On 2 January 2009, the Tánaiste and Minister for Enterprise, Trade & Employment (the “Minister”), Mary Coughlan, published the Report of the Advisory Group on Media Mergers (the “Report”). The Advisory Group was established to review the current Irish merger control regime specifically as it applies to media mergers. The Report makes a series of recommendations as to how the existing rules under Section 23 of the Competition Act, 2002 (the “Act”) should be amended.
Among the most significant changes proposed by the Report is the introduction of a new notification system, whereby a separate notification would be made to the Minister in respect of media mergers, in addition to any notification to the Competition Authority (the “Authority”), the European Commission and/or (in the case mergers involving broadcasters) the Broadcasting Commission of Ireland (the “BCI”). The Report also proposes a new statutory test to be applied by the Minister in her review of media mergers; an expanded definition of what constitutes a “media merger”; and a reduced role for the Authority in the assessment of the public interest aspects of media mergers.
This Advisory Group’s study was undertaken as part of a wider review of the Act announced by the then Minister, Micheál Martin, on 13 November 2007, and takes place against the backdrop of other recent changes including the proposed merger of the Authority with the National Consumer Agency (“NCA”), and the reduction of the five member executive board of the Authority to four. (Following the move by Authority member, Paul Gorecki, to the Economic & Social Research Institute, it is understood that a fifth member of the Authority will not be re-appointed in the near future).
CURRENT REGIME FOR MEDIA MERGERS
Under the current rules, the jurisdictional thresholds for notification in the Act are disapplied for media mergers, so that media transactions are automatically notifiable, regardless of the turnover of the undertakings involved.
Media mergers are initially notifiable to the Authority, but the Authority’s approval of a media merger is subject to review (and potential veto) by the Minister. If the Authority approves a media merger at the end of Phase One, it must inform the Minister who has a period of 10 days in which she may decide, on the basis of specified public interest criteria, to direct the Authority to open a Phase Two investigation. If the Authority clears a media merger at the end of Phase Two (with or without conditions), the Minister may, within a further 30 days, prohibit the merger or impose new or stricter conditions.
Respondents to the Advisory Group’s public consultation were critical of the public interest criteria as currently set out in the Act, which were perceived to lack clarity, and of the failure of the Act to prescribe an overall objective for the Minister in carrying out her review (equivalent to the “substantial lessening of competition” or “SLC” test used by the Authority). The Advisory Group itself characterised the mechanism for Ministerial intervention in media merger review as “anomalous” given that it limits the Minister’s power to intervene decisively only at the end of the Phase Two review.
In addition, when examining a media merger at Phase Two, the Authority is obliged under the current rules to form an opinion in relation to the application of the public interest criteria and to inform the Minister of this opinion. The Authority has publicly stated its view that this requirement obliges it to do something “outside its area of expertise” and should therefore be abolished.
EXPANDED DEFINITION OF “MEDIA MERGERS”
A “media merger” is currently defined as a merger or acquisition in which each of two or more of the undertakings involved carry on a defined “media business” either in the State, or in the State and another jurisdiction respectively. Section 23(10) of the Act in turn defines a “media business” as “(a) a business of the publication of newspapers or periodicals consisting substantially of news and comment on current affairs, (b) a business of providing a broadcasting service, or (c) a business of providing a broadcasting services platform” but specifically excludes from this definition the publication of content over the Internet. The Report suggests amending this definition to include undertakings involved in providing print or certain audio visual content over the Internet.
NEW SYSTEM OF NOTIFICATION
The Report recommends that the Act be amended to provide for a separate system of notification of media mergers to the Minister for clearance. While the Authority would continue to review the competition aspects of media mergers under the SLC test, media mergers would require an additional notification to the Minister (on a specific notification form and attracting a separate fee) who would apply a statutory test (discussed below) to ensure that the merger is not contrary to the public interest.
