Alison Harcourt

I. Introduction

Rapid advances in media technologies coupled with the liberalisation of media markets from the 1980s have produced dramatic change in the structure of the European media industry. Market liberalisation at the national level has resulted in the appearance of numerous new commercial broadcasting operations. Due to the large financial investments required by new technologies available for broadcasting, media companies have engaged in mergers and acquisitions to amass the necessary financial capital. National governments have aided industry concentration by relaxing media ownership rules, eventually including those restricting cross media ownership.

In an attempt to improve their market positions, media companies have combined merger and acquisition strategies with those of internationalisation and diversification. The main players in the media sector now operate at the European level and define their policies accordingly as the ‘domestic’ market has now become the European one. This transformation of national mono-media markets into one European multimedia market has been documented by economic analyses. Thus the regulation of media ownership has become a European issue, one presently being tackled by the European Commission.

As media companies are also expanding into adjacent communications markets, the definition of media markets is becoming more difficult, making regulation by the European competition taskforce (Directorate General IV) problematic. Indeed, without specific rules for the media industry, the European Commission is often accused of unreasonable arbitration and competition decisions on the media industry often face appeal. Furthermore, the sheer volume of media merger decisions presented to DG IV is becoming overly burdensome.

Consequently, a debate about legislating specifically for media ownership has emerged within the European Commission. Positions have ranged from the harmonisation of national media ownership laws (designed to protect pluralism and public interests from multi-media concentration) to the encouragement of a ‘natural’ emergence of a competitive European media market. Attempts to propose harmonisation have been delayed by lobbying efforts by media companies and their legality contested by national authorities. It seems that arguments for full liberalisation are succeeding in the Commission which now appears to moving towards complete deregulation of media markets under an initiative on convergence.

This article examines the development of the Commission’s policy on media ownership. It first provides an overview of national regulation which would be either harmonised or liberalised by any future Commission initiative. Section three details the politicisation of media concentration as a European issue by the European Parliament. It then discusses the Commission’s response to the Parliament, describing the policy process leading to an initiative for harmonisation of national regulation. The Commission’s recent initiative on convergence is discussed in section four. The role of DG IV’s merger taskforce is reviewed in section five. Section six concludes with a discussion of the Commission’s approach.

II. National level liberalisation, regulation and deregulation

Of the 50 largest European media companies (by turnover), 90% are presently located in the following countries: France, Germany, Italy, Luxembourg, the Netherlands, Spain and the UK (see figure 1 and table 1). Of the media companies operating Europe-wide, the majority of larger players are dominant in their home markets (see table 2). Securely seated at the national level, these companies have been able to mature and growth into multinational companies with varied media interests. Likewise, with liberalisation, large non-European media conglomerates with similarly secure home bases have accessed the European market.

FIGURE 1: Breakdown of the 50 leading European media companies by nation (based on turnover)

TABLE 1: Europe’s Top Ten Media Firms (by media turnover $ billion)

TABLE 2: Summary table of largest European media firms in selected EU member states

*Those with national cross-media interests.

+Those with substantial foreign media holdings.

The first wave of national liberalisation, coinciding with the EU’s 1986 Single European Act, saw the introduction of private operators in terrestrial, cable, satellite television and radio broadcasting (up until the mid-1980s, only Italy, Luxembourg and the UK had private television broadcasting). National regulatory measures accompanying liberalisation, particularly those in European countries with the largest liberalised markets (the UK, France and Germany), attempted to restrict media ownership in the interests of retaining pluralism (see table 3). These regulatory efforts were very quickly outflanked by pressures for further liberalisation: technological advance, domestic lobbying, international activities of national media operators and initiatives by the European Commission.

TABLE 3: Regulation of Media Ownership in Selected EU Member States

Thus, a second wave of deregulation ensued in the early 1990s, with member states complying to the European Union’s 1989 TWF directive. Many countries experienced a consequential consolidation of ownership in mono-media sectors (television, press, and radio). A third wave taking place in the late 1990s, this time with a relaxation in cross-media ownership rules, has resulted in increasing horizontal and vertical concentration across media sectors.

