(2.00 pm)
MS PATRY HOSKINS
Good afternoon, Mr Richards, Dr Bowe. Just before we move away from the discussion we've just been having about the Russell Brand/Jonathan Ross complaint, can I raise with you something that was said yesterday in evidence about the time in which it takes to deal with complaints. It was said yesterday by Lord Grade that when the complaint came in to them at the BBC, the matter was resolved very quickly. They were able to deal with the complaint in the course of a week or ten days. But of course the same complaint to Ofcom, he said, would take much longer to resolve, and that was a disadvantage of statutory regulation in his view. Do you have any comment to make about whether or not that's a disadvantage of statutory regulation?
MR RICHARDS
Perhaps one or two observations. I think the first is that we have a very, very wide range of complaints, and some of them are dealt with very quickly. Those are the easy ones. When a complaint takes a longer period to resolve, it's typically more complex and requires more consideration. I think the second point is that you would expect the organisation responsible, the governance of the organisation responsible for a situation of that kind to act swiftly, because there are editorial compliance issues, there are managerial responsibility issues and things of that nature. I would always expect any of our licensees or people we regulate to make their own judgment about something that happened under their watch in their organisation, and you'd expect them to do that reasonably quickly. We in this regard are a statutory regulator, so we, of course, have to consider due process, we have to make sure representation is taken, we have to make sure that in exercising our powers we do so properly. So in a complex and difficult case, that is likely to take longer. I think the other peculiarity of that particular case is that I think I recall that we knew the BBC were doing their own investigation
DR BOWE
Yeah, we did.
MR RICHARDS
we knew the Trust were looking at it, so we bided our time because it would clearly be relevant to any finding, particularly in the context of any possible sanction, as to what response the BBC themselves had taken. So I wouldn't myself read too much into that, and I would emphasise that sometimes we have cases that I think can be and are dealt with very swiftly because they are relatively straightforward.
LORD JUSTICE LEVESON
Presumably in a case such as that, you will also be thinking about the wider ramifications beyond the specifics of Mr Brand and Mr Ross.
MR RICHARDS
Absolutely. And as we mentioned before lunch, that was a case which through which we used our exceptional circumstances. There was no complainant. And therefore it did raise wider implications, and therefore I don't think I would want to remotely apologise for taking due consideration to come to a conclusion.
LORD JUSTICE LEVESON
No, I don't think it was a question of requiring an apology. I think the point that Lord Grade was making was rather different. He was saying "As a self-regulatory body we can act extremely quickly and get it done in short order, whereas statutory regulators have compliance procedures and it's much more formalistic and all terrified about judicial review, et cetera, et cetera". I possibly don't do him full justice.
MR RICHARDS
There's clearly an element of truth. If you are subject to judicial review in that way, then you need to take the right amount of care and so on. I think the BBC Trust were making the other decision in the Ross/Brand case, and they are a statutory body as well.
LORD JUSTICE LEVESON
That's a charter.
MR RICHARDS
Slightly different. So it is true to say that we have to exercise our power carefully and with due process. It's probably true in a perfectly formed, well-functioning, self-regulatory environment that decisions potentially can be made quicker, and that's probably potentially the case, but I think it's much more important in the long term that whether it's self-regulatory, co-regulatory or statutory regulation, it's much more important that there is respect for the decisions at the end of the process. What matters far more is that the decision is the right one and has been taken in the right way, rather than it has been taken quickly.
MS PATRY HOSKINS
Is that even true from the point of view of a complainant?
MR RICHARDS
I think a complainant is far more concerned to have the right answer, or have a fair process, and then in their mind ideally the right answer, but certainly a fair process. I think complainants would be far more concerned about that than the speed of the answer, generally speaking.
Q. The second point I wanted to raise before I moved on was on the Broadcasting Code. You'll remember that the Chairman asked you a few questions about who has input into the code.
MR RICHARDS
Yes.
Q. And you pointed out that industry figures would have input in the way that you explained. But I wanted to understand whether there's any form of public consultation or any other procedure that would involve the public.
MR RICHARDS
Yes, absolutely. So the Broadcasting Code is very similar to anything else we do in that respect. We would consult on any revision to the code and we would expect to receive responses and input on that from practitioners but also literally members of the public, bodies representing members of the public, bodies purporting to represent, bodies of opinion of the members of the public and so on, and typically on the code we would have a very wide-spread range, a spanerse range of consultation responses, but we would always consult widely for a revision to the code, that's right.
Q. That's helpful. I'm going to move on now to the adjudication of complaints, please, and the procedures that are in place. The procedures for considering and adjudicating on fairness and privacy complaints are set out in a document headed "Procedures for the consideration and adjudication of fairness and privacy complaints". It's in tab 18 in file 2. It's a different process from other content complaints, as far as I understand. I have given you the reference so we can turn it up and refer to it if necessary, but again I'm going to summarise the procedures in the interests of saving time. Tab 18. It's 05144.
MR RICHARDS
Yes.
Q. In essence, there'll be an investigation and it will I'm summarising in very general terms and then I'll come onto the specifics. In general, there will be an investigation, it will look into whether there is an issue to be considered under the code and if so whether the code has been breached. Can I start from this point: complainants are firstly encouraged to approach the broadcaster directly before complaining to Ofcom.
MR RICHARDS
Mm-hm.
Q. We can see that from paragraph 1.7 of the procedures document.
MR RICHARDS
Yes.
Q. Do you provide any kind of assistance with that stage? Is there any mediation service or are they simply referred to the broadcaster?
