is that extending the powers to Ofcom in phase 1, as Amendment 33G seeks to do, is not necessary and indeed changes the nature of what is a first-phase review to decide whether a fuller, much more thorough investigation is warranted.

As noble Lords have said, the media landscape is changing at a faster and faster rate and the tests set down in 2003 may no longer fully cover all the public interest considerations needed in media mergers. We have heard arguments throughout the passage of the Bill that the fit and proper assessment needs to be baked into the media public interest test. As the Secretary of State made clear in her Statement of 16 March, Parliament has given Ofcom a duty to assess on an ongoing basis the question of fit and proper for all organisations applying for broadcast licences. For corporate bodies, Ofcom’s assessment will cover controlling directors and shareholders.

Both the Secretary of State and Ofcom have said that while many of the same issues will be relevant to both the assessment of the commitment to broadcasting standards’ public interest ground and to an assessment of the fitness and propriety of licence holders, it is right that the latter—the fit and proper test—sits with an independent regulator. The current grounds for intervention in media mergers are all linked to the important public interest consideration of media plurality: plurality of ownership, plurality of content, and a commitment to standards that support plurality of views and content.

Although I acknowledge that, in a quasi-judicial role, political considerations do not come into play, adding fit and proper as a ground of intervention goes beyond the plurality test into questions of character and fitness, and puts the ultimate decision on those questions in the hands of a politician. Notwithstanding what the noble Lord, Lord McNally, said about the Government having a duty to protect the ecology of our media, this is a different position. We are very clear that the decision on fit and proper should be made by an independent authority; that is, Ofcom. This cuts entirely across what is generally the role of an independent regulator and, in my view, takes the grounds of intervention a step too far.

On the general premise that the media merger public interest consideration may not fully capture future shifts, we agree that it is time to consider this. Amendment 33F seeks to broaden the definition of media enterprise to take account of new forms of delivery and distribution. Amendment 33J, although introducing a media public interest test around fit and proper in proposed new subsection (2CC), adds a new media public interest test to cover access to cultural and performing rights, talent and other expression available to UK audiences in terms of media plurality.