The Finkelstein Report - How do you solve the media puzzle?

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7 March 2012

On 28 February 2012 the Independent Inquiry into the Media, led by the Honourable Mr Ray Finkelstein, reported to the Commonwealth Government (the Report). The Inquiry was convened by Senator Conroy in response to calls for an investigation into the media, provoked at least in part by the News of the World phone hacking scandal.

The report provides a detailed, scholarly analysis of the role of the media in Australia which, irrespective of whether its recommendations are adopted, will inform analysis of media markets for some years to come.

Although focussed exclusively on news media, the Report effectively pre-empts many of the findings of the Convergence Review (which is due to report later this month).  Containing almost 500 pages of analysis of Australian and overseas evidence on the economic, social and legal issues facing the media, it will be a useful tool for both policy makers and regulators such as the ACCC in the event they are required to consider any future media mergers.

In language that echoes the Convergence Review Interim Report, the Report recommends regulation by function, rather than form, stating that “In the newly converged news media environment, it is neither practicable nor sensible to discuss regulation of print and online platforms in isolation from the regulation of television and radio.”  

More controversially it recommends the creation of a new statutory authority, the News Media Council, to regulate converged news media.

The perceived problem

The Report identifies two major problems that it says existing regulation has failed to address:

  1. market failure; and
  2. lack of trust in the media.

In relation to market failure, the Report states that:

  • the harm produced when the press is not properly regulated extends well beyond direct consumers.  It extends to the community as a whole which relies upon the media for democracy to function properly.  As you would expect from a former President of the Australian Competition Tribunal, the existence of this externality is described as a “classical example of market failure”,
  • information asymmetry means that consumers may not have sufficient information to evaluate the quality or accuracy of a news story; and
  • concentration of ownership, particularly in cities or towns with only one newspaper, can lead to a lack of diversity and a decline in standards because of the absence of effective competition.

In relation to lack of trust in the media, the Report concludes that consumers’ trust in newspaper’s coverage of political views is low: many believe that news is not reported accurately, fairness and diversity is lacking and newspapers have too much power.

The proposed solution

The Report makes two major recommendations.  The first is the establishment of an independent statutory body called the News Media Council, that would take over the functions of the Australian Press Council and the some functions of the Australian Communications and Media Authority.  The News Media Council would:

  • enforce standards of conduct based on already existing codes developed by the media or in consultation with the media;
  • regulate current affairs coverage on all platforms: print, online, radio and television;
  • have statutory powers to investigate contraventions;
  • be able to make binding decisions in relation to those contraventions, including the power to require a news media outlet to publish an apology, correction or retraction.

The second is that, within two years, the Productivity Commission conduct an inquiry into the health of the news industry and whether there is a need for government support.  That inquiry should also consider the policy principles on which any such support, if necessary, should be given so as to maximise effectiveness and eliminate any chance of political patronage or censorship.

It will be interesting to see how, and to what extent, the final report of the Convergence Review adopts the recommendations in the Report in its consideration of the desirability of a new converged media and telecommunications regulator.  It will also be interesting to see how the News Media Council’s proposed powers develop.  At first blush, the ability to investigate infringements and order the publication of corrections seems quite similar to the Australian Competition and Consumer Commission’s power to issue infringement notices. 


The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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