Competition v. Plurality

The following article was written by Smarika Kumar and Siddharth Narrain and first appeared on The Hoot.

On 12 August 2014, TRAI published a set of recommendations on issues relating to media ownership. The recommendations aim to establish a regulatory framework to preserve external plurality (diversity of ownership) and internal plurality (diversity of content) in the media ecology of India. We discuss the implications of some of these recommendations.

TRAI recommendations on External Plurality

TRAI recommendations on external plurality have many merits. First of all, the recognition of the need for plurality of media ownership in the country is in itself commendable. Next, that a comprehensive understanding of the positions of ownership can be used to influence media in Chapter 2 is praiseworthy. The definition of “ownership” and “control” has been discussed in this chapter to conclude that “ownership” is only a smaller aspect of the larger concept of “control” which can be used to influence media. Additionally the recommendations propose a framework for mandatory disclosures in Chapter 3 which can help immensely in bringing transparency to the media industry. However there are some issues with the recommendations on external plurality which do need to be discussed.

Absence of recommendations concerning horizontal integration

What is conspicuous by its absence in the TRAI recommendations is a proposal for a regulatory framework which would work to promote horizontal plurality and prevent horizontal consolidation (i.e. consolidation of different service providers in one segment of the media under the same owner, eg. single ownership of multiple TV channels, or single ownership of multiple newspapers, or single ownership of multiple TV broadcast distributors). While the TRAI recommendations address the issues of cross-media ownership and vertical integration, they fail to comment on whether the current regulatory framework for horizontal integration is adequate to preserve media diversity.

From the absence of such recommendations, TRAI seems to have assumed that current provisions of competition law are adequate and provide enough safeguards to preserve plurality in media. However enough instances exist to prove that this assumption is wrong.

The biggest instance is of course, the Reliance-TV18 combination, which managed to combine several large TV channels and internet news websites under a single ownership umbrella because the current framework of competition law does not see such a combination as anti-competitive. Additionally in JAK Communications v. Sun Direct TV, the practice of predatory pricing by DTH service providers against MSOs, was not recognised as an anti-competitive practice. In Dish TV v. Hathway and Others, allegations by MSOs that DTH service providers collectively abuse their dominance in the TV distribution sector was not recognised as a violation of Indian competition law. Yet each of these instances is an assault on the plurality of players which operate in each horizontal segment: be it the TV channel segment, the internet news website segment, or the TV distribution segment.

This is not to even say that the inadequacy of our competition law is what is at fault here. While it may have its own problems, the fact of the matter is that competition law exists to protect competition, and not plurality. Presence of competition in a media market does not necessarily ensure presence of plurality of media ownership. Competition law applies generically to all markets and is not specialised to specifically address the peculiar implications of media. That is why there is a need to find, outside of competition law, a framework for horizontal ownership regulation, which address the unique plurality needs of a media environment. As TRAI itself has pointed out, the issue of plurality of media is not similar to the issue of plurality of shoe manufacturers simply because “the media serves a higher purpose and needs separate consideration.”(para 1.12) However, when it comes to giving such separate consideration to horizontal regulation of media, TRAI has chosen to keep a disappointing silence.

Use of the concept of relevant market to regulate cross-media ownership and vertical integration

In the 3rd Chapter of its recommendations, TRAI identifies the problem when it comes to regulating cross-media ownership (single ownership of different kinds of media and content, eg. TV, print, news and general entertainment), viz., on what parameters is one to even determine the existence of concentration of media across segments like TV, print, radio etc.? To answer this question, TRAI endorses understanding concentration of cross-media ownership through the framework of “relevant market”: “The demarcation of relevant markets for media consumption is essential to determine the true extent of media concentration. This will help in identifying the players within the market that are capable of behaving independently in the absence of effective competitive pressure, thereby affecting plurality.”(para 3.5). Similarly, the 4th Chapter of TRAI recommendations which addresses issues of vertical integration (single ownership of various stages of media production eg. content and distribution), endorses TRAI’s “Recommendations on Issues related to New DTH Licenses” dated July 23, 2014,(para 4.15) which again employs the idea of “relevant market” to determine undesirable concentration of media ownership.

