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Extra! Extra! Read All About It! How the Media Bit Back in the ACCC’s Digital Platforms Inquiry and What It Means for Media Diversity in Australia

 |  October 27, 2019

By Matthew Lees (Arnold Bloch Leibler)1

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    Introduction

    While the final report by the Australian
    Competition and Consumer Commission (“ACCC”) in its digital platforms inquiry
    addresses various important issues relating to digital platforms,2 the inquiry is perhaps more revealing
    for what it tells us about the relationship between competition policy and
    another industry: news media and journalism.

    Born out of a political deal to relax cross-media
    ownership laws, the inquiry was conducted by the media-savvy ACCC. News media
    and journalism was the focus of the inquiry’s terms of reference, as well as
    key recommendations in the final report.

    News media and journalism are important not only to
    politicians and competition and consumer regulators: they play an essential
    role in a democracy like Australia by keeping citizens informed of public
    affairs, holding those in power to account and facilitating healthy public
    debate. They are also important for facilitating informed markets, providing
    valuable information to consumers.

    In recent years, a number of countries around the
    world have experienced concerns about the quality of news and information (or
    “fake news”) being publicly disseminated, particularly online, accompanied by
    concerns about the quality of the political process and fears of rising
    political extremism.3
    These are issues that affect us all and underline the importance of fair and
    accurate news media and journalism.

    In its final report, the ACCC endorsed the idea of
    developing platform-specific codes of conduct to address inequality of
    bargaining power between Google or Facebook (on one hand) and media businesses
    (on the other hand). It also proposed government grants for journalism in the
    public interest – in particular, local and regional journalism relating to
    local government and local courts. Both measures are both designed to directly
    assist media businesses.

    However, the inquiry must also been seen against
    the backdrop of the ACCC’s decisions to approve two significant media mergers –
    the proposed acquisition of the Ten Network and Nine Entertainment’s
    acquisition of Fairfax – even though Australia already had one of the highest
    concentrations of media ownership in the world.4

    Further, during the course of the inquiry, the
    Chair of the ACCC made a speech that downplayed the importance of media
    diversity in applying competition law.5 He also made clear that the ACCC does
    not subscribe to the “hipster” antitrust (or competition law) movement, which
    seeks to fashion competition law as a weapon against the might of tech giants
    such as Google and Facebook.

    And so, while the final report recommends some
    measures of benefit to media businesses and local journalism, it is certainly
    not a radical response to the significant challenges raised by digital
    platforms.

    The Origins of
    the Inquiry

    The Inquiry was established in late 2017 as part of
    a political deal reached between the government and cross-bench Senator Nick
    Xenophon to relax laws restricting cross-media ownership.6

    Those reforms were necessary to enable the
    acquisition of the Ten Network by entities associated with Bruce Gordon and
    Lachlan Murdoch. Ten is one of Australia’s three major free-to-air commercial
    television broadcasters and, at the time, was in voluntary administration and
    receivership.

    The proposed acquirers already had minority stakes
    in Ten as well as other media interests. Mr. Gordon controlled WIN (a regional
    commercial television broadcaster) as well as a minority stake in Nine
    Entertainment (another major commercial television network). Mr. Murdoch held
    interests in News Corporation (a major print/online media company), Foxtel (a
    pay-television operator), 21st Century Fox, Fox Sports Australia and Endemol
    Shine (content producers), and the Nova Entertainment Group (a commercial radio
    broadcaster).

    The ACCC approved the acquisition under its
    informal merger clearance process.7
    This was even though the acquisition could not proceed without changes to the
    cross-media ownership laws. Those changes were passed by parliament but
    ultimately Ten was acquired by U.S. media company CBS.