MR RICHARDS
I think our general approach is to refer to the broadcaster, so what we call a broadcaster-first approach, and we encourage people to take the complaint and seek immediate redress for their concern or explanation from the broadcaster. The reason for that is, in a sense, linked to the earlier question, which is: if that does offer resolution, then that is very speedy and very efficient, so that's a preferable route, and that's what lies behind that.
Q. Okay. So they're encouraged to follow the broadcaster's own complaints procedure, but if they don't, are they in any way precluded from coming to you?
MR RICHARDS
No.
Q. Moving back now to when you were considering a complaint, I'm going to summarise again: the complaint needs to be made within a reasonable time and generally speaking that means within 20 working days after the broadcast of a programme, although it can be extended.
MR RICHARDS
Mm-hm.
Q. You decide whether or not at that stage to entertain the complaint. If it is entertained, then representations are invited from the broadcaster. You then come to a preliminary view and there's then publication of an adjudication. I know I've summarised it in very basic terms and probably missed some stages out, but is that a fair assessment of the process?
MR RICHARDS
It is and there are occasionally cases where the 20 days is extended. We had a particularly celebrated one during the course of the last year or two. So there are circumstances in which that 20 days is moved.
Q. That's absolutely clear from 1.10 of the document. It actually explains that yes, ordinarily you won't accept a complaint after that, but there are circumstances in which the time can be extended?
MR RICHARDS
That's right, and that does happen.
Q. What I want to understand is a bit more about the process. Let me ask you a series of questions, the first being: to what extent can you require the production of evidence by broadcasters? I mean, require it, say, "Look, provide us with X, Y and Z material"?
MR RICHARDS
Yes, we are absolutely able to do that and there is an obligation on broadcasters to keep records. So we would I can I'm not going to quote the exact obligation, but we can provide that to the Inquiry, but we expect and there is an obligation for broadcasters to provide such evidence, that's right.
Q. Right. And then going back to the timeliness point, do you consider yourself under an obligation to adjudicate quickly and if so, how do you ensure that all the necessary evidence and issues are considered in an effective way?
MR RICHARDS
I think this is again an echo of what I said in answer to one of the earlier questions. It often depends upon the complexity of the case.
Q. Indeed.
MR RICHARDS
So we have internal measures to ensure that we are not being lax or slow or inefficient, but that would be an average or for a typical case, so we test ourselves against that efficiency measure, but within that there will always be fairly straightforward cases which come well within the time period, and complex cases which typically take longer, and that is to do with the body of evidence you need to gather, the time it takes to assess that evidence, take representations and so on and so forth. So I think it's quite closely linked to the complexity of the case.
Q. All right. Still sticking with procedures when you're considering fairness and privacy complaints, the document does allow for an oral hearing to be held. Is that something that happens on a regular basis?
MR RICHARDS
It doesn't happen on a regular basis. It has happened and it is important to say that the opportunity is there. Typically we don't find it necessary, and I would say that is predominantly the case, so we it's not a common occurrence, but the opportunity is there.
Q. Right. If an oral hearing were to be held, is it very legalistic, are lawyers invited, do lawyers represent the parties?
MR RICHARDS
I think they can do. I think people have that opportunity. What you mainly want to get to, of course, is an accurate understanding of the case, the concern and the circumstances, so I wouldn't want to exaggerate the legal nature of it. It's more about really understanding the source of the concern and the nature of the circumstances of the complainant. And then also, of course, the broadcaster's side of the story. It's very important to take both sides, both perspectives, to make a judgment in this kind of area.
Q. So if I were a complainant on a fairness or privacy complaint, I would put in my complaint to you, I could request an oral hearing if it was entertained then I could put in a request for an oral hearing, I could attend, I could be represented if I want to, the broadcaster could also be represented presumably in those circumstances as well?
MR RICHARDS
Yes.
Q. And is there any cost jurisdiction?
MR RICHARDS
No. I think one of the key parts of our whole approach is what I would call I would say it is essentially free at the point of use. I regard that as something that is extremely important here. The threshold of being able to complain and to pursue a complaint is very low, and I think we regard that as at the heart of making sure that we're an effective organisation, and it's simply about accessibility. The right of complaint is not really a right if it costs a significant amount of money to exercise it, so we try and minimise any cost and the core activity is free at the point of use.
Q. I understand. Can I move on to statutory sanctions. As I understand it, sanctions apply equally to standards and fairness cases. Again I'll attempt to summarise it so we're not going through lots of pages of legislation. In the event of the breach of a condition of a licence you have the power to impose statutory sanctions on the broadcaster under provisions which are contained by and large in the Broadcasting Acts?
MR RICHARDS
Yes.
Q. Can we make it absolutely clear, just because there's a finding by Ofcom that there's been a breach of the Broadcasting Code following a complaint doesn't necessarily mean that there will be a sanction, there can just be a finding there's been a breach?
MR RICHARDS
Absolutely. In fact, I don't have the statistics to hand, but a very significant volume, a very significant volume, are simply breaches. And that is about not seeking to use the sanction powers unnecessarily or gratuitously. It is quite often the case that sometimes an error of judgment has been made, good compliance was in place and but in our view it's fallen the wrong side of the line and we need to make that clear, and broadcasters learn from that and make better judgments, we hope, next time. But in many, many cases we do not consider a sanction at all; it's just clarity that that was a breach and we leave it there.
Q. All right. We'll come on to consider the situations in which you would consider imposing a sanction, and in that respect can we turn to the next tab, tab 19, "Procedures for the consideration of statutory sanctions in breaches of broadcast licences". I congratulate you there on your use of plain English. It's obviously a document which sets out the various different procedures, and if we look, please, firstly at paragraph 1.10, which is on the fourth page, I think this reflects what you've just been saying,
MR RICHARDS
"The imposition of a sanction against a broadcaster is a serious matter. Ofcom may, following due process, impose a sanction if it considers that a broadcaster has seriously, deliberately, repeatedly or recklessly breached the relevant requirement." So that's the threshold, am I right?
