DCMS launches consultation on updating the media mergers regime for the digital age – time to act for media companies?

On 6 November 2024, the Department for Culture, Media & Sport ("DCMS") published a consultation on updating the media mergers regime for the digital age. This consultation comes amidst seismic shifts in the media sector, from changes in how the public consumes news to the use of AI by media companies both in terms of content creation and new product development.

What prompted the consultation?

The consultation has been launched as a response to the latest review by Ofcom, the UK's communications regulator, into the operation of media ownership rules in the UK. One of the recommendations from Ofcom is to broaden the scope of the existing media "public interest" regime beyond print newspapers and broadcasters to a broader range of "news creators". 

This comes against a backdrop where news is increasingly being consumed online and via social media platforms, and ownership of news organisations increasingly spans multiple platforms (for example, a print newspaper will often also have an online subscription-based presence, as well as video or broadcast content produced for social media platforms). 

The consultation also follows the application of the "public interest" regime to RedBird IMI's attempted acquisition of The Telegraph newspaper, during which a "public interest intervention notice" was issued and the then Secretary of State for Culture, Media and Sport was minded to refer the transaction to the UK's Competition & Markets Authority ("CMA") for an in-depth review on the grounds of (i) the need for accurate presentation of news in newspapers, and (ii) the need for free expression of opinion in newspapers. Whilst that transaction ultimately was abandoned obviating the need for an in-depth CMA review, a separate "foreign state ownership" regime was introduced enabling the Government to review ownership interests by foreign states in UK newspapers. However, the review of RedBird IMI's attempted acquisition of The Telegraph highlighted gaps in the current "public interest" regime and how it may no longer be fit for purpose in the new media landscape.

In light of the above, the consultation seeks to address some of the issues identified by Ofcom and which have been considered by DCMS in recent transactions. The consultation makes certain proposals as to how the regime could be broadened and seeks views from interested parties on the proposals, details of which are set out below. 

What is the current “public interest” regime?

Currently, the Enterprise Act 2002 ("Enterprise Act") contains a "public interest" regime whereby the Secretary of Sport for Culture, Media and Sport ("SoS") has the ability to issue a "public interest intervention notice" ("PIIN") when two circumstances arise:

(i) the SoS has "reasonable grounds" for suspecting a "relevant merger situation" has arisen or is in progress; and 

(ii) she believes that a "public interest consideration" arises. 

There are currently 3 categories of "public interest considerations":

^{* Media enterprises in (a) is defined as covering broadcasters and transactions involving broadcasters who are involved in newspapers.  Media enterprises in (c) is defined as covering broadcasters.}

As can be seen above, there is no general "media plurality" test applying across all media platforms. There are also no specific "public interest considerations" which apply to online news media, periodicals or news-focussed magazines. There is also no assessment of, for example, plurality issues across platforms. 

What changes does the consultation propose?

The consultation makes 3 key proposals.

1. Expanding references to "newspapers" to also include online or print publications, magazines or periodicals which consist of or include news-related material which is subject to editorial control, and which is "connected with" the UK or a part of the UK – this will effectively bring online news websites and news-focussed magazines and journals within the ambit of the "public interest" regime;
2. The provisions relating to the accurate presentation of news and freedom of expression, and the plurality of views in newspapers will be broadened to encompass "news media", meaning transactions involving online news publications and broadcast news programmes will need to be assessed from the perspective of accurate presentation of news and freedom of expression and plurality, in addition to print newspaper deals; and
3. The provision relating to the plurality of persons with control of media enterprises will be expanded to apply to deals involving online and print newspapers too, and not only broadcasters, meaning that there will be a need to ensure sufficient plurality of ownership across newspapers and broadcasters (i.e., a cross-platform test).

Interaction with the foreign state ownership regime

The SoS explicitly stated that she intends to broaden the "foreign state ownership" regime introduced earlier this year to capture online news publications as well.

Considerations for stakeholders in the media sector

The exact rules to be adopted will be influenced by responses from media sector stakeholders. That said, there are likely a number of issues for stakeholders to consider.

1. Whatever changes are adopted will impact media sector M&A. In an environment where there are significant business pressures on newspaper businesses and broadcasters, it appears that the UK government is moving towards a tougher regulatory environment for the media sector, which will have significant knock-on impacts for M&A including potential bidder pools and executability of deals. Any deals in the sector should expect greater scrutiny from DCMS. Early planning on regulatory risks and how best to navigate the regulatory landscape will be key.
2. There is clearly a move towards assessing plurality of media ownership on a cross-platform basis. This will impact media owners who hold or seek to hold a mixture of newspaper and broadcaster assets. This is a significant change to the current regime.
3. The proposals will expand the rules to cover online and print news media where the majority of the readership is in the UK, the majority of editorial decisions are taken in the UK or the registered or principal office is based in the UK. This expands the UK rules to publications that are connected with the UK, even if ownership is not based in the UK. The SoS explicitly stated in interviews that the proposed rules would cover online-only news providers such as HuffPost.
4. That said, the proposed rules do not go as far as including online intermediaries (e.g., social networking sites) or online news aggregators (e.g., Apple News, Google News). But there is a risk that future rules may seek to go further; the Ofcom recommendations which underpin this consultation appear to go further to include online intermediaries. However, it should also be noted that such companies are also facing greater regulatory scrutiny, albeit not in in relation to their specific media activities), under the Digital Markets, Competition and Consumers Act 2024.
5. Finally, the interaction between the "public interest" regime and antitrust will be interesting to see. In the last CMA decision in the newspaper sector, DMGT's acquisition of the i, the CMA adopted the approach of looking at share of print circulation for "quality newspapers". Given the move in the "public interest" regime towards looking at cross-platform ownership, it will be interesting to see whether the CMA will adopt a similar approach in the future.

How to respond to the consultation

Responses can be submitted here: Consultation on updating the media mergers regime - GOV.UK. The deadline for submissions is midday 18 December 2024.

White & Case and the media sector

White & Case has extensive experience advising media companies and other media industry players on corporate transactions and regulatory matters, including recent direct experience on transactions and issues concerning the "public interest" regime and the new "foreign state ownership" rules. Please contact the individuals below if you are interested in submitting a response or discussing developments in the sector more generally.

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

_{© 2024 White & Case LLP}