    In order to gain Senator Xenophon’s support, the
    government agreed to a $60 million fund for regional and small publishers
    including funding for cadetships – as well as an ACCC inquiry into platforms
    such as Google and Facebook.8
    At the time, Senator Xenophon had recently alleged in a Senate committee
    inquiry hearing that Google was abusing its market power, and this was “hurting
    journalism in this country and that’s bad for our democracy.”9

    Consistent with those concerns, the inquiry’s terms
    of reference required the ACCC to consider, among other matters, “the extent to
    which platform service providers are exercising market power in commercial
    dealings with the creators of journalistic content and advertisers.”10

    Media Diversity

    Two weeks after the cross-media ownership changes
    were enacted, the ACCC updated its Media Merger Guidelines.The
    guidelines acknowledge “the diversity of media voices is interlinked with a
    number of issues the ACCC considers in its competition assessment under section
    50 of the Act,”11
    and those issues include the level of concentration in a market, reduction of consumer
    choice and reduction in the quality of media content.12

    The guidelines do not, however, consider media
    diversity as an aspect of competition that is itself protected by competition
    law. This approach is illustrated by two decisions. First, when explaining its
    decision to approve the joint acquisition of Ten, the ACCC’s Chair said:13

    While this transaction will result in some
    reduction in diversity across the Australian media landscape, we have concluded
    it would not substantially lessen competition, which is the test the ACCC is
    required to assess acquisitions against.

    This statement appears to draw a distinction
    between competition (on one hand) and media diversity (on the other) and
    emphasizes that competition law is concerned with the former.

    Second, when the ACCC approved Nine Entertainment’s
    proposed acquisition of Fairfax Media (which combined two of the largest online
    news providers in Australia), the ACCC explained:14

    While the merger between these two big name media
    players raised a number of extremely complex issues, and will likely reduce
    competition, we concluded that the proposed merger was not likely to
    substantially lessen competition in any market in breach of the Competition and
    Consumer Act,” ACCC Chair Rod Sims said.

    This merger can be seen to reduce the number of
    companies intensely focusing on Australian news from five to four. Post the
    merger, only Nine-Fairfax, News/Sky, Seven West Media and the ABC/SBS will
    employ a large number of journalists focussed on news creation and dissemination.

    The ACCC acknowledged that Australian news,
    including investigative journalism, was the “key issue.” It did not, however,
    expressly address the issue of loss of media diversity. Instead, it appears to
    have treated differences between the two media businesses as indicating that
    they did not compete closely with each other: 15

    The ACCC also found that Nine’s television
    operations and Fairfax’s main media assets generally do not compete closely
    with each other. Nine’s news and current affairs programs target a mass market
    audience while Fairfax’s print and online publications tend to provide more
    in-depth coverage, targeting the demographic of its subscription audience.

    The ACCC said it “understood” concerns about losing
    a brand known for independent investigative journalism (Fairfax). However,
    after considering Fairfax’s loss of half its advertising revenue over the past
    five years, the ACCC concluded that likely future changes to the way Fairfax
    and Nine operate in the future “would not be, to a significant extent, caused
    by the merger lowering the level of competition.”16

    The argument here appears to be that Fairfax is
    unlikely to sustain its current level of independent investigative journalism,
    but this is for financial reasons (whether or not the merger proceeds) rather
    than lack of competition from Nine (if the merger proceeds). Again, there is no
    stated objective of media diversity, which is reduced by the merger itself,
    regardless of the potential impact of financial pressures in the future.

    In the final report of the inquiry, the ACCC
    portrayed diversity of media ownership as an outdated understanding of media
    diversity and argued that “diversity of media ownership may contribute to (but
    does not guarantee) the availability of a higher number of independent
    editorial voices.”17
    The ACCC’s concerns regarding the availability of additional editorial voices
    were focused on local and regional journalism.

    Interestingly, the ACCC’s proposed measure in
    response to the media businesses’ financial challenges was public funding for
    local journalism,18
    not the proposed codes of conduct to govern digital platforms’ relationships
    with media businesses. The codes of conduct seem more directed at specific
    contractual issues arising from an imbalance of bargaining power, although this
    includes stopping digital platforms from impeding a news media business to
    monetize its content, and requiring fair negotiations to share any value
    “directly or indirectly” obtained by a digital platform from such content.19

    Other Approaches

    A stark contrast to the ACCC’s approach is provided
    by the decision of the New Zealand Commerce Commission (“NZCC”) to decline to
    authorize the merger of New Zealand Media and Entertainment (“NZME”) and
    Fairfax in New Zealand. The NZCC explained:20

    ‘This merger would concentrate media ownership and
    influence to an unprecedented extent for a well-established modern liberal
    democracy. The news audience reach that the applicants have provide the merged
    entity with the scope to control a large share of the news consumed by a
    majority of New Zealanders. This level of influence over the news and political
    agenda by a single media organisation creates a risk of causing harm to New
    Zealand’s democracy and to the New Zealand public,’ Dr Berry said.