MR RICHARDS
Yes.
Q. You have various sanctions available to you, and I will again attempt to summarise them in this way: you can issue a direction not to repeat a programme or advert, you can issue a direction to broadcast a correction or a statement of your findings, you can impose a financial penalty, you can shorten or suspend a licence (that's only applicable in certain cases) and/or you can revoke a licence again. That's not applicable to all channels, for example the BBC would be excluded from that, but have I accurately summarised the sanctions available?
MR RICHARDS
Yes, you have.
Q. One of those is obviously a financial penalty, and I'll come on to explore with you some of the examples of financial penalties, but in some cases they can be considerable. We will come on to see penalties imposed of hundreds of thousands of pounds. To what extent do you consider the existence of a financial penalty to have a chilling effect on your broadcasters?
MR RICHARDS
A chilling effect on the broadcasters?
Q. Yes, a chilling effect is one of the buzz words buzz phrases?
LORD JUSTICE LEVESON
Yes, but I hope it would have.
MR RICHARDS
Well, I would distinguish between the chilling effect on bad behaviour contrary to the code on the broadcasters, where I think it is extremely effective, and any chilling effect on, for example, investigative journalism, which I am not at all persuaded that it has.
MS PATRY HOSKINS
How can you tell that there's a difference?
MR RICHARDS
I think the difference is in our own experience over many years and indeed our predecessors in relation to the effect on the effectiveness of compliance, the attitude and the response of broadcasters when there is a threat of or when there is an actual financial sanction. It is it focuses the mind. It has significant reputational impact, it obviously has an economic consequence and it is a very effective deterrent. Very effective deterrent. But the effect it is having is on the effectiveness of compliance, the procedures, the focus withing the broadcaster, both inspanidual journalists or producers and higher up the editorial chain on ensuring compliance with the code. I think that is quite different, and I'm happy to explore this in more depth, from a financial penalty having any alleged impact on the conduct of investigative journalism.
LORD JUSTICE LEVESON
Of legitimate journalism.
DR BOWE
Yes.
MR RICHARDS
There is no reason at all why the presence of a financial penalty should deter good, effective investigative journalism, because good, effective journalism stays within the code and is therefore not subject to it, and indeed there are plenty of examples of broadcast journalism, broadcast investigative journalism, which has been both controversial, highly challenging, which has been done entirely within the Broadcasting Code. So the notion that it is simply not possible or somehow there is no investigative journalism in broadcasting because of the presence of the code or the possibility of a financial deterrent simply, to me, is not supported by the evidence. That is my perspective, that is a perspective borne from my experience here, it's a perspective borne from talking to dozens of journalists in broadcasting who I know, and you will have taken your own evidence from practitioners.
LORD JUSTICE LEVESON
To me it doesn't make sense. If you can do the job properly, then that's what you do.
DR BOWE
Yes.
LORD JUSTICE LEVESON
If you have to break the rules, then you're breaking the rules.
MR RICHARDS
Right. I think that's right.
DR BOWE
If you want to read a good account of how this looks to a current broadcast journalist, I'd suggest you might like to have a look at Jon Snow's recent Cudlipp lecture, which is on precisely this point, where he vigorously challenges the proposition that the kind of statutory regulation that he works within has a chilling effect on his journalism.
LORD JUSTICE LEVESON
Yes, that's the slightly different question, isn't it? That's going to the statutory self-regulation issue, rather than whether it's appropriate to impose a financial penalty.
DR BOWE
Well, it's connected, though, I think, because I think a lot of the comment we have heard in recent weeks has slid very quickly from statutory to chilling, as it were, in the way that this topic was first introduced.
LORD JUSTICE LEVESON
I understand the point that you're making.
MS PATRY HOSKINS
Perhaps another way of looking at it would be this, would be to consider the caselaw, if I can put it that way, of decisions that you have adjudications that you've handed down over the years with a view to seeing whether financial penalties have ever been imposed in situations where all that was really happening was good investigative journalism. Are you aware of any case in which a financial penalty has been imposed where the breach was as a result of some kind of true investigative journalism?
MR RICHARDS
I'm struggling to recall one. I don't want there is a difference. I don't want to convey the idea that we think the broadcast environment is identical to all other environments like the press and so on. There is a difference. And I think it's clear that people in the press are able to, shall I say, take more risks, might be the way of putting it. But what I think I would challenge and hopefully have done is the notion that investigative journalism, robust, effective investigative journalism is somehow inconsistent with the regulatory model that we have, because I simply do not think the facts support that.
DR BOWE
But on your precise question of instances of financial penalties, I think we're going to have to provide information to you on where there have been financial penalties and in what context. You will see from the fact that we are both struggling to think of a case where there has been a financial penalty in respect of some investigative broadcast journalism, there's nothing that springs straight away to mind, but it might exist.
MR RICHARDS
The only one that suddenly springs to mind is the Carlton TV case to do with the drug wars, as I recall, many, many, many years ago. It predates Ofcom by many years, but that's literally the only one I can at the moment recall.
Q. I'm sure you can provide answers. If there was an example, we'd be grateful to receive it. Again, I just want to wrap up one other point, that's the extent to which Ofcom seeks to impose penalties that are proportionate to the broadcaster's revenue and also to the severity of the offence and also to the financial gain that's attributable to the breach. Can I summarise this very briefly without turning up the rather complex provisions: in most cases, the maximum financial penalty for commercial TV or radio licensees is ?250,000 or 5 per cent of the broadcaster's qualifying revenue, whichever is the greater?