The present-day map of the national media markets therefore shows high levels of concentration in mono-media sectors and increasing concentration in cross-media ownership. New instruments of regulation introduced from 1996 such as the restriction of media reach based on audience share (perceived as the best way in which to regulate media ownership by the European Commission and subsequently introduced by the British and German governments) may become ineffective as media markets continue to fragment and media companies act increasingly at the European level. In the UK, the interpretation of the government’s 1996 new rules on cross-media ownership by the regulatory authorities (the Independent Television Commission (ITC) and the Radio Authority) is proving difficult. In Germany, La nder (state) legislators often disagree over interpretation of 1996 changes to ownership rules and media operators doubt the legality of defining a channel's audience share.

1. France

The press, television, radio, and satellite sectors are regulated separately in France. Since the 1986 Act on media concentration, limitations on the activities of media operators have been set according to media reach and share ownership. Newspapers are not to exceed a circulation of over 30% of the national market. In 1994, rules on ownership of broadcasters were relaxed to allow any one company 50% ownership of one station, 15% of a second station and 5% of a third. Cross-media ownership is permitted, but regulated according to different combinations of media reach and ownership limits. Special rules still apply in France to public and private broadcasting which secure a balanced reporting of political parties. There has long been a tradition of government subsidising of media firms (Lang and Loon, 1990, Ostergaard, 1991). French groups have benefited from a strong national base from which to Europeanise.

2. Germany

Germany represents the largest media market in Europe. As there have been virtually no cross-media restrictions in Germany major publishers have been allowed television and radio interests. As a result, the national market is a complicated web of cross-media ownership with each media market regulated separately. Although media companies operate nationally, regulation is further tiered at the regional level. For radio and television, fifteen Land (state) regulators (Medienanstalten) regulate frequencies and broadcasters apply separately to each Land for licences. As Humphreys (1997:12) argues, the national media market has long been characterised by Standortpolitik by which the German Lдnder have only served to further liberalise or support the status quo in order to encourage sector growth in their geographic area. Therefore concentration in this sector has ironically been largely supported and encouraged by successive Lдnder treaties which have promoted consolidation in the sector over competition resulting in a comparatively lax regulatory structure. Indeed, the only legal limit imposed by the 1996 interstate treaty is to restrict broadcasters to 30% of audience share (previously Lдnder could prevent a private broadcaster from owning 49.9% of a general programming channel and from controlling two additional specialised channels). This liberal regulatory framework has both strengthened national media companies for investing abroad and made Germany very attractive to outside investors.

3. Italy

Local cable broadcasting was liberalised as early as 1975 in Italy and terrestrial as early as 1976 (Lang and Van Loon, 1991:218, Ostergaard, 1991;132), but legislation on dominant positions in broadcasting did not appear until the 1990 Broadcasting Act (following substantial concentration in television during the 1980s). The 1990 Act limits a company from owning 25 per cent of the number of all national channels, but does not limit audience share. The Act also restricts cross-media ownership preventing publishers with a circulation of over 16% from owning television stations or with a circulation of 8% from owning more than one station. Dominant position in the press was legislated somewhat earlier in until 1981 with limits of 20% circulation imposed at the national level and 50% at the regional level. In July 1997, the Prodi government drew up proposals allowing telecommunications companies to compete with broadcasters and proposing new limits on ownership which resulted in the 1997 New Media Act. A new authority is presently being established in Italy which will regulate the telecommunications and media markets jointly.

4. Luxembourg

Luxembourg has long pursued a non-interventionist media policy which it considers important for freedom in press and broadcasting. Luxembourg has no anti-concentration rules and no media ownership rules (with the small exception that the 1989 Act on Electronic Media imposed some ownership restrictions upon firms that broadcast within in Luxembourg). This liberal framework has been attractive for investors and media has become an important sector of the Luxembourg economy.

5. The Netherlands

The Netherlands did not permit private terrestrial broadcasting until as late as 1990. Until then private broadcasting companies existed but were contracted to provide public service programming. The 1990 Media Act allowed private broadcasters for the first time, but restricted broadcasting to cable transmission, all terrestrial frequencies have been reserved for the public stations. The Act contains some provisions on cross media ownership in that any publisher with more than 25% circulation is not permitted to own more than 50% of a broadcaster.

6. Spain

Spain has comparably strict media concentration rules for radio and television, but not for the press or cross-media ownership. The Private Television Act of 1988 limits ownership to only one television company and to 25% of shares therein. Under a 1992 amendment, companies holding a licence for a satellite television service are subject to the same rules. The Telecommunications Act of 1987 sets the same limits for private radio stations. At the end of 1997 the Spanish government was drawing up a package of measures designed to ensure a total transition to digital transmission by the year 2001 (linking the measures to a renewal of the broadcasting licences of the country's commercial terrestrial channels).

