Maintaining "fit and proper" UK broadcasters: Ofcom's role (Communications newsletter, October 2011)

The ongoing furore over the News Corporation-owned News of the World "phone hacking" scandal has led to debate about whether BSkyB, 39 per cent owned by News Corporation, is a "fit and proper" person to hold a broadcast licence and has, accordingly, brought into the limelight Ofcom's role of ensuring that this requirement is fulfilled.

The test

Ofcom is responsible for licensing all UK commercial television services, and in particular, has an ongoing duty to ensure that broadcast licence holders are, and remain, fit and proper to hold such licences.(1)

The difficulty in practice is that Ofcom has not published substantive formal guidance on the precise interpretation of this "fit and proper" test, and legal precedent on the application of the "fit and proper" test in the broadcasting context is scarce (Ofcom does not publish rejected applications for broadcasting licences and there is only one previous case of an existing licence being revoked under the application of the test).

Applying the test

Ofcom has recently noted that "in considering whether any licensee is fit and proper Ofcom will take into account any relevant misconduct of those who manage and control the licence."(2) Whilst this rather vague statement does not provide much greater insight into the "fit and proper" test, some guidance can be drawn from Ofcom's licence application forms, which include sections on the "Fit and Proper Criteria". These sections note that Ofcom will use all of the information provided in the application form in order to determine whether the applicant is a "fit and proper" person, in particular that highlighted in the box below may be of relevance.

__________________________________________________________
Key broadcast licence application information

  • Directors and/or substantial shareholders who have ever received any criminal convictions or civil penalties.
  • The applicant's other broadcasting licences, in particular, information on investigations or sanctions in respect of broadcasting-related matters.

__________________________________________________________

In relation to criminal convictions, in its licence application forms Ofcom further clarifies its position by saying "a director or shareholder who has a criminal record will not necessarily be refused a licence." The implication is that Ofcom will consider the seriousness of any crime when determining whether to grant or revoke a licence. In addition, in its recent pronouncements on the application of the "fit and proper" test to BSkyB, Ofcom has also made it clear that it is  "not precluded from acting by the ongoing police investigation" and that "Ofcom's process is not dependent upon a criminal conviction being secured by the police".(3)

In relation to the applicant's broadcasting experience, Ofcom appears to be concerned about regulatory compliance, i.e. whether a broadcaster is willing and able to comply with UK broadcasting rules. This is consistent with the only precedent for revocation of a broadcasting licence. It was on the basis of repeated breaches of the broadcasting rules and regulations that Ofcom revoked the licence of Bang Channels Limited in 2010. That licence holder had breached Ofcom's Broadcasting Code more than 60 times over an 18-month period and had not paid a fine of £157,250. Ofcom stated that the licence was revoked on the basis that it "no longer considered that the Licensees were fit and proper persons to hold a licence" as a result of "serious and repeated breaches of the Ofcom Broadcasting Code."

Where does this leave BSkyB?

Ofcom has announced that it is considering whether BSkyBs is "fit and proper" to hold a broadcast licence and that it has asked to be kept abreast of developments in the investigation by the Metropolitan Police. However, detail on its investigation, including timing and process, is not currently available.

Further, Ofcom has noted that the "fit and proper" test applies to both licence holders and their controlling shareholders and directors, and, in this context, that Ofcom "must take account of News Corporation's conduct in assessing whether BSkyB is a fit and proper person".(4)

Accordingly, the conduct of News Corporation (including its News of the World subsidiary) will continue to be relevant to an assessment of BSkyB's compliance with the "fit and proper" test notwithstanding that News Corporation has shelved its plans to increase its shareholding in BSkyB.(5)

BSkyB is unlikely to have its licence revoked on the basis of non-compliance with regulatory conditions (in the way that Ofcom revoked the licences of Bang Channels Limited based on its persistent and flagrant breaches of regulatory conditions and its unwillingness to change its behaviour or pay fines imposed by Ofcom).

Uncharted waters

If Ofcom were to revoke any of BSkyB's broadcasting licences as a result of News Corporation's conduct in relation to the hacking scandal, it would be sailing in uncharted waters (and almost certainly straight into another legal battle with BSkyB). Further, Ofcom would also need to consider whether such unprecedented action would be consistent with Ofcom's general Communications Act 2003 duties, in particular, whether the revocation of its licences would be consistent with Ofcom's duty to ensure a diverse and high quality broadcasting landscape in the UK.

Notes:
(1) Section 3(3) of the Broadcasting Act 1990.
(2) Ofcom's paper "Frequently asked Questions 'Fit and Proper' in relation to broadcast licensees" of 18 July 2011 (Ofcom paper).
(3) Ofcom's letter to Rt Hon Simon Hughes MP, Rt Hon Don Foster MP and Tim Farron MP of 22 July 2001 (Ofcom letter).
(4) The Ofcom paper.
(5) Ofcom's open letter to Jon Whittingdale Esq OBE MP of 8 July 2011, the Ofcom letter and the Ofcom paper.

 

Please click on the links below for the other articles in the October 2011 Communications newsletter

 

Contact

Dhana Doobay
T: +44 (0)20 7859 3133
E: dhana.doobay@ashurst.com

 

This newsletter is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

 

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