Scatmag.com

September 2014

TRAI DECLARES MEDIA RESTRICTIONS



On 12th August 2014, the TRAI released its "Recommendations on Issues Relating to Media Ownership."

These hard hitting recommendations cover the TRAI's views on limiting cross media ownership, to ensure fair play, transparency and unbiased news reporting. The recommendations propose to rectify and regulate a wide gamut of current inappropriate practices that have victimised consumers and other industry players.

The current recommendations cover Corporates & political parties in media, cross media holdings for News Broadcasters, paid news, advertorials, Covert control and private treaties.

The TRAI's strict recommendations make no concessions for pre-established entities that violate the recommendations. The TRAI wants such entities to exit, within a year.


No Concessions For Pre-Established Entities That Violate The Recommendations. They Must Exit In 1 Year.

Let us review each of these recommendations from the TRAI.


CROSS-MEDIA FOR NEWS NOT ENT

The TRAI has proposed cross-media restrictions only for News, and not for entertainment. Under the News category, it has included TV and only daily newspapers for print news, including business & financial news. Radio & internet news have been exempted from Cross media holding restrictions, for now. The rules restrictions should be reviewed every 3 years.

Giving reasons for leaving out entertainment channels out of the cross-media ownership rules, the authority noted that while the general entertainment genre has high viewership and therefore has the potential for influencing views through its programmes, the opinion disseminated through this genre is informal and indirect in nature as the prime objective of programmes in this genre is entertainment and any perceived social and political influence cannot be determined objectively.


MARKET SHARE

Market share needs to be addressed separately for each geographic market, defined in terms of language and the State(s) in which that language is spoken in majority.

For calculating TV market shares, the GRP of a channel should be compared with the total GRP of all the channels in that market. The market share of an entity or group will be the sum of the market shares of all the channels controlled by the group.

Similar calculations for newspapers will be based on circulation.



HHI INDEX

The TRAI has recommended the use of the Herfindahl Hirschman Index (HHI) to measure concentration in a media segment in a particular market. HHI considers the market shares of all entities in the market, thus reflecting diversity both in terms of number of voices present, as well as influence, it stated.

An upper ceiling of HHI = 1,000 has been fixed per market, which is approximately 33%.

Since only 2 media segments - TV and print news are to be monitored & restricted, the "1 out of 2" rule can be applied. This implies that any entity contributing more than 1,000 HHI in Television, cannot have a HHI of more than 1,000 in newspapers in the same market.

This rule applies only if the HHI thresholds are violated consecutively for 2 years.


MERGERS & ACQUISITIONS

Mergers and Acquisitions (M&A) in the media sector will be permitted only to the extent that the HHI is not breached.

If it does so, it will have to dilute its control in any 1 of the 2 segments.


VERTICAL MONOPOLIES

The TRAI has already declared its recommendations related to DTH. It reiterates those recommendations on vertical integration amongst Broadcasters and DPOs (Distribution Platform Operators: MSO, DTH, HITS and IPTV operators) and recommends early notification and implementation of the same.

These recommendations were covered in detail last month. To summarise them:

The TRAI has recommended that regulated vertical integration may be permitted between broadcasters and DPOs, subject to the following:

♦ A vertically integrated broadcaster can control only one DPO.

♦ A vertically integrated DPO cannot control any other DPO of other category in the relevant market.

♦ A vertically integrated DPO cannot acquire more than 33% share in the relevant market.



A Broadcaster Can Control Only 1 DPO (MSO, DTH, HITS or IPTV Operator).

CONTROL

To prevent entities hiding behind multiple corporate veils, or exerting covert control, the TRAI has defined control as:

An entity (E1) is said to 'Control' another entity (E2) and the business decisions thereby taken, if E1, directly or indirectly through associate companies, subsidiaries and/or relatives:

(a) Owns at least 20% of total share capital of E2. Indirect shareholding is calculated as follows: An entity who owns, 30% equity in Company A, which in turn owns 20% equity in Company B, then the entity's indirect holding in Company B is 30% * 20%, which is 6%.; Or

(b) Exercises de jure control by means of:

(i) Not less than 50% of voting rights; Or

(ii) Appoints more than 50% of the board of directors; Or

(iii) Controlling the management or affairs through decision-making & appointments; Or

(c) Exercises de facto control by being a party to agreements, contracts and/or understandings, overtly or covertly drafted, whether legally binding or not, that enable the entity to control the business decisions in ways as mentioned in (b) (i) (ii) and (iii) above.