7. The UK

In the UK, cross-media ownership has traditionally been regulated to a greater extent than in the rest of Europe. With the 1996 Broadcasting Act, rules governing cross-media ownership were relaxed permitting national newspapers with less than 20% market share to own one private broadcaster (radio, television or satellite) and have full control of non-domestic satellite broadcasters. (Although this allows News International continued operation of BSkyB for the time being, BSkyB will need a licence from OFTEL when it goes digital). A new market measurement was introduced in the Act to limit audience share of broadcasters to 15%. The measurement is based upon the ownership of companies and their corresponding audience share, not on channels (as in Germany and France). This has made the UK’s acceptance of EU proposals for audience share difficult as ITV channels in particular have complicated ownership structures created by past UK legislation (limiting ownership of more than one licence holder to 20% in another). ITV, the channel with the largest audience share is ITV, is separated into regional divisions which are licensed to 18 companies. These ITV companies in turn are owned by other investors in a complicated arrangement of cross-holdings. A new broadcasting bill is anticipated from the UK in 1998 which may allow competition between broadcasters and telecommunications operators. There has never been a UK limit to newspaper circulation or provisions against press concentration, except that the transfer of ownership of a newspaper with more than 500,000 copies daily circulation must be approved by the Secretary of State for Trade and Industry.

8. European Union

Following the liberalisation of the European market with the Single European Act, the late 1980s witnessed a growth in the international activities of media companies across Europe. The 1989 TWF directive accelerated this growth which included a number of cross-national mergers and acquisitions. During the 1990s, this merger and acquisition activity has continued and has been accompanied by the formation of a number of transnational joint ventures between large European media operators. Indeed, it seems possible to identify camps of alliance between the large firms, particularly in the case of digital television where joint ventures have been justified by the large financial investment needed to enter the new market (Lange, 1997).

III. Politicisation by the European Parliament leading to an initiative by the European Commission

The issue of media concentration was placed onto the agenda of the European Commission by the European Parliament. In 1984 shortly after the release of DG III’s TWF Green Paper, the EP produced a number of requests for media concentration legislation which could accompany the liberalising TWF directive. The European Parliament did not at all see media concentration as a problem of market inefficiency; rather it was viewed politically as a threat to democracy, the freedom of speech and pluralist representation. Along these lines, the EP produced three demands to the European Commission during negotiations leading up to 1989 TWF directive: a 1985 Resolution; a 1986 official request to the Commission; and the 1987 Barzanti Report. Each time it was requested that the Commission be granted the legal resources to safeguard media pluralism within TWF.

However, when the TWF was ratified by the Council in 1989 it contained no provisions for anti-concentration measures. The Directive contains only one very limited technical measure which indirectly affects media concentration. In response to the calls for legislation on pluralism, the Commission internal market argument advocated that liberalisation of the media industry would automatically produce pluralism and diversity.

The 1989 TWF directive typifies a single market regulatory policy. The directive establishes a legal framework for the cross border transmission of television programmes thereby creating a single audio-visual market. A media company may only be regulated in the country of transmission, not reception. Herewith the Commission aims to strengthen the competitiveness of the national media industries thereby strengthening the European market against wider forces in the international market. However, the TWF’s depoliticisation during the policy process was hard won by the Commission and it’s consequential effects on the market by encouragement of European level mergers, acquisitions and joint ventures (see Humphreys 1997; Lang 1997) prompted further political demands for concentration control from the European Parliament.

Immediately following the TWF ratification the European Parliament again took issue with the Commission over media concentration. No less than two Resolutions and two working papers were put out by the European Parliament between 1990 and 1992. In response, the European Commission released its first Green Paper on the issue in 1992.

In the 1992 Green paper, the Commission, as it had with TWF, framed media concentration as an issue of the internal market. Acceptance of the issue on these terms was not immediately attained. For this reason, the Commission sought support for the initiative from the other EU institutions and from interest groups (Beltrame 1996). Official opinions were sought and given by the EP, the Economic and Social Committee, member states, national interest groups, national government departments and European federations. In the Green Paper the Commission called for consultation papers from interest groups to consider three possible courses of action. This wide consultation on the initiative (culminating in an April 1993 public hearing) served only to enmesh the Commission in a wider debate of EU legislative competence in matters of democratic concern.