    ‘Having reviewed all the evidence, our primary
    concerns remain that this merger would be likely to reduce both the quality of
    news produced and the diversity of voices (plurality) available for New
    Zealanders to consume. Competition between NZME and Fairfax leads them to
    produce higher quality content than would otherwise exist with the merger. This
    competition incentivises investment in editorial resources, motivates
    journalists and editors in their day-to-day work and acts as a safeguard to
    plurality.’

    The NZCC’s approach expressly reflects concerns
    about the role of the media in a liberal democracy, and media diversity for the
    benefit of consumers and consumer choice.

    Further, U.S. commentators have argued that a
    vibrant media, creating a “marketplace of ideas,” is a fundamental for a
    healthy society in which market competition can take place:21

    An independent and competitive media, for example,
    informs policy makers of the unintended social effects of their policies,
    provides a voice to pressure the government for change, serves as a catalyst
    for institutional change to promote competition policy, increases political
    accountability, and reduces corruption, which hampers any competition policy.
    As Professor Ed Baker writes:

    Concentrated communicative power creates demagogic
    dangers for a democracy, reduces the number of owners who can choose to engage
    in watchdog roles, may reduce the variety in perspectives among the smaller
    group of people who hold ultimate power to choose specific (varying) watchdog
    projects, and multiplies the probable conflicts of interest that can muzzle
    these watchdogs.

    However, even if media diversity is specifically
    protected by competition law, media mergers may still raise difficult issues.
    In particular, due to the financial pressures on print media businesses
    explained in the ACCC’s final report, the loss of independence of one media
    “voice” may be compensated for by what is left of that voice becoming a
    stronger voice than it otherwise would be because of its improved financial position.

    It should be noted in both of the ACCC merger
    decisions referred to above (Ten and Nine-Fairfax) there were concerns about
    the financial position of the media business being acquired. However, based on
    its explanations, it appears the ACCC did not directly engage with the benefits
    and detriments to media diversity arising from the proposed mergers.

    Hipster Antitrust

    The ACCC’s Chair provided an insight into the
    ACCC’s thinking regarding media diversity at an economics conference during the
    course of the digital platforms inquiry.22 The
    speech explained how the so-called “hipster antitrust” movement has re-opened
    old debates about whether competition law should focus exclusively on the
    economic “consumer welfare standard” or take a broader range of considerations
    into account.

    One of the main concerns of the “hipster antitrust”
    movement has been the new economy.23
    As the ACCC’s Chair explained:

    Around the world there is increasing competition
    concern about the rise of a new type of dominant firm — digital platforms with
    a dominant position in their market, such as Amazon, Google, or Facebook.

    There is increasing concern that these players are
    large enough to control access to the market, or to distort normal competitive
    processes; but some argue it is not clear that this behaviour can be picked up
    through a narrow focus on consumer welfare.

    Whether or not you consider Amazon to be a
    bottleneck, it does not seem to have resulted in higher prices to consumers.
    Does this mean that, under the consumer welfare standard, Amazon should get a free
    pass under the competition law?

    The ACCC’s Chair rejected calls for a broader
    approach to competition and, in this context, specifically commented on media
    diversity:

    As I said earlier, this renewed questioning of the
    economic foundation of competition law has led to calls to expand the range of
    considerations in competition law, to include both broader economic
    considerations (such as income inequality, low wage growth, or unemployment)
    and non-economic considerations (such as concentrations of political power,
    financial stability, media diversity, or environmental protection).

    In my view, it is inadvisable and counterproductive
    to import these considerations into the core of competition law. Competition
    law is enforced by an independent authority, not by elected officials, so the
    objectives must be clear. Competition law and policy should be first and
    foremost about protecting and promoting competition for the welfare of
    consumers.