MR RICHARDS
Yes.
Q. And in terms of licensed public service broadcasters it's very slightly different. For the BBC, the maximum financial penalty is 250,000?
MR RICHARDS
That's right.
Q. These are very complex provisions. I just want to make sure that I've summarised them correctly?
MR RICHARDS
That's right.
Q. And you have penalty guidelines which set out the procedure for assessing an appropriate penalty in the event of an unfairness finding and again all those factors will be taken into account.
MR RICHARDS
Yes.
Q. I'm now going to ask you very briefly about some adjudications of complaints in practice
LORD JUSTICE LEVESON
Before you come to practice, I want to ask a different question.
MS PATRY HOSKINS
Of course.
LORD JUSTICE LEVESON
How much more significance is attached to the imposition of a financial penalty over and above a direction to broadcast a correction? My question is linked I'm sure you see the parallel.
DR BOWE
Yes.
LORD JUSTICE LEVESON
The Press Complaints Commission require a publication of an apology, or some redress, but can't impose a financial penalty; you can do both. I rather gather, if only looking at the bullet points and the way they're set out, you see the issue of a direction as coming below the imposition of a financial penalty, so you might very well issue a direction without imposing a financial penalty.
MR RICHARDS
Yes.
LORD JUSTICE LEVESON
But would I be right in saying you wouldn't issue a financial penalty without also giving a direction?
MR RICHARDS
I think that's right. It depends upon the nature of the case, but generally speaking that is right. I think the other point to make in drawing the parallels that you're inviting us to do, the other key aspect of our direction in relation to corrections or statements is that we determine its form and its location and its visibility. And that is non-negotiable.
LORD JUSTICE LEVESON
I think that's very interesting. And more than one witness has expressed the view that the PCC could do rather better at this, or whatever comes out of the review of regulation of the press. But I'm just keen to get your view upon the additional value of the financial sanction.
MR RICHARDS
I think the if you affect the bottom line, that always makes a difference. I think it's probably broader than that, though. If you require a correction to be broadcast, what we would typically do is require that correction or our determination to be broadcast at a similar time, with similar visibility, such that the people who would have been watching the original programme will also see it. So, for example, if the programme was a current affairs programme that went out at 9 o'clock on one of the main channels, which secure millions of viewers at that point in time, we would not even countenance the idea that the correction should be broadcast at 12.30 at night on a remote channel. It would go out at 9 pm, at the same time, in the same slot, ideally in front of the next episode of the same programme. So the 5 million people who watched the programme in which the problem arose are highly likely the same 5 million would see the correction. That's, I think, a key point. The advantage of a financial penalty is firstly the bottom line, obviously, but much more importantly, I think is that it tends to have far more significant reputational consequences, so a financial fine is not just a correction which the 5 million people watching that programme would see, but it's something which will then be reported by the rest of the media, and which a broader, far wider range of people would also be aware of, and therefore I think it has an additional deterrent benefit.
DR BOWE
Also, I think I would add to that the fairly obvious point that the financial penalty is something that will probably gain the unspanided attention of those who are responsible for the management of the business, as distinct from those who are responsible for the editorial side of the business, and that is another issue to bear in mind in thinking about how one constructs the appropriate sanction.
LORD JUSTICE LEVESON
That's very useful. Thank you.
MS PATRY HOSKINS
I was going to ask about the adjudication of complaints in practice. I'll deal firstly with standards cases and then move on to fairness and privacy adjudications. Dealing firstly with standards, this is dealt with, Mr Richards, in your statement, but we probably don't need to turn it up. You tell us that in the financial year to 2011, Ofcom received just shy of 25,000 complaints about broadcasting standards. If you want to turn this up, it's paragraph 29.2.
MR RICHARDS
Just to remind myself.
Q. Of course. File 1, first tab, paragraph 29.2.
MR RICHARDS
Yes.
Q. You tell us that 9,031 of those complaints resulted in published decisions, of which 168 cases were found to be in breach of the Broadcasting Code. 36 were resolved. 8,827 cases were found to be not in breach. My first question is: what does "resolved" mean?
MR RICHARDS
"Resolved" is actually a very important categorisation. It sounds neutral, but it actually isn't neutral. It's a situation in which the complainant has raised a concern, we are entertaining it, we're considering it, but the broadcaster then offers redress of some sort, offers something, typically redress, to the complainant and the complainant is satisfied with their redress. At that point, the case can be declared resolved and we don't have to issue a judgment. But the key to that is that the complainant is satisfied with the redress on offer, so it's again a more efficient and speedy way of a satisfactory resolution.
Q. But of the 25,000 complaints approximately that you receive, 168 were found to be in breach of the code. Why, in your view, were so few complaints upheld? Does this have anything to say about public expectations compared to Ofcom's application of the code?
