MEDIA SPOTLIGHT: What does Ofcom's first paper mean for mergers?

The proposals are intended to safeguard existing media plurality, Alasdair Reid says.

Anyone who had absolute faith in the notion that, with the creation of Ofcom, we were entering a new era of light-touch media regulation probably got a bit of a shock when they glanced at the regulator's first guidance paper.

Released last week as Ofcom's (and its chief executive Stephen Carter's) first significant act, it outlines proposals for the public interest tests that will be applied in its deliberations on future media owner mergers.

Surprise, surprise, this pronouncement is anything but short or sweet - the new regulator, like its illustrious predecessors, will be no friend to forests.

But that isn't really the main cause of consternation. Far more sobering is the reminder that Ofcom may well continue to have a significant and intricate role in determining the outcome of a media merger, contrary to the widely held notion that, henceforth, only Competition Commission requirements would have to be met.

We'll see, obviously. These are just draft guidelines (get your responses in quick) and the mechanism by which they may be invoked can only be put in process by a secretary of state for trade and industry - and, what's more, only if the competition authorities' investigations show there may be further issues that need exploring.

But still, bureaucrats will be bureaucrats and it will surprise no-one if these provisions are taken out for a test drive at some point in the not-too-distant future.

As one senior newspaper executive states: "It's not immediately obvious how important these proposals are. They've just sort of slipped them out there without any fuss, haven't they? But then you look at some of the stuff in there. I don't think people realise generally that if Ofcom gets the go-ahead to look at you, they'd want to know, for instance, the numbers of pages of features you'd published. Or the number of column inches of human interest stories. Why? The initial feeling is that this is wholly unnecessary and quite pernicious. On a broader front, the immediate speculation, obviously, is whether Richard Desmond (the owner of the Express Group) would face an Ofcom investigation if he moved for The Daily Telegraph.

We won't comment on the record at this stage, though, but you can rest assured we'll be submitting a detailed response to Ofcom, giving our thoughts on this paper."

Indeed, there is a lot of seemingly bizarre stuff in the section on newspapers - Ofcom would want to know if a future proprietor had honourable intentions towards a proposed acquisition. It would seek to estimate "the likely level of involvement of proprietors in editorial decisions, with evidence of (their) track record". Would there, the document continues, be adequate arrangement for "ensuring accurate presentation of news?"

Obviously, one sunny day, there will be, Ofcom. Meanwhile, such questions are useful only in underlining the seemingly unbridgeable gap between regulators and the real world. And in the real world, there doesn't seem to be much in this document that would seriously worry, say, the owner of a mid-market national newspaper, who was considering buying up a couple of broadsheet nationals.

It's all designed to safeguard media "plurality" - one of those moist concepts that absolutely everyone can agree is highly desirable and worth defending to the hilt, but one that no-one has ever succeeded in defining.

The Communications Act has a go. There is a need, it says, "for there to be a sufficient plurality of persons with control of the media enterprises serving (a particular) audience in relation to every different audience in the UK or a particular area or locality of the UK".

Ofcom is on firmer ground where broadcast is concerned and you'd expect it to be, given that for a large part it is the bloated offspring of the Independent Television Commission and given also that there's lots of primary legislation covering broadcasters. Ofcom will have a fairly straightforward role in safeguarding the public service remit of ITV (and, to the extent that it currently exists, that of five too).

One of the broadcast sectors that it might find slightly more testing is radio. According to continuing speculation (although it's true that the speculation is less intense than it was) the medium is due for a bout of consolidation during 2004 and some of that consolidation would probably involve increased cross-media ownership. For instance, perhaps newspaper owners with both national and regional titles will seek to own a greater number of local stations, which would surely be an ideal situation in which to administer the plurality test.

Should any of this be of concern for advertisers? Probably, Bob Wootton, the director of media and advertising affairs at ISBA, reckons. But, like many observers, he believes in the future it will be rare for the competition authorities to call in Ofcom regarding a potential media merger - most of the bases will already have been covered. "Plurality as regards the interests of readers or viewers or listeners is obviously a consideration but in my experience it is not the overriding consideration. Mergers are complicated enough as it is. So, from an ad industry point of view, it's probably a secondary issue," he says.

However, Wootton does agree with the notion that a national newspaper takeover could trigger a plurality debate, as could, for different, more parochial reasons, a radio consolidation.

"Radio is so local that the compartments it divides into are often quite small, so the issue of plurality in each of those cells becomes more important. Can I see plurality ever being invoked by an interested media owner? Or a group of customers such as, say, ISBA? I'd assume it's more likely to be something competitors invoke against each other. I can't honestly see us going to Ofcom and saying that we have grave reservations about a merger on the sole grounds that a specific section of the audience will be less well catered for as a result," he concludes.