    Properly applied competition law should go well
    beyond price effects and so can significantly assist media diversity, but they
    are not the same things; they are not completely overlapping sets.

    This raises a number of important points. Although
    the ACCC is an unelected body, parliament has chosen to pass laws that protect
    competition and to give the ACCC powers under those laws.24 The
    issue is not whether the ACCC should pursue media diversity as an objective
    separate to competition; the issue is whether and to what extent media
    diversity is an aspect of competition that is protected by competition law.

    The final paragraph quoted seems to acknowledge
    that competition law and media diversity overlap, albeit incompletely. Granted,
    they are not identical. However, that does not prevent media diversity from
    being critical for competition – not just competition for news media services,
    but competition in markets generally, in the same way that media diversity is
    critical ingredient for a liberal democracy.

    While the ACCC argues that the objectives of
    competition law must be clear, this overstates the certainty of a narrow focus
    on economic considerations.25
    Economic considerations are not necessarily able to be stated, or applied, more
    clearly than non-economic considerations such as media diversity.

    This is not to suggest that all non-economic
    concerns should be taken into account.26 Nor
    is it to dispute the importance of economic considerations in identifying the
    existence of competition in particular industries or markets, as recognized by
    the then Trade Practices Tribunal in the famous QCMA case.27

    In that case, the Tribunal described “competition”
    as “such a very rich concept (containing within it numbers of ideas)” that “may
    be valued for many reasons as serving economic, social and political goals,”
    and cautioned against attempting any final definition that might be unduly
    restrictive.28
    The concept is not defined in the Competition and Consumer Act 2010 (Cth).

    Further, it is not the case that the ACCC’s roles
    and responsibilities are limited to purely economic considerations and it lacks
    the requisite capability with respect to non-economic considerations. The ACCC
    already has broad powers, in relation to conduct that would otherwise breach
    competition law, to authorize that conduct on the basis that the conduct would
    result in a net public benefit despite its anticompetitive nature or effect.29

    As explained in Part II above, the impetus for the
    inquiry was a concern that Google’s alleged abuse of market power was harming
    journalism and consequently democracy. There may be limits to how well
    competition law can protect media diversity, and such protection necessitates a
    deliberate, considered and transparent approach to enforcement, but that
    protection remains important nonetheless.30

    Conclusion

    News media and journalism are not the only industry
    to be significantly disrupted by the digital age. However, given their
    importance to the political process and society generally, it is perhaps
    unsurprising they prompted the digital platforms inquiry.

    In the final report, the ACCC made recommendations
    designed to assist media businesses. However, the ACCC’s media merger decisions
    and public comments have downplayed the importance of media diversity in
    competition law. The ACCC’s final report did not canvass the differing views
    regarding the role of competition law in protecting media diversity, or
    recommend changes to competition law to strengthen that protection.

    There are, it is submitted, good reasons for recognizing media diversity as important to effective competition, and carefully considering the implications for media diversity when they arise in competition law cases. This does not mean that the end result is straightforward – as shown by the case of the acquisition of a failing media business – but it is preferable to engage directly with the issue. Competition law should not be limited to purely economic considerations, with everything else dismissed under the label of “hipster.” While economic considerations may ordinarily be sufficient for routine merger matters, there will also be situations where broader issues are at stake. If ever there was a time when competition law should be looking to protect the important role of news media and journalism in our society, it may be now.

    Click here for a PDF version of the article


    1 Competition Partner, Arnold Bloch
    Leibler, Melbourne. The views expressed in this article are the author’s own
    and do not necessarily represent those of his firm or its clients. The author
    acted in relation to the proposed acquisition of the Ten Network, which is
    referred to in this article, for a client that was not one of the parties to
    that proposed acquisition.

    2 Australian Competition
    and Consumer Commission, Digital
    Platforms Inquiry: Final Report
    (2019).

    3 See e.g. Reuters
    Institute for the Study of Journalism, Digital
    News Report 2019
    (2019); Australian Broadcasting Corporation, Fake News: The Battle of the Social Networks,
    Four Corners (broadcast September
    16, 2019); European Broadcasting Union, Democracy
    in the Online World
    (October 7, 2019) https://www.ebu.ch/news/2019/10/democracy-in-the-online-world.

