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Allens Arthur Robinson

Focus: Media – December 2001

In brief: Australia's cross-media ownership laws are back on the agenda following the Coalition's re-election to Federal Government. Senior Associate Raani Costelloe looks at the chances of things changing.

Cross-media rules: what prospects of change?

The re-opening of the cross-media ownership debate has major implications for the existing landscape of media ownership, since changes to the current regime would undoubtedly trigger significant corporate acquisitions and divestiture in relation to television, radio and newspapers.

The Coalition's election policy stated that:

  • cross media rules are anachronistic and media organisations should be able to obtain exemptions from the rules - provided they give undertakings to maintain separate and distinct editorial processes, and retain existing levels of local news and current affairs production on television and radio;
  • existing media-specific foreign ownership rules that apply to television and newspapers are preventing the introduction of new players and a more competitive media sector. They should be abolished, with media acquisitions considered under general foreign investment law.

However, it may be difficult for the Government to achieve its policy objectives, since it requires the support of opposition parties in the Senate to pass legislation. Following the Coalition's re-election, Prime Minister John Howard commented that he is not going to bloody his nose on the issue if the opposition parties in the Senate remain opposed, and he has no intention of using the issue to trigger a double dissolution election.

While the election policies of Labor, the Democrats and the Greens generally opposed the abolition of cross-media rules, there has been no blanket rejection of the Government's proposal and it currently appears that they will only comment on substantive legislation once it is introduced into Parliament.

Cross-media and foreign ownership restrictions

Twice in the last five years the Coalition Government has attempted and failed to revisit and repeal the provisions of the Broadcasting Services Act 1992 (Cth) (BSA), which prevent any one person controlling more than one of the following in any geographic licence area:

  • a commercial free-to-air television licence;
  • a commercial radio licence; or
  • a wide circulation newspaper.

The Government also sought to review the media-specific foreign ownership restrictions. The BSA contains specific foreign ownership restrictions with respect to free-to-air and pay television licences, including:

  • free-to-air television: foreign persons must not be in a position to control a free-to-air television licence and the total of foreign interests must not exceed 20%;
  • pay television: foreign interests are limited to a 20% company interest in a pay television licence for an individual and a 35% company interest in aggregate.

In addition to the BSA, there are controls on foreign investment in the media under the Foreign Acquisitions and Takeovers Act 1975 (Cth) and associated policies. In summary:

  • all media: all direct (ie. non-portfolio) proposals by foreign interests to invest in the media sector irrespective of size are subject to prior approval under the Government's foreign investment policy. Proposals involving portfolio share holdings of 5% or more must also be approved;
  • newspapers: the maximum permitted aggregate foreign (non-portfolio) interests in national and metropolitan newspapers is 30%, with a 25% limit on any single foreign shareholder. The aggregate non-portfolio limit for provincial and suburban newspapers is 50%.

It should be noted that the non-BSA foreign ownership restrictions are easier to change than the cross-media and foreign ownership restrictions in the BSA relating to television. For example, the Government could relax the 30% foreign limit on newspapers without the need for Senate approval.

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Background to the law

The cross-media restrictions were introduced by a Federal Labor Government in 1987 and the oft-quoted remark of then Treasurer Paul Keating that media proprietors 'may be princes of print or queens of the screen, but not both' reflects the underlying policy intention of preventing a media company from controlling broadcast and print media in the same geographic area.

Some media companies argue that the cross-media rules have forced them to stay small and non-competitive and unable to compete with foreign conglomerates on the world stage. There is also a view that foreign ownership rules remain a substantial barrier to entrants and investors in the media industry, and, combined with the cross-media limits, are out of step with the trend in economic regulation to expose industry to competitive pressures. The Australian Competition and Consumer Commission (ACCC) believes the Broadcasting Services Act and the Foreign Acquisitions and Takeovers Act could impede international competition.

The Government believes that the cross-media rules are antiquated and piecemeal, since they fail to acknowledge the reality of digital convergence and the rise of new media such as the Internet and pay television, which, it is argued, have increased the plurality of views and reduced the likelihood of the concentration of ownership and influence.

On the other side of the fence, critics such as public interest groups and the journalists' union argue, firstly, that the same media companies tend to dominate new forms of media such as pay television and Internet content portals; and, secondly, in any event print media and free-to-air television remain the most influential media. As such, they maintain that cross-media restrictions prevent concentration in the ownership and control of the most politically influential media.

Past attempts at reform

A 1996 review of cross-media rules was abandoned when the Government failed to secure support from the opposition parties and even some of its own members, particularly rural and regional members.

In 1999, Federal Treasurer Peter Costello referred the BSA and related broadcasting legislation to the Productivity Commission and asked it to advise on practical courses of action to improve competition, efficiency and the interests of consumers in broadcasting services. The Commission's Report recommended that the cross-media and foreign ownership rules in the BSA be repealed, provided that:

  • foreign investment in broadcasting is covered by Australia's general foreign investment policy;
  • the Trade Practices Act 1974 (Cth) (TPA) is amended immediately to include a media-specific public interest test which would apply to all proposed media mergers; and
  • the Government removes the regulatory barriers to entry by new entrants into broadcasting and makes spectrum available for new broadcasters.

No legislation emerged. While the Commission's recommendations on foreign ownership are not too far removed from the Government's recent election policy, its recommendation that the cross-media rules should only be removed on the condition that new entrants be allowed into the broadcasting market conflicts with the Government's policy regarding commercial free-to-air television and the introduction of digital terrestrial television. It has granted free-to-air television licensees a period of protection, ending in 2007 at the earliest, in which no new free-to-air commercial television licences may be issued.

Conclusion

It is doubtful that the Coalition Government stands any greater prospect of success than in its past attempts, given the need to obtain the support of its own members (particularly regional members) and the opposition parties in the Senate. The adequacy of regional television news services is a sensitive issue due to the recent closure of a number of local news bureaux by regional television operators.

Much has been made of new Labor communications spokesman Mr Lindsay Tanner's qualified support of the removal of the cross-media rules in the past. However, his qualifications were much the same as those of the Productivity Commission, that is, the Government also simultaneously facilitates new entrants in the media sector. As noted above, new entrants to the free-to-air television sector are not imminent.

The Government may take an incremental approach and first attempt to remove radio from the cross-media restrictions, thereby allowing television or newspaper proprietors to acquire radio interests in the same market or vice versa. In addition, the Government may relax foreign ownership limits on newspapers as this would not require Senate approval.

It will be interesting to see whether the Government seeks a wholesale repeal of the cross-media laws or proposes an exemption regime which reflects its election policy. An exemption regime may be less confrontational than wholesale repeal but will be far more complicated in the detail.

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