As no further action had been taken by the Commission by 1994, the EP continued its pressure for legislation. In its 1994 Fayot/Schinzel Resolution the EP voted in favour of tough restrictions on European media ownership. The Resolution urgently called for legislation to prevent European media companies from controlling too many media outlets and for measures to insure pluralism and diversity.

In October 1994 DG XV published a second Green paper entitled Follow Up to the Consultation Process Relating to the Green Paper on ‘Pluralism and Media Concentration in the Internal Market- an Assessment of the Need for Community Action’. In this paper, the Commission reiterated the internal market argument. The paper stated that the responses to the 1992 paper were supportive of future legislation on media concentration. In line with internal market logic the Commission pointed out that this opinion in favour of European regulation is due to the industry’s legal uncertainty on media concentration law which it considered a disincentive to Europe wide investment.

The Green paper differed from the first in that it noticeably concentrated upon the information society. In particular it is argued that national restrictions on media companies constrict the growth of the information society within the Single Market. As well as indicating the differing national regulatory systems for media concentration, it referred to shortcomings in national law for new technologies which it claimed are also leading to fragmentation of the internal market. In this respect, the Commission links media concentration to its more popular information society initiatives. (However, later drafts do not include provisions for new technologies).

Indeed, the paper described itself in its opening pages as both a follow up to the 1992 Commission Green Paper and an initial response the Bangemann report. In anticipation of the Green paper, the Bangemann report in turn reciprocated its support of the media concentration initiative by referring to national media ownership rules as ‘a patchwork of inconsistency which tends to distort and fragment the market’ (European Commission 1994a:14) thereby reiterating internal market concerns stated in the first Green Paper.

The 1994 paper concludes with a detailed discussion of policy instruments. In particular the emphasis is on the use of audience share to measure media concentration. A questionnaire was then sent out following the 1994 paper to interest groups which had responded to the 1992 paper. Along with the questionnaire, two technical studies on possible policy instruments were sent for comment; one on audience share measure, from a UK ad-hoc consultancy group Goodhall, Alexander, & O’Hare (GAH) and the other on the definition of the controller from the European Institute for the Media (EIM).

Due to the high political sensitivity of the issue of media concentration and the fact that the EP had increased its powers following the 1992 Maastricht Treaty, the Commission thought it important to gain the support of the EP’s Committee on Culture, Youth, Education and the Media, the most advocate of the pluralist argument. The Commission at first attempted informally to gain support for its initiative, reasoning to the committee that, after consideration of the limited competencies of the EU, internal market logic offered the only way in which a directive could be proposed (Beltrame 1996:4).

In return for its support of the internal argument, the Parliament wanted public commitment from the Commission for pluralist concerns. Accordingly, in September 1995 Commissioner Monti gave a speech before the Cultural Committee in which he declared himself to be personally in favour of an initiative which would seek to ‘safeguard pluralism’. The Commission repeated this view in a Commission communication to the EP in October 1995. The Cultural Committee remained quiet on the issue of media concentration until the October 1996 Tongue report.

Confident of its support from the other EU institutions, after four years of consultation, a proposal for a Directive on media concentration was submitted to the College of Commissioners by Commissioner Monti on July 24, 1996. The draft was widely agreed upon in principle, with objections mainly to policy instruments. Stronger objections came from Commissioners Brittan and Bangemann who found the draft too strict. Dissent from these two Commissioners was anticipated by the Monti cabinet (European Voice, 07.97). The draft was reconsidered by the Chefs du Cabinet and resubmitted on September 4, 1996. Initially, a major objection was raised during the September 4 meeting and which was not expected by the Monti cabinet. This came from Commissioner Oreja and it was on grounds of pluralism.

The reasons why the pluralism argument reappeared were perhaps political. The submission of the media concentration draft was badly politically-timed as it coincided with the renewal of the 1989 TWF directive. The 1996 ratification of the TWF directive became so politically loaded as it went through the new Maastricht-established codecision procedure that it took one year of negotiation between the Council and the EP before an agreement was reached. The EP had made 44 amendments to the directive in February 1996. All of the EP amendments were rejected by the Council of Ministers in its summer 1996 sitting.

Significantly, the amendments were mostly linked to democratic issues: content of programming, protection of minors against harmful programmes, advertising rules and extending the scope of the directive to new services. Commissioner Oreja, who held the TWF portfolio, was in agreeance with the Cultural Committee over amendments to the directive. The rejection by the Council of the inclusion of these provisions seriously drew into doubt the ability of the Commission to commit itself as promised to pluralist objectives. Accordingly, Commissioner Oreja objected to the September draft because the directive would not be based on principles of pluralism, but on the internal market. Soon afterwards, in October 1996, the European Parliament published the Tongue report on Pluralism and Media Ownership which seriously criticised the Commission’s submission to the College. In particular its suggestion of audience share was denigrated as ‘fail(ing) to take into account of pluralism content controls.’