“Relevant market” is a concept borrowed from competition law. Under the Competition Act, 2002, “relevant market” is defined as a market determined with reference to the “relevant product market” or “relevant geographic market” or both (Sec. 2(r)). TRAI has identified that only news and current affairs genre and print and television segments need to be regulated under cross-media ownership rules and has recognised these as part of the “relevant product market”.(para 3.13 and para 3.20). “Relevant geographic market” on the other hand has been demarcated by TRAI on the basis of language and States. (para 3.27).

The basic tenet of competition law is that a practice is deemed anti-competitive only when viewed in relation to other players in a “relevant market.” What TRAI has done via its recommendations is extend this competition law-based concept of “relevant market” to cross-media ownership and vertical integration, which was not possible under the current competition law regime that addresses only issues of horizontal integration. Accordingly TRAI says, “Cross-media ownership rules would restrict ownership within a relevant market, i.e. between the newspaper and television outlets, and not across different relevant markets.”(para 3.28), and similarly for vertical integration, where some integration is nevertheless allowed, for purposes of efficiency.

Once the “relevant market” in which cross-media ownership and vertical integration is sought to be regulated are recognised, and then the HHI index is recommended to be used as a metric for measuring concentration in that “relevant market”. Without commenting on the merits of the use of the HHI index, we would like to point out that the use of the concept of “relevant market” to demarcate markets is in itself problematic if the objective is to protect media diversity.

Over the years, the Competition Commission of India (CCI) at various points, has used “relevant market” in case of media industry to determine if anti-competitive practices are taking place or not. Often, “relevant market” has been inadequate to protect plurality of media players. In Consumer Online Foundation v. Tata Sky and Others, the practice of collective dominance by DTH service providers to prevent entry and sustainability of new players in the market, in the same “relevant market” was not recognised as an anti-competitive practice, even though it obviously affects media plurality. The problem gets further compounded when language is used as a factor to delineate “relevant market.”

India is a multilingual country, where a sizeable portion of the population is able to speak more than one language. Setting the objective of media diversity of ownership should then mean, for instance, that a person listening to news in different languages does not in fact hear them from the same source. So that if one speaks both English and Kannada, and one listen to news in English from popular English Channel X and news in Kannada from popular Kannada Channel Y, Channels X and Y should not be owned by the same entity. This is what having plurality of media ownership means, or at least should imply.

Demarcating “relevant market” on the basis of language however does not take this implication of plurality of media ownership into account, because it frames regulations only for ownership within a language market and not across language markets. This results in approval of combinations like the Reliance-Network18-Eenadu deal, which consolidated news channels in English, and several other regional languages under a single ownership, by reasoning that concentration of media ownership is not measured across language markets, but only within language markets. Similarly, in its order approving the Walt Disney-UTV combination, the CCI relied heavily on the fact that while Walt Disney produced mostly English content, UTV produced mostly Hindi content, and based on this language demarcation, held that the combination could not labelled anti-competitive. Competition may have been preserved in media markets via such decisions. But is the plurality of ownership preserved? The short answer is no.

Such decisions only make sense if we look at media purely as an economic product produced and consumed via interplay of market forces. But they fall amazingly short if media is also recognised as a cultural form which shapes a democratic environment. The need for media plurality stems from this recognition of media as a cultural form. In fact, TRAI in its recommendations does a great job of recognising the existence and importance of media as culture, and hence the need for media plurality. But when it comes to framing mechanisms, the so-called technical aspects needed to reach this objective, it seems to completely forget the cultural life of media, and seems to see media only as an economic product, which it then goes on to regulate. The upshot is that competition law concepts, by their very design, cannot be effective enough to serve the objective of media plurality, because competition law and media plurality operate on two completely different ideas of what media is.