The Report proposes that media mergers which fall within the jurisdiction of the European Commission pursuant to Council Regulation (EC) No. 139/2004 (“EC Merger Regulation”) should also be notified to the Minister for approval. This would appear to provide for a specific mechanism (not currently provided for under the Act) for the application in Ireland of Article 21(4) of the EC Merger Regulation, which allows Member States to take “appropriate measures” to protect legitimate interests, including media plurality.
The Report defines a proposed new statutory test be applied by the Minister in her review of media mergers, ie: “whether the result of the media merger is likely to be contrary to the public interest in protecting plurality in media business in the State”. Plurality of the media is defined in the Report as including “both diversity of ownership and diversity of content”.
The Advisory Group also recommends the adoption of a revised set of “relevant criteria” to be considered in applying the above test, including the likely effect of the media merger on plurality; the undesirability of allowing any one individual/undertaking to hold significant interests within a single sector or across different sectors of media business in the State; the consequences for the promotion of media plurality of the Minister intervening to prevent the merger; and the adequacy of other mechanisms to protect the public interest.
The Report recommends that these criteria should be supplemented by more detailed statutory guidelines to be issued by the Minister in consultation with the Minister for Communications, Energy and Natural Resources. Such guidelines are intended to assist the undertakings involved in knowing how the Minister will apply the “relevant criteria”. It is proposed that the guidelines would contain indicative guidance on levels of media ownership and in particular, cross media ownership, that would generally be regarded as unacceptable. The would also provide for concrete indicators of diversity and plurality which might operate as a “sort of checklist” which the parties to a media merger would be invited to address in their notification. Examples given include demographic audience information and market share data, shareholder information, compliance by the parties with industry codes of good practice, and whether the parties have a “record of truthful, accurate and fair reporting”.
Should the Minister implement the proposals contained in the Report, parties will require a separate approval from the Minister prior to implementation of a media merger. The Report suggests a two phase system for review, in which Phase One would last until 30 days after the date of notification to the Minister or the decision of the Authority / European Commission / BCI, whichever is the later (ie effectively a two month period for mergers notified to the Authority).
At the end of this period, the Minister may decide to (i) approve the media merger on the basis that it does not contravene the public interest test, (ii) approve the media merger with conditions, or (iii) proceed to a Phase Two examination.
It is proposed that Phase Two should last no more than four months from the date of the Phase One decision. In addition, at any stage in the process (Phase One or Two), the Minister would be entitled to look for further information and extend time limits by the time required to respond.
In the event of a Phase Two review, the Report calls for the establishment of a five person Consultative Panel comprised of experts in law, journalism, media, business or economics, to advise the Minister on the application of “relevant criteria” (and to replace the existing role of the Authority in this regard). As the number of media mergers which are referred to Phase Two is small (only three media mergers have been referred to Phase Two since the Act came into force in 2002), it is not proposed that the Consultative Panel be established on a permanent basis but rather be convened from time to time as appropriate.
At the end of Phase Two, unless concluded in the intervening period by a Ministerial decision, the Minister shall decide whether to approve, approve with conditions or block a media merger.
TRANSPARENCY AND ONGOING REPORTING
The Report places a significant emphasis on transparency and recommends that both the Minister’s decision and the report of the Consultative Panel should be published on the conclusion of the review process.
The Report further recommends the imposition of a statutory obligation on parties to a media merger to provide full information to the Minister on all circumstances that may have a detrimental effect on media diversity and to notify the Minister of any changes in information provided. The Report also recommends the ongoing collection and periodic publication by the Government of information in relation to media plurality in the State.
The Department of Enterprise, Trade & Employment has indicated that legislation to implement these recommendations is expected to be brought forward during 2009. While the extent to which the Minister will incorporate all of the Advisory Group’s proposals is by no means certain, it appears that radical changes to the legislative framework regarding media mergers are likely. It is unclear whether the Authority’s merger with the NCA and the proposed broader reform of the Act will take place simultaneously, however it is expected that these changes are more likely to take place at a later date.