    4 Tim Dwyer & Denis
    Muller, FactCheck: is Australia’s level
    of media ownership concentration one of the highest in the world?
    The Conversation (December 12, 2016) https://theconversation.com/factcheck-is-australias-level-of-media-ownership-concentration-one-of-the-highest-in-the-world-68437.

    5 Rod Sims, Chair,
    Australian Competition and Consumer Commission, Address to the 2018 Annual RBB
    Economics Conference (November 29, 2018).

    6 Richard Baines, Media industry facing major shake-up as
    Government strikes Senate deal with support of Nick Xenophon
    , ABC News (September 14, 2017) https://www.abc.net.au/news/2017-09-13/media-reforms-set-to-pass-senate/8943266. The changes scrapped
    the “two out of three rule” and the “reach rule.” The former meant that a
    person was not allowed to control more than two of commercial radio, commercial
    television or newspaper in the same licence area. The latter meant a person was
    not allowed to control commercial television licences that, in combination,
    broadcast to more than 75 percent of the population of Australia: Australian
    Communications and Media Authority, Changes
    to media control and diversity rules
    (February 18, 2019) https://www.acma.gov.au/theACMA/changes-to-media-control-and-diversity-rules.

    7 Media Release,
    Australian Competition and Consumer Commission, ACCC will not oppose Birketu
    and Illyria’s proposed acquisition of Ten (August 24, 2017).

    8 Baines, supra note 6.

    9 Hansard, Senate Select
    Committee on the Future of Public Interest Journalism, committee hearing,
    Sydney (August 22, 2017) 31. See also at 30.

    10 Commonwealth of
    Australia, Inquiry into Digital Platforms,
    Terms of Reference (December 4, 2017).

    11 Section 50 of the Competition and Consumer Act 2010 (Cth)
    prohibits mergers and acquisitions that substantially lessen competition.

    12 Australian Competition
    and Consumer Commission, Media Merger
    Guidelines
    (2017) 6-7.

    13 Media Release,
    Australian Competition and Consumer Commission, ACCC will not oppose Birketu
    and Illyria’s proposed acquisition of Ten (August 24, 2017).

    14 Media Release,
    Australian Competition and Consumer Commission, ACCC will not oppose
    Nine-Fairfax merger (November 8, 2018).

    15 Id.

    16 Id.

    17 Australian Competition
    and Consumer Commission, supra note 2, at 287.

    18 Id at 334, Recommendation 10.

    19 Id at 256, Recommendation 7.

    20 Media Release, New
    Zealand Commerce Commission, Commission declines NZME/Fairfax merger (May 3,
    2017).

    21 Maurice E. Stucke &
    Allen P. Grunes, Towards a Better
    Competition Policy for the Media: The Challenge of Developing Antitrust
    Policies that Support the Media Sector’s Unique Role in Our Democracy
    , 42 Connecticut Law Review101, 107 (2009), citing C. Edwin Baker,
    Media Concentration and Democracy: Why
    Ownership Matters
    (2007) 120-1.

    22 Sims, supra note 5.

    23] Most famously, Lina M.
    Khan, Amazon’s Antitrust Paradox 126,
    Yale Law Journal 710 (2017).

    24 For completeness, it
    should be noted that the interpretation of those laws is ultimately a matter
    for the courts. The ACCC’s approach is of significant importance, however,
    especially when, in effect, it commonly determines the application of
    competition law to proposed mergers through its informal merger clearance
    process.

    25 Robert Pitofsky, The Political Content of Antitrust, 127 University of Pennsylvania Law Review
    1051, 1065 (1979).

    26 Id. at 1058.

    27 Re Queensland Co-operative Milling Association Limited, 8 ALR 481,
    511 (1976).

    28 Id.

    29 Competition and Consumer Act 2010 (Cth) Part VII, Division 1.

    30 Howard A. Shelanski, Antitrust Law as Mass Media Regulation: Can
    Merger Standards Protect the Public Interest?
    94 California Law Review 371 (2006).