TRAI Recommendations on Internal Plurality

    TRAI, in its recommendations on media ownership, has addressed three main themes:

    Government Ownership of Media Entities

    In its recommendations, TRAI draws on a number of illustrations from journalistic accounts to argue that media ownership by political parties distort the news and therefore colour our view of the world. These examples are then posed against the counter argument that political parties can reach out more effectively to their constituencies through their own news channels or newspapers. TRAI has recommended that media regulations should be changed to bar newspapers and television channels from being owned by political bodies, religious bodies, urban, local, panchayati raj, urban, local, other publicly funded bodies, central, state government ministries, departments, companies, undertakings, joint ventures, government funded entities and affiliates. This is an extreme and broad sweeping solution to a particular problem the media is facing, and raised a number of constitutional and legal issues. For instance, what would this mean for initiatives like the Lok Sabha TV, owned by the Parliament, and widely acknowledged to have programming that is informative? Would it qualify to be a ‘political body’, and therefore barred from operating? How does one define ‘political’ or ‘religious’ bodies? Would this then bar any entity that is receiving public or government funds from operating television channels and newspapers? What percentage of existing channels and papers would be impacted by this recommendation?

    The impression that one gets is that the evidence cited here is anecdotal. For instance, we know the problem in a state like Tamil Nadu could be a combination of ownership by political parties and media monopolies. Banning political parties from owning newspapers and news channels altogether requires a stronger justification. Would such a ban mean that political parties are allowed to continue to bring out smaller newsletters or mouthpieces? An outright ban on ownership by political parties would on the face of it seem to violate the constitutional guarantee of freedom of speech and expression. The Indian Supreme Court has in Bennett and Coleman v UOI struck down a measure like the regulation of newsprint saying that this amounts to an indirect form of censorship. Given this history, it seems improbable that a complete ban on ownership by political parties, government agencies and government-funded entities will pass constitutional muster.

    Corporate Ownership

    These set of recommendations seem to be better thought out. TRAI has recommended that non-media corporate entities, address the lack of transparency of publicly available ownership in the media sector by making details public. These include details like shareholding pattern, FDI pattern, interests in other sectors, shareholding and loan agreements, details of key executives and board of directors, sources and quantum of advertising revenue. Addressing the problem of private treaties (quid pro quo between media entities and corporate clients to ensure favourable coverage), TRAI has recommended that these treaties be proscribe through statutory rules or the Press Council. The recommendations cover all forms of private treaties — advertising in exchange for the equity of the company advertised, advertising in exchange of favourable coverage or publicity, and exclusive advertising rights in exchange for favourable coverage.

    Taking up the issue of paid news, the authority has suggested that a liability be imposed on both parties involved. TRAI has not looked at how this will be enforced. On advertorials, TRAI recommends that there must be a clear disclaimer in bold letters.

    Media Regulator

    On the overarching and oft-debated question of media regulators, TRAI’s diagnosis is that there is that the existing self-regulatory frameworks (Press Council for print) and the News Broadcasting Services Authority (NBSA) framework for broadcast are ineffective. As an alternative, the Authority has recommended a single regulatory body for print and broadcast media (the Internet is left out of the picture since the authority says it is a smaller number as well as there is multiplicity if voices, radio not addressed as news is still not allowed).

    TRAI has recommended that this regulatory authority be constituted by “eminent persons from different walks of life” and predominantly non-media eminent appointments through a just, fair, transparent process, media regulator will have the power to impose and enforce penalties”. TRAI has made it very clear that under no circumstances should the government regulate the media. These recommendations are linked to the issue of repeated violation of privacy by media organizations (that TRAI has flagged but not addressed specifically in its recommendations) as a stronger regulatory authority with teeth could act as a deterrent against these violations.

    The recommendations conclude by suggesting that a Commission be constituted, possibly headed by a retired Supreme Court judge for a comprehensive evaluation of the legal and legislative framework around these questions. However, given that the Law Commission of India has recently invited responses to concerns around media law, the Law Commission’s report could be used as a template for any changes in law and policy rather than reinventing the wheel by constituting another body.