MR RICHARDS
The short answer is I don't think it does, but let me explain why. Firstly, we have that number of complaints, but those complaints are often about the same issue, so on some occasions we have a single programme, a single incident on a programme, and that might attract thousands of complaints. We have had extreme cases where there have literally been many thousands of complaints for one incident. So the number of complaints is not a reflection of the number of issues. Once one is then looking at the issues, there is a very, very wide range of issues. At one end there are serious matters which end up with a breach finding. At the other end, there are frankly very relatively trivial matters. The most well-discussed is the one in which a viewer called us to complain about an episode of Tom and Jerry, and they complained that Tom had set fire to Jerry. That, I can understand, may have caused that inspanidual some offence, but under the Broadcasting Code it was relatively easy to dispatch. So some cases are quite easy to rule out. So you then gradually distill down to a number of issues which you then fully consider, and then assess them on their merits. I would be much more concerned the other way, if we were finding hundreds and hundreds and hundreds of in-breach decisions every year, because all that would tell me is that our code and compliance with the code was ineffective. So I don't think it tells you that we are out of kilter with public expectations. I hope what it tells you is that the public generally speaking knows where to complain, feels comfortable complaining, does complain. We then look at them on the merits and that because the compliance is generally pretty good, the actual number of cases that are found to be finally in breach are, as a proportion of the total number of complaints, relatively few, but I would be far more concerned the other way around, that we sat here today reporting that 5,000 cases a year we were finding as breaches of the Broadcasting Code. That would be far more troubling.
LORD JUSTICE LEVESON
I thought from what you just said that I was thinking to ask the question that if you had 9,031 complaints, some of them may be multiple complaints, how many issues, but I'm not sure that's right, Mr Richards, because you say that 8,827 cases were found not to be in breach. So unless most of your complaints were multiple complaints that weren't in breach
MR RICHARDS
I think that's probably the case.
DR BOWE
Yes.
MR RICHARDS
We can do the mathematics
LORD JUSTICE LEVESON
I'm just quite interested to know the number of issues, but that would suggest, rather oddly, to my mind, that more complaints not only doesn't mean breach established, it might be quite the reverse.
DR BOWE
Yes.
MR RICHARDS
I think that's the case, and to pick up from where we were before lunch, in the Jonathan Ross/ Russell Brand case, there were hardly any complaints at all, and yet it ended up being a very serious in-breach finding with sanctions and so on. So there is absolutely no clear relationship between
LORD JUSTICE LEVESON
I understand.
MR RICHARDS
the volume of complaints and the breach finding or indeed the seriousness of the breach finding. I think the Ross/Brand case illuminates that very clearly.
LORD JUSTICE LEVESON
Of course, a member of the public who complained wouldn't necessarily come within your complainant group, would they?
MR RICHARDS
For fairness and privacy, that's right, they wouldn't.
LORD JUSTICE LEVESON
Right.
MS PATRY HOSKINS
We're on standards cases at the moment.
LORD JUSTICE LEVESON
I understand, I understand.
MS PATRY HOSKINS
Perhaps it would be illustrative then to look at the only three standards cases which were considered serious enough for statutory sanctions in the financial year 2010/2011. In the interests of time, I'm not going to turn them up, but I'll give the tab references so that the Chairman may look at them in due course. The first of the three standards cases that attracted a statutory sanction was the Teletext Limited case. That's behind tab 27. We don't need to turn it up, but Ofcom in that case imposed a financial penalty of ?225,000 in respect of Teletext's failure to provide the public service content of the licence. Can I assume from that that that was something that didn't attract a huge number of complaints, but nevertheless was a very serious finding of breach?
MR RICHARDS
You can, and it was I think an exemplary deterrent sanction. It was all about being clear that when you have obligations that you've signed up to as part of your licence, we expect you to deliver them.
Q. The second is the DM Digital Television Limited case. That's behind tab 46. This is a situation where the Advertising Standards Authority referred three breaches of their code, or their broadcasting code, to Ofcom for consideration of a statutory sanction. I'll come on to discuss the authority both with you and with them later on this afternoon, but they referred these three breaches to you in relation to the broadcast of an advert which they had held to be harmful and in breach of the code, and in that case you imposed a financial penalty of ?17,500 and required the licensee to broadcast a statement of your finding on their service. Again, is that a fair and accurate
MR RICHARDS
Yes.
Q. So again that's not something that's been dealt with because there have been numerous complaints but because you've been referred the complaint by the authority?
MR RICHARDS
That's right, it was an ASA reference.
Q. The last one is the Bang Channels and Bang Media case that we've looked at in part, tab 22. In that case you imposed financial penalties of over ?150,000, and again that was multiple breaches of the Broadcasting Code and licence conditions, but in that case it was to do with adult chat and daytime programming on those services, and there there had been a wholly inadequate compliance system, as you've already explained, and you also revoked the licences on the basis that they were no longer fit and proper to hold the licences. Again can we take it from that
LORD JUSTICE LEVESON
Yes, you concertinaed that a bit I think Miss Patry Hoskins because as I read the decision, you imposed fines for one set of breaches, and while all those breaches were being investigated, they carried on breaching.
MR RICHARDS
That's exactly right. So there was a separate finding.
MS PATRY HOSKINS
Absolutely right, two separate findings. But again not linked to the number of complaints the seriousness of the penalty is not linked to the number of complaints necessarily but linked to how serious the breaches were considered to be. In the other cases so if my maths are right, there were another 165 cases where there was held to be a breach of the Broadcasting Code. Were sanctions imposed in those cases or can you give us a feel for whether any sanction at all was imposed in those other cases?
MR RICHARDS
No, most of those would be an in-breach finding, as I mentioned earlier, so that would be a reasoned decision that is published that is available for everybody to read and ideally learn and understand from, and we in those cases would not have judged it necessary to take or impose a sanction. I think by and large that is what we vastly prefer to do.
Q. Can I ask you this question on sanctions before we move away from standards: you will remember right at the start of this session we discussed the approach under section 3 of the Comms Act and in particular the principle that essentially regulatory activity should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed.
MR RICHARDS
Mm-hm.
Q. Would it be right to say that sanctions are imposed only in cases where action is needed?
MR RICHARDS
Yes. That's the approach I think we take, and that's why quite a large number do not have sanctions.