Following this, the summer rejection of TWF led to a second reading in November 1996 by the European Parliament at which 314 votes were needed to modify the Council decision. Only 290 votes were attained and TWF was eventually ratified only including a fraction of the original changes suggested by the European Parliament. Again, through this issue, the Commission was drawn into a wider debate of EU democratic concern. The loss of the vote drew attention to the problem of a lack of democratic legitimacy in the EU. The EP, as an elected body, even with a large majority, was unable to influence the decision of the Council. Particularly because the amendments to the TWF had involved issues of democratic relevance, the reality of the near miss horrified MEPs on the cultural committee. For this reason, support by the EP for a media concentration initiative based solely upon internal market principles is highly unlikely.

Shortly afterwards, on December 18, 1996, Monti resubmitted the media concentration draft to the College of Commissioners. The same objections were again made from Commissioners Bangemann, Brittan and Oreja. As the initiative was not going to go through as it stood, a coalition contract was sought. Consequently, Commission Monti organised a special forum in January between himself, Bangemann and Oreja to discuss the issue. At this forum, Monti succeeded in consolidating support for his initiative from the two Commissioners. Bangemann’s support in particular came to the surprise of a number of interest groups.

The draft directive was confidently resubmitted to the College on March 12, 1997 (with the word ‘pluralism’ omitted from its title). This time Bangemann and Oreja supported the draft and for the first time the necessary majority of 11 out of 20 was achieved. However, three substantial objections were raised: by Commissioners Brittan, Papoutsis and one, unexpectedly, from Santer’s cabinet. Although possessing an unrelated portfolio, Papoutsis expressed his domestic concern over the liberalisation of the Greek print market. The objection by Santer’s cabinet was due to intense lobbying against the initiative, in particular by News International, Springer, ITV and CLT which had targeted the Commission president. The objection by the president was significant. Although Monti had enough support in the College for the initiative, he was convinced he had to withdraw the draft. Resubmission to the College has not yet been rescheduled meaning that at present there has been no proposal from the European Commission for the harmonisation of national media ownership laws.

Typical of single market initiatives, the harmonisation initiative has relied heavily upon technical arguments, policy instruments and the logic of the internal market, in an attempt to distance broader concerns of democracy. Unavoidable politicisation of the issue by the European Parliament as one of fundamental importance to the destiny of democracy and of primary interest to the ordinary citizen, has irretrievably slowed the initiative. Lacking an adequate, wider address of these issues by the European Union, it is easy for lobbying groups to pick holes in the initiative based upon the principle of subsidiarity. Indeed, this politicisation could prove a significant impasse for the Commission later in the policy process, if not at the stage of proposal.

It is evident from national levels that the more liberal media ownership legislation, the smaller the number and the greater the size of media players. As it stands now, national legislation is limiting concentration to a few players at the national level, but cannot prevent concentration on a European scale. As the TWF liberalised European markets without concentration measures, large media operators have been free to form alliances at the European level. The Commission draft proposal seeks only to harmonise national laws in Europe. The limits proposed by the draft of 30% audience share are designed to provide for 4 large media players and one small player at national levels (meaning further liberalisation in many national markets). Considering the recent increase in cross-national media holdings this could in practice mean very few players at the European level, if large players are allowed to continue to invest in each others’ companies. In this way, if the directive is eventually adopted, the EU, can, even at best, only ensure the even growth of players across Europe and their Europeaness rather than the diversity in media ownership at national levels.

IV. Technological and regulatory convergence: the Commission’s international commitments

With the issue of bureaucratic competence resolved, the Commission’s media ownership policy has been firmly placed under the protective umbrella of the information society framework. Under this umbrella, DG XV (internal market) is responsible for the initiative on media ownership, DG X (cultural policy) for new services and DG XIII (telecommunications) is responsible for the initiative on convergence between telecommunications and media policies.

DG XIII (Telecommunications, Information Market and Exploitation of Research) has an interest in media policy due to its legislative authority in the area of communications technologies. This is a particularly successful DG having produced a number of directives dealing with telecommunications (leading up to full EU liberalisation in 1998) and satellite communications during the last ten years. It is also well-funded in comparison to the other DGs and is therefore able to support more experts to deliberate on the future of Europe’s communications industries.