OWNERSHIP RESTRICTIONS

The TRAI's regulations try to clean up media outfits from the dirt of paid news, covert ownership and control and political influence.


NO TO GOVT & RELIGIOUS BODIES

The TRAI has recommended that entities (political bodies, religious bodies, urban, local, panchayati raj, and other publicly funded bodies, and Central and State Government ministries, departments, companies, undertakings, joint ventures, and government-funded entities and affiliates) should be barred from entry into broadcasting and TV channel distribution sectors.

Even surrogates of the entities listed above should be barred from entry into broadcasting and TV channel distribution sectors.

The regulator has reminded the Government that it had made the same recommendations in Feb 2012, and has urged that these be implemented immediately, as the matter has become pressing.


AUTONOMOUS PRASAR BHARATI

The arm's length relationship between Prasar Bharati and the Government be further strengthened and that such. Measures should ensure functional independence and autonomy of Prasar Bharati.


'PRIVATE TREATIES'

"'Private Treaties' between the media companies and corporate entities is one of the most dangerous manifestation/precursor of 'Paid News'. 'Private Treaties' is referred to as an agreement between the media company and another non-media company in which the latter transfers certain shares of the company to the former in lieu of Advertisements, space and favourable coverage. The Committee note that the phenomenon blatantly violates the journalistic ethics and gives rise to the menace/malpractice of 'Paid News'/'Advertorials'.

Due to such extensive investments by the media in the non-media market, these are no longer media firms if they have invested in over 350 companies in the market, but are indeed equity firms. "The media is too heavily invested in the market to ever tell you the truth about it. …

Given the inherent conflict of interest arising from practices such as "private treaties", such practices be immediately proscribed through orders of the PCI or through statutory rules and regulations. This should cover all forms of treaties including

(i) Advertising in exchange for the equity of the company advertised;

(ii) Advertising in exchange for favourable coverage/ publicity;

(iii) Exclusive advertising rights in exchange for favourable coverage.


...These Are No Longer Media Firms, They Are Indeed Equity Firms.

ADVERTORIALS

The Times Of India runs an entire daily supplement - The Bombay Times, as advertorials !"... this business of advertorials, private treaties. I am sorry to say it has reached a scandalous position. You cannot carry on by passing off advertisements as news,"• TRAI chairman Rahul Khullar stated.

"Advertorials", or for that matter any content which is paid for, a clear disclaimer should be mandated, to be printed in bold letters, stating that the succeeding content has been paid for. Placing such a disclaimer in fine print will not suffice. Action on advertorials and other material which is paid for may be taken immediately.


PAID NEWS

The TRAI has taken serious note of rampant 'Paid News' & points out that the President of India, Pranab Mukherjee, recently said "… it is distressing to note that some publications have resorted to "Paid News" and other such marketing strategies to drive their revenues. There is need for self-correcting mechanisms to check such aberrations. The temptation to "dumb down" news should also be resisted.

On "paid news", in addition to the above, the TRAI says that it is imperative that liability reposes in both parties to the transaction if it is tried to be passed off as news.


Both Parties Involved Are Liable For Paid News Offences

MEDIA REGULATOR

The "Media Regulator" shall entertain complaints on "Paid News"; "Private Treaties"; issues related to editorial independence; etc, investigate the complaints and shall have the power to impose and enforce an appropriate regime of penalties.

With respect to the "Media Regulator", the Authority recommends that:

(a) Government should not regulate the media;

(b) There should be a single regulatory authority for TV and print mediums;

(c) The regulatory body should consist of eminent persons from different walks of life, including the media. It should be manned predominantly by eminent non-media persons;

(d) The appointments should be done through a just, fair, transparent and impartial process;


COMMISSION REQUIRED

The above recommendations, once implemented, will address the immediate objective of curbing unhealthy media practices.

The TRAI feels the need for a comprehensive evaluation of the legislative and legal framework in order to establish a robust institutional mechanism for the long term. The Authority, therefore, recommends that a Commission, perhaps headed by a retired Supreme Court Judge, be set up to comprehensively examine the various issues relating to the media, including the role and performance of various existing institutions, and the way forward.

More than 5 years have elapsed since the Authority released its 'Recommendations on Media Ownership' on 25 February 2009. The situation has become graver. Clear time-lines may, therefore, be indicated to the Commission so appointed. n