Q. I understand. Let's move on to fairness and privacy adjudications, please. You explain to us that in the financial year 2010/2011 you published 171 decisions relating to fairness and/or privacy issues, very much fewer than the standards cases. Pardon me, 171 decisions were published, sorry, that's not the number of complaints, but of those 171 cases, nine were upheld as in breach of the code, 36 not upheld, 13 resolved, and 113 were either not entertained or discontinued after initial consideration.
MR RICHARDS
Mm-hm.
Q. You tell us that in that year there were no fairness or privacy cases considered serious enough for consideration of a statutory sanction. Can I ask you this: do you find the entertainment stage to be a useful stage or does it prevent you from investigating complaints that might be legitimate? What is the what process do you undertake when you're deciding whether or not to entertain a complaint?
MR RICHARDS
We are assessing it against the so the complaints come in and let's take the most obvious example. We have to satisfy ourselves that it meets the statutory criteria.
Q. Yes.
MR RICHARDS
So in relation to fairness and privacy, for example, one of the questions we're asking there is whether the complainant is in fact the person or representing the person affected by the broadcast. Sometimes that isn't immediately obvious. If it isn't the actual inspanidual, we have to establish whether or not the inspanidual has been authorised by the affected party or not, and sometimes that's very quick and clear, and other times it isn't. So it's those kind of things that we're considering when we are going through that process.
Q. So it's an essential stage?
MR RICHARDS
I think it is an essential stage, yes.
Q. And it doesn't prevent you from investigating complaints that might be legitimate?
MR RICHARDS
Oh no, not at all.
Q. You've provided us with examples of fairness and privacy decisions. We have discussed the Russell Brand/Jonathan Ross decision. You've told us quite a lot about that, but for the sake of completeness, you imposed a financial sanction in that case, ?150,000, and I want to ask you about an earlier decision that also related to Jonathan Ross. That was a standards complaint, as I understand it. This was the incident where Jonathan Ross, who has a chat show, a late evening chat show, was interviewing David Cameron, and made a number of comments about Margaret Thatcher. I don't think I need to say anything further. In that case, that was a standards complaint by a viewer or viewers, and there hadn't been any complaint by either David Cameron or Margaret Thatcher, and I want to ask you about the difference between the two, because, of course, technically in the Jonathan Ross/ Russell Brand case the fact there had been no complaint may have excluded the complaint, but in the standards case you were able to take on board the complaint despite the fact that neither David Cameron nor Margaret Thatcher had complained. Do you see a slight issue with the way that the structure is set up?
MR RICHARDS
I don't think so. I think it's in both cases a question of judgment. It is right that the complaints around the David Cameron appearance on Jonathan Ross were largely well, they were entirely from members of the public, and therefore could be considered under offence, but there was a broader question about whether or not there was unfairness to David Cameron, and that is something I recall we did consider. Let me try and draw a distinction for you, because I think there is a distinction between that case and the Jonathan Ross and Russell Brand case. It's probably in these areas. Firstly, David Cameron went on to the Jonathan Ross programme voluntarily, knowing full well that Jonathan Ross is a provocative interviewer and that sometimes he takes a risque approach to issues, so he was a voluntary participant in a programme in which that was the context. That was the editorial context. It was actually broadcast at 11.30 at night, so that was the context. In contrast, Georgina Bailey and Andrew Sachs had nothing to do with the broadcast, were not invited and accepted to go onto a broadcast. They were minding their own business in complete privacy and suddenly they were treated in the way that is now very familiar. So I think there is a very significant difference between the two cases, and in a case like that, where I think there were questions about fairness because of Jonathan Ross's approach to David Cameron, we didn't have a complaint from Mr Cameron or anyone authorised on his behalf, and therefore the question we're asking ourselves is whether the circumstances of that case are sufficiently extreme or whether they raise a broader set of issues such that we use our exceptional circumstances clause, and I think in this case our judgment was that it fell the other side of the line, whereas for some of the reasons that I explained earlier, the Russell Brand/Jonathan Ross case I think fell the other side of the line.
Q. I understand. That's very helpful. It's clear from your evidence, though, that sanctions are rarely imposed and some of the reasons might be the reasons we've discussed. Do you consider that the level of sanctions imposed is sufficient to deter breaches of the code more generally?
MR RICHARDS
I think generally speaking we do. I think we are comfortable with the ascending order. It's important to see them in that way. I think that's widely understood, that the world hasn't ended if you have a breach of the Broadcasting Code. It's important, it matters, you need to take it very seriously, but it's not the end of the world. And that thereafter we can step through those sanctions, up to and including revocation of licence, where, in a sense, the world does end. So I think we feel comfortable with that, and that that gives us an armoury, if that's the right word, it probably isn't, a set of tools, which enable us to make, I hope, good judgments about what is necessary for deterrents and to ensure overall compliance. By and large, I think, if we come across repeated failures of compliance, repeated or serious, reckless failures to adhere to the Broadcasting Code, we can go up through those responses and I think generally speaking we find it effective.
DR BOWE
It takes us back to two points that we touched on this morning. One is proportionality, and as Ed says, we have a range of things we can do, and I always think that's an important regulatory technique. The second thing is that as Ed has touched on a few times, the publication of the report of breaches that have not been sanctioned is a very important part of people working in the industry understanding what's good, what's not so good, what works, what doesn't wok, where the boundaries are. In terms of having a clearly understood set of requirements for the industry, I think those breach reports are actually extremely useful to people in indicating where the boundaries are for a working journalist.
LORD JUSTICE LEVESON
On breach reports, I've read, among others things in your papers, but just to prove I have read it, a complaint made by Mrs Yan Polcwiartek. It's a building dispute case. And what impressed me about this complaint, which was not upheld by the way, is that it is 17 closely typed pages, and this obviously involved an enormous amount of work. How long do these things take?