It is clear that Commissioner Bangemann, who holds the portfolio for DG XIII, considers the media industry to be an essential part of Europe’s information society. As it has been by national governments for the last 20 years, development in information industries is looked to by the Commission for providing future jobs to ease Europe’s growing unemployment. There is much pressure on Bangemann, not only to achieve a European information society, but also to aid the realisation of the Global Information Society to which he promised his commitment at the 1995 G7 meeting in Brussels. During this meeting, the issue of convergence between media and telecommunications industries (driven by technology) was of major consequence. Significantly, UNICE, the federation representing European industry, declared at the meeting that ‘distinctions between broadcasting and information services will become irrelevant’.

International pressure for liberalisation and a European policy on convergence has come in particular from the USA, WTO and OECD. The Commission met with strong opposition by US broadcasters to the small European programming provision included in the 1989 TWF Directive and the US government took the issue to GATT. When the Uruguay Round eventually ended in 1994, the EU managed to obtain an opt-out for audio-visual products. However the USA is continuing to protest against the opt-out. Revisions to the agreement are expected particularly with the EU’s offer to liberalise telecommunications. The USA is also exerting indirect pressure on Europe with its 1996 Telecommunications Act. European media companies are demanding similar deregulation on convergence in Europe. The companies argue that they may be left behind US firms if they are not also allowed to compete in adjacent markets. The OECD has also been promoting convergence. At a recent conference an OECD representative stated that with technological convergence ‘there will be no need to have separate broadcasting and telecommunications regulators.’ Similar views were expressed by a WTO representative.

Accordingly, DG XIII has set up an internal ad-hoc working committee dealing with the issue of policy convergence. The Bangemann Group II, a forum of large European and American firms, is also considering issues of convergence. From mid-1995 onwards, DG XIII began to publish studies and policy papers on convergence between telecommunications and audio-visual policies which media ownership is mentioned as an integral part of. The issue of convergence is first publicly raised by DG XIII in an academic paper written by two DG XIII officials (Schoof and Brown, 1995). The authors stipulate that EU policy must soon address the issue of convergence which is at the ‘heart’ of the information society. They argue that the information society requires a policy framework which encompasses all communication technologies and seeks to eradicate inconsistencies between policies in different media sectors. A similar paper, Regulating the convergence of telecommunications and broadcasting, was presented by the Commission official Marcel Haag at the International Conference ‘The Social Shaping of Information Highways’ a DG XIII sponsored workshop in Bremen, in October 1995.

In September 1996, DG XIII published a report entitled Public Policy Issues Arising from Telecommunications and Audiovisual Convergence commissioned from KPMG. The report went further in suggesting radical change to member states’ media ownership laws. It made no distinction between telecommunications and distinct media markets, and public service enterprises were deemed monopolistic or unnecessary. The KPMG report produced a fair deal of political backlash in the national press and from the European Parliament. The attack on public broadcasters prompted the EBU to seek a protocol (no.32) in the June 1997 Amsterdam treaty guaranteeing their continued existence. The protocol states that ‘the system of public broadcasting in the Member States is directly related to the democratic, social and cultural needs of each society and to the need to preserve media pluralism’.

In November 1997, DG XIII published its Green Paper on the Convergence of the Telecommunications, Media and Information Technology Sectors, and the Implications for Regulation. The paper is much more careful in its approach than the KPMG report and shows evidence of wide consultation. Its fundamentally recommendation remains the convergence of national telecommunications and media policies which it suggests be governed over by one regulatory authority. The paper foresees competition between the sectors, predicting what it terms a ‘struggle between computer, telecommunications and broadcasting industries for the control of future markets’ (1997:10). It calls for the liberalisation of national markets to allow media operators to enter the telecommunications market and vice-versa. Ownership is not much mentioned, the issue ‘already being dealt with in Community initiatives’, but the paper cautiously states:

‘Current restrictions in some Member States (and not others) regarding what types of services can be carried on different infrastructures could make it difficult for operators to formulate unified strategies addressing pan-European markets. It may also prevent economies of scale being realised. The resulting higher unit costs, and hence tariffs, could hold back the delivery of innovative services’ (1997:27).

