Media ownership matters. The proposals of the European Media Freedom Act

The European Media Freedom Act proposes a set of new rules to protect media pluralism and media independence in the European Union. In this post we will focus on the main novelties related to the economic dimension of media pluralism.

Information as a public good

In explaining the objectives of the proposed regulation, the European Commission highlights the role of information as a public good and acknowledges that media companies cannot be treated as any other business. The Commission cites the political commitment by President von der Leyen in her announcement of the initiative in the 2021 State of the Union address. The definition of media as a public good is confirmed in the preamble of the Commission Recommendation, published together with the proposed law.

This theoretical framework calls for a regulatory intervention when the functioning of the market does not guarantee the provision of the public good that is information. The legal basis for an intervention at the EU level is Article 114 of the Treaty on the Functioning of the European Union (TFEU). Obstacles to the correct functioning of the single market may arise from the fragmentation of national regulations on media ownership and concentrations; opaque or unfair allocation of economic resources; or undue public or private interference in media independence. All these risks are exacerbated in the digital environment of today’s media. At the same time, digitalisation has raised a substantial threat to the economic viability of media providers.

Transparency of media ownership and editorial independence

A novelty of the EMFA proposal is the provision on the disclosure of beneficial ownership by media service providers (Article 6). According to the Anti-Money Laundering Directive (Directive (EU) 2015/849), ‘beneficial owner’ means any natural person(s) who ultimately owns or controls the customer and/or the natural person(s) on whose behalf a transaction or activity is being conducted. Ownership transparency is of special importance for media pluralism as it brings to the attention of the public and state authorities ownership structures that can influence editorial independence.

Ownership transparency has usually been addressed from an economic point of view, with the aim to combat money laundering in commercial and financial activities. An example is the Anti-Money Laundering Directive (EU Directive 2015/849, amended by EU Directive 2018/843). However, the EMFA proposal takes a different approach.

By requiring media service providers to give their users easy and direct access to information about the beneficial owners, the proposed EMFA focuses on the media’s role in democracy. Thus, Article 6 guarantees the right of citizens to choose their sources of information freely and consciously, as highlighted in the recent Study on Media Plurality and Diversity Online. Ownership disclosure allows other actors, such as journalists and researchers, to monitor independently possible misconduct or abuse of power.

Further, Article 6 (paragraph 2) addresses transparency in relation to editorial autonomy, requiring media providers to guarantee editors’ freedom to take decisions in the exercise of their professional activity, and to ensure the disclosure of any actual or potential conflict of interest by any party having a stake in media service providers that may affect news provision and content.

Such measures could also reduce levels of scepticism among audiences. As the Journalism Trust Initiative (JTI) argues, transparency can reinforce public support and respect for high-quality journalism and editorial independence, especially in times of proliferation of on- and offline information sources.

Media market concentration

The concentration of media ownership is very high in EU member states, as well as worldwide. This is the historical outcome of structural features of the media industry, deriving from economies of scale and technological constraints, particularly in the audio-visual sector. The digital evolution has not contained this tendency; on the contrary, competition among the very large online platforms in the attention market has brought even further concentration in the media industry (see the companion EUIdeas post and the latest Media Pluralism Monitor).

Moreover, the 2022 Study on Media Plurality and Diversity Online documents fragmented and inconsistent approaches in Europe towards regulating concentration of economic resources in the media sector. While nearly half the EU member states have special rules for the assessment of mergers in the media sector, usually with the specific goal of protecting media pluralism, the definition of media pluralism varies from state to state and the laws imposing restrictions diverge in scope, criteria and thresholds. The division of competencies between the media authority and the competition authority also varies.

To strengthen media pluralism, the proposed EMFA addresses both market concentration and editorial independence. It obliges member states to establish a specific body and procedures for the evaluation of mergers when they affect the media market, and to do so in strict coordination with the new European Board for Media Service, which will draw up guidelines and opinions on the assessment of media mergers. Substantially, the EMFA introduces a sort of ‘media pluralism test’ for all mergers that may impact media pluralism and editorial independence, and a supranational body to supervise it.

Where the EMFA’s clout lies

While the introduction of a non-binding opinion on pluralism in media mergers might appear weak in relation to the objective, this innovation by the EMFA may have a strong impact. First, the need to evaluate the effect of mergers on media pluralism has been declared a high principle in the single market. Second, the measure harmonises national rules. And third, it triggers a supra-national intervention, introducing EU-level scrutiny in any media merger case involving different member states or resulting in ‘significant influence’ on public opinion in a single member state.

The proposed law also sets some basic criteria to assess the impact of a merger on media pluralism, which go beyond a strictly economic evaluation – that is, the market share of the entity resulting from the concentration – to consider other elements that contribute to a plural and diverse media environment. These elements are: 1) the effects of the merger on the formation of the public opinion and on the diversity of media players, also accounting for the online environment and the other businesses of the actors involved; 2) the safeguards for editorial independence; and 3) whether there are no alternatives to the concentration to guarantee the economic sustainability of the entities involved. As the last condition will likely be cited in many cases, it represents one of the main challenges to the law’s implementation, given the harsh economic conditions of media providers.

In this regard, the EMFA also introduces rules for “transparent and fair allocation of economic resources”, calling for an intervention in the methods of audience measurement (which has a direct impact on the advertising market) and new rules on state advertising (advertising paid by state or state-controlled actors).

Next challenge: Coordination

The proposed EMFA, if approved, will innovate the regulatory framework by protecting people’s right to know who is the owner of the media outlet from which they get information, protecting the right to receive information not affected by undue influence, whether by the state or by owners, and tackling the dominance of a few market players in the formation of the public opinion. Equally important to note is what is missing from the proposal. The Act does not specifically address other economic threats that have increased in the online ecosystem of the media, in which the resources that used to finance the media content providers – advertising – are increasingly gathered by the digital intermediaries. Moreover, the EMFA does not intervene on the topic of public subsidies to the media, neither calling for them nor addressing the related risks of political interference.

These issues are outside the scope of the EMFA, and are indeed the target of other interventions: the Digital Markets Act proposal for the data and online advertising market, and various financial support programs for the media sector recently adopted by the EU. Nonetheless, the EMFA provides an opportunity to coordinate legislative and regulatory tools that should not be wasted.

 

Danielle Borges is a Research Associate at the EUI’s Centre for Media Pluralism and Media Freedom (CMPF). Borges holds a PhD and an LL.M in Law from the European University Institute. Her research interests focus on human rights and media freedom, data protection and new technologies.

Roberta Carlini is a Research Associate at the EUI’s Centre for Media Pluralism and Media Freedom (CMPF), a journalist and a writer.