MR RICHARDS
Well, rather than respond off the top of my head on that, we can provide you with the actual data. We've actually been conscious of the time that it takes for a little while, and about a year ago we modified the procedures to try and make them quicker and more efficient, and again it does depend, as I said earlier on, on the nature of the case. Some do take some months, and others can be done fairly quickly. It really is quite case specific. The fact that it has I mean, the team we have are experienced in this and they are used to writing reasoned decisions in relation to these case, so the fact that it's 17 pages, I wouldn't place too much weight
LORD JUSTICE LEVESON
No, I'm not being critical, I'm merely asking the question. As somebody who spends his recent life writing judgments, I know how long they take, and I'm supposed to be experienced doing that.
MR RICHARDS
They don't happen overnight for exactly the reason you're describing, but we are we're very happy to give you the actual data.
LORD JUSTICE LEVESON
I'm just interested because it's relevant to
DR BOWE
Yes, indeed.
MR RICHARDS
It takes a while.
DR BOWE
It's case specific is the answer.
LORD JUSTICE LEVESON
Of course.
DR BOWE
Ed has mentioned that we've had a good look at these processes in the course of the last year to make sure they were as efficient as we can get them, but in the end you have to do a proper job and I would not be happy, frankly, if people came to the board and said, "Wonderful news, we've sped it all up so we're now turning them all around in 24 hours". That would make me feel, on behalf of complainants, a bit uncomfortable, to put it very mildly.
MS PATRY HOSKINS
Before we move away from adjudications, I just want to touch on appeals against decisions of Ofcom. Can I summarise it in this way: if a complainant or a broadcaster or a directly affected third party is unhappy with an Ofcom decision relating to both content and standards, the route of appeal is by way of application for judicial review to the Divisional Court, as I understand it, and in your witness statement you describe a recent challenge in the Jon Gaunt case in relation to a finding that there had been a breach of the code although no sanction had never been imposed but nevertheless there was still the right of judicial review and that's the process.
MR RICHARDS
Yes, that's right, and that's the most obvious recent case that, as I recall, went all the way to the Court of Appeal.
LORD JUSTICE LEVESON
It went first to the Administrative Court and then from the Administrative Court to the Court of Appeal?
MR RICHARDS
Yes.
MS PATRY HOSKINS
And there was an application for permission to the Supreme Court.
MR RICHARDS
That's right.
MS PATRY HOSKINS
Can you update us?
MR RICHARDS
I think it's been refused.
MS PATRY HOSKINS
There's nodding at the back of the room. I think I'll accept that as evidence.
LORD JUSTICE LEVESON
Well, it doesn't really matter. It is a potential risk, because this complaint has presumably taken a very, very great deal of time and cost an enormous amount of money.
MR RICHARDS
In that case, that's absolutely right. That one has consumed a lot of time and a lot of money. However, it was a difficult and interesting case. I think we were never uncomfortable about the fact that it was being appealed and we weren't uncomfortable because I think it's an interesting area of interpretation of the law, and we're obviously pleased that we won the case and made the right judgment, but we were certainly not uncomfortable with it being appealed and our judgment being tested. I think from time to time it's important that that takes place.
MS PATRY HOSKINS
Would you like me to look at that decision or not?
LORD JUSTICE LEVESON
Not particularly. It is a freedom of speech-type decision.
MR RICHARDS
It is. That's exactly what it is.
LORD JUSTICE LEVESON
But all these things are always so fact-sensitive that it's quite difficult to derive enormous lessons from that.
MR RICHARDS
I think the general lesson is that our decisions can be appealed, and sometimes they are. And we are, I think, comfortable with that and I would expect any regulator to be comfortable with that.
DR BOWE
Yes.
MS PATRY HOSKINS
I'm going to move on to investigatory powers. I want to explore the extent to which Ofcom is an investigatory body and whether it can launch investigations when there is suspicion of unethical activity. You'll understand why that's important. I'm going to do this by reference to the premium rate phone services case, because in between 2006 and 2008, as you know, you made a number of investigations into the use of premium rate phone services in television quiz shows, not exclusively quiz shows, but by and large, and the result of those investigations was that a number of broadcasters were fined substantial sums for breach of the licence conditions. There was also a report of Richard Ayre, behind tab 3, in which he found there was a systemic culture of denial amongst the main broadcasters about their responsibility to ensure that the programmes that they devise, commission or produce fully deliver on the transactions they offer to viewers. I won't call this the phone hacking of Ofcom, although I just have, but it was clearly a very serious issue which arose. What I want to understand is with your ability to investigate a problem that arose, how you went about it and whether or not you feel that the outcomes are satisfactory. So in your own words, I'm going to allow you to tell me as briefly as you can what happened and how you felt you were able to investigate it.