Regarding new services, the paper states:

‘Any use of licensing or any regulatory limitation on market entry represents a potential barrier to the provision of services, to investment and to fair competition and should therefore be limited to justified cases. In particular, the trend should be towards limiting regulation where potential barriers exist, rather than extending heavier regulation to more lightly regulated sectors in order to equalise market conditions’ (1997:29).

Public service broadcasters are not condemned, but it is suggested that private broadcasters could increasingly fill public service roles:

‘Future developments may impact on the fulfilment of the public service mission. First, as the pay-TV market matures, operators may need to increase their investment in local content to maintain quality and product differentiation. For example, British satellite pay-TV operator, BSkyB, is now a major investor in the UK film industry, and Canal+ is acquiring rights in French cinema libraries’ (1997:21).

Unsurprisingly, the convergence green paper has found support from large media conglomerates which favour greater liberalisation of media markets and has met with opposition from public broadcasters such as the BBC and ARD. Significantly, News International, Springer and ITV would be worst hit by XV’s harmonisation initiative due to draft’s the extension of audience share to the press (for which many member states have no rules, including the UK and Germany) and its measurement of media reach by channel (instead of by company ownership which would effect ITV).

V. Competition policy and the single audio-visual market

Under competition policy, the European Commission has direct authority to make decisions which are not subject to approval by the Council of Ministers or the European Parliament, only to review by the European Court of Justice. Within the Commission, Directorate General IV (DG IV) has responsibility for competition decisions and houses the Merger Task Force. Due to the special status of media falling under cultural policy at the level of the member state, DG IV has over the years developed a special policy towards Europe’s media industry. Most importantly, cultural as well as economic concerns are taken into consideration in DG IV media decisions

Since the 1989 TWF directive, a significant number of cross-European media mergers have been officially decided under EU competition policy. Many further recommendations have been made on an informal basis directly with media companies and national government decisions are often influenced by the European Commission. This occurred for instance when the DG IV suggested to the ITC that BSkyB be excluded from British Digital Broadcasting (BDB) when the UK issued its licence in 1997. Informal negotiations were attempted to deal with the Premiere/DF1 digital platform until the case was officially registered with the European Commission in December 1997.

DG IV firstly applies competition law to the broadcasting industry according to articles 85, 86, and 90 as defined under the Treaty of Rome. This occurs when agreements between companies are seen to come into conflict with the creation of a single market or there is generally a perceived threat to competition through cartels, monopolies or mergers. Article 85 prohibits private sector anti-competitive agreements and Article 86 prevents the abuse of dominant position. Articles 85 and 86 are applied to the public sector by Article 90. DG IV’s main concern when applying these articles is that markets remain open and identifiable entry barriers are removed.

Previous to 1990, all Commission competition decisions were made under Articles 85 and 86 of the Treaty of Rome. From 1990 onwards, merger decisions were made under the 1989 Merger Regulation, although joint venture decisions continued to be made under Articles 85 and 86. The Merger Regulation required proposed mergers with global sales revenues totalling over five billion ECU to notify DGIV for permission. Notification allowed companies to receive a quick decision from the Commission (within one month). In April 1997, the Merger Regulation was amended to include joint venture decisions and thresholds were lowered from five to two and a half billion ECU.

Under the Merger Regulation, DG IV makes the first attempt to accommodate the special status of the media industry within existing EU competition law. Member states are permitted under Article 21 of the Merger Regulation, which stipulates that national authorities may protect legitimate interests, to enact national legislation to preserve media pluralism. DGIV regards these pluralism cases as originating either when separately defined markets are involved in multi-media transactions or when media mergers, which are not viewed as a threat to competition, are perceived as a danger to pluralism.

Following the Commission’s 1989 Television Without Frontiers directive, there was a significant increase in European media mergers (Humphreys 1996, Lang 1997). In anticipation of a corresponding increase in media-related competition decisions, DG IV sought better definition of its policy towards the sector. Accordingly, in February 1990, DG IV conclusively clarified its position towards the audio-visual industry in its Communication to the Council and European Parliament on Audio-visual Policy. The Communication identifies the audio-visual sector as being different to other sectors due to a number of “specific economic and cultural considerations”. It is stated that EU competition rules would continue to apply equally to the audio-visual sector as they do to other sectors, but a list of factors relevant to the audio-visual sector were given which would be taken into consideration when media competition decisions were made. In the Communication, DG IV firstly defines three distinct audio-visual markets: 1) production and distribution of cinema and television films 2) the market for television broadcasts 3) the market for satellite broadcasting services. Secondly, further separate product markets are then specified: free access television (advertised), free access television (non-advertised), pay television, cable television, satellite broadcasting (general), and satellite broadcasting (wholly dedicated to sport).