MR RICHARDS
What happened, if I go back to the start, was that there was a lot of pressure on commercial businesses at the time. It was a difficult time in advertising, and a new stream of income was identified, this was so-called revenue sharing from premium rate telephone lines, and it was a tremendous discovery at one level, because it combined both the interaction between the viewer and the quiz. You could suddenly the viewer could participate in the quiz by phoning up with the answer or voting or whatever, with the fact that they would pay to do so, so suddenly the broadcaster would not only have an engaged audience but also be receiving money, so it was fantastic. As a result, it took off incredibly fast. Suddenly almost every mainstream broadcaster was doing it. You could not conduct a quiz show without having phone calls coming in, and they were commissioning third party suppliers, premium rate telephone service providers as fast as they could find them. The regulatory backdrop to this environment was that when the Communications Act was passed, we were given the duty or we were asked to have regard for self-regulation or co-regulation where we could, and, as you know, we've done that in relation to advertising and we'll come back to that. We were, however, bequeathed an organisation called ICSTIS, which was the premium rate telephone regulator. It pre-dated Ofcom. It existed and it was established already as a co-regulation body. When this development of premium rate use on quizzes on television began, I think the challenge for everybody, broadcasters, operators, but ourselves and ICSTIS as well, was it wasn't absolutely clear who was in charge of what. We took the view initially that this was essentially a premium rate telephone service and therefore we would have said it was primarily ICSTIS, but suddenly it was the broadcasters who were involved as well. So one observation that I begin with is that it was novel, it grew incredibly quickly and there was a degree of lack of clarity about who was responsible for what, both from broadcaster and premium rate supplier perspective and from an ICSTIS/Ofcom perspective. That was the backdrop. What then happened was that a number of wholly unacceptable practices began, the best example of which I can give you is the cut-off of voting. So the winner of the competition will be determined or the result of the vote will be shown after the break at 9.30, and, you know, vote now, and you're voting for the winner. And what had actually happened was that the voting had been cut off at a quarter to 9, hundreds of thousands or tens of thousands of people then voted, paying ?1 or more a time, between 10 to 9 and 20 past 9, and their votes were never actually counted. So it was direct consumer harm. Consumers were paying for something, they were not having the service
LORD JUSTICE LEVESON
I might call it something else as well, but that's fair enough.
MR RICHARDS
Now, the real point about describing this in that way, because I think everybody recalls it, is that there was an element of invisibility to it. The viewer had no idea that their vote had not been counted. No viewers did. I voted in some of these competitions and you happily voted, you did not have a clue that the vote had stopped. So you were perfectly happy, and nobody was doing what they would normally do with us in those circumstances, which is saying, "I don't like that, I think I've been ripped off, I am going to phone Ofcom"; nobody knew. This went on for a period, until, as I think you'd expect in a situation like that, it becomes revealed by whistle-blowers who are actually working in that environment and know it's taking place.
LORD JUSTICE LEVESON
And they're rather troubled that it seems to be a fiddle.
MR RICHARDS
Absolutely. It was a good example of whistle blowing. They went to the press, went to the TV broadcasters, paradoxically or ironically in due course whistle blowers came to us. And suddenly this series of scandals was unearthed, and it turned out that it had not just been happening in one or two incidents, but as we looked at it more, it turned out that it was really quite commonplace.
MS PATRY HOSKINS
Just pause there for one moment. This is where the third witness statement might have come in helpful, because there's a whole table which sets out all the different television shows where this was happening. Have you received a copy of it yet? I'll give you mine. It's section B onwards and I'll mark the place where the table is so you have some idea. (Handed). (Pause).
LORD JUSTICE LEVESON
This is a way to solve the national debt.
MR RICHARDS
It made a modest contribution at the time, I think.
LORD JUSTICE LEVESON
Thank you. I'll let you have your statement back. I would want a copy. Let me immediately comment how grateful I am to you for responding to questions that you had very, very late in the day so fully. But I will study it.
MS PATRY HOSKINS
Sorry to interrupt. I just wanted to make sure that the chairman had that.
MR RICHARDS
Shall I pick up the story from there?
MS PATRY HOSKINS
Yes. You told us that whistle blowers brought it to your attention. I want to understand now on what statutory authority an investigation was launched and what happened from that point.
MR RICHARDS
From that point, once it was all clear, I think we then immediately said this is clearly not incidental, it's quite widespread, and we need to do something really very serious about it. We then investigated using our powers of investigation against a couple of parts of the Broadcasting Code to do with misleading audiences and quizzes and competitions being fair, so we found a locus which worked for these quite novel cases, but we were able to do that. We then used the investigatory powers and were able to access everything we wanted, really, from the broadcasters. It's important to say that in this context we were not able to access by legal right information from the premium rate suppliers, but from the broadcasters we were able to secure data, audited information, witness statements, everything we needed, we were able to secure and require that of them. We then did a very thorough investigation of all the cases we could find. At that point, the broadcasters themselves realised thoroughly what was happening and, in my judgment, they were in full collaborative mode at that point. They said, "We need to sort this out, the house needs to be cleaned, and you can have whatever you want", and we had whatever we wanted, we assessed it and the outcome of that was this series of sanctions which you were shown a moment ago. Some were fairly modest sums, others were the highest fines we have ever levied in our history and involved millions of pounds, not even thousands of pounds. That was the sanctions process. But it's very important to go on from there, I think. The question for us then was: what led to this and what lessons do we need to learn and what lessons do the industry need to learn in general? So the sanctions, I think an effective deterrent, everybody knows where they stand on that front. But we also then had to go back and make sure there was appropriate regulatory clarity, so we recast our relationship with ICSTIS in a very clear way. That was clarified. We introduced new licence conditions for the broadcasters so there was no doubt that the broadcasters themselves had a responsibility, which there was an uncertainty about before. We introduced an audit requirement, such that we could have confidence that the broadcasters would comply in the future, and we tied all that together with a cross-industry event and programme around compliance, education and understanding which we did jointly with the BBC Trust. So it wasn't just about the sanctions. It was then about ensuring that we had the right powers looking forward, that there was regulatory clarity and that compliance could be secured, and that there was understanding about that compliance on a widespread broadcasting industry basis. So it was quite a broad-ranging approach once the problem had emerged, which rested upon having the right powers, following through with those powers and then ensuring there was regulatory clarity thereafter.
LORD JUSTICE LEVESON