The 1991 Communication discusses exclusive programming rights. It notes that although DG IV did not look negatively upon co-operation between European media companies, it would ensure that programming material is not withdrawn from the market as a result. It further expresses concern that media companies may fix prices in the purchase of programming from third parties. Based upon Article 85, the Commission is also opposed to the joint acquisition or distribution of programming rights (although exemptions could be granted). Where exemptions were granted, and a multinational organisation achieves joint exclusive rights for its members (such as the EBU, ACT), non-members must be allowed access to programming. When exclusive programming rights are obtained, they cannot be of “excessive” duration and later conditions cannot be added to the contract. These considerations are to apply to both public and private media companies.

At a recent conference, Commissioner Van Miert remarked: ‘As a direct result of the Single Market there are many, many more cases, particularly in multi-media ....’. Indeed, faced with a growing number of media decisions, the European competition taskforce (DG IV) is understaffed. With media companies expanding into adjacent markets, the definition of media markets is becoming increasingly difficult, making judgements controversial. With or without a Commission directive on media concentration, the work of DG IV will continue to rise in the area of media. However, with a directive stating clarity of the Commission’s position the justification of DG IV media decisions may become easier. When asked if he were in favour of a draft harmonising media concentration, DG IV Commissioner Van Miert stated:

‘My personal opinion is that I am convinced of a need for European legislation on media concentration. From a democratic point of view, it is necessary. When we said no to the Nordic satellite case, the ruling was considered to be difficult. We cannot use competition rules to govern democratic issues’.

VI. Conclusion: Europe as a special case?

For historical and cultural reasons, Europe has been a special case with its tradition of public service broadcasters and highly regulated media markets. The WTO has so far recognised this by allowing Europe an opt-out for media policy under the Uruguay round on “cultural” grounds. Similarly, national media markets have been exempt from European competition law under Article 21 of the Merger Control Regulation (to protect cultural interests) and under the principle of subsidiarity. However, as shown in this article, pressure for market liberalisation from international and domestic sources is challenging the way in which Europe regulates its media. The European Commission is therefore left with the difficult task of pursuing both liberalisation to produce large European companies to fend off foreign competitors and creating rules to ensure media diversity at national levels.

The European Commission debate is a tricky one. As it has been very difficult to conceptualise media ownership policy solely in terms of the single market, it has now been absorbed into the information society framework. Accordingly, the harmonisation initiative is meant to complement the parallel information society initiative on convergence. However, the Commission faces a difficult task of amalgamating the two policies. One fundamental difference is that harmonisation of media ownership policy guarantees the continued existence of media regulatory authorities at the national level whereas convergence policy requires the abolishment of these authorities which are accounting for ‘overregulation.’ The convergence green paper delineates bureaucratic competence for media ownership and new service policies, delegating them to other services (ie DG X and XV). However, this contradicts the basic idea of the convergence paper which is to regulate all media equally. Similarly, the harmonisation initiative distinguishes between telecommunications and media industries, defines print, radio and television broadcasting and new service markets separately, and distinguishes between public and private companies. It does not attempt to regulate new entrants to media markets from external industries (such as telecommunications or new services). The Commission’s long term aim could in this case be to first liberalise national media markets with its harmonisation proposals, then follow some years later with convergence legislation once telecommunications companies have lost market power due to introduced competition and new services have been allowed to grow through lack of legislation.

If this is the case, it is relevant to consider how the Commission initiatives could work in practice. Increasingly, joint ventures between media and telecommunications firms are being formed as convergence between communications technologies necessitates. If the European Commission succeeds in liberalising access between these markets with a directive on convergence these joint ventures would most probably develop into mergers (as the draft proposal assumes convergence in technology means also convergence in ownership). The earlier convergence legislation is proposed, the more precarious the market for media firms. Considering the sheer size of telecommunications operators in comparison to media companies (in the UK, BT dwarfs the largest media company in terms of turnover), there is little doubt that earlier legislation would mean the absorption of media companies by telecommunications firms. Later legislation would allow time for the media companies to bulk up following further liberalisation of national ownership rules. Whether the formerly state-owned European telecommunications firms will lose their monopoly positions in home markets has yet to be seen following the 1998 EU telecommunications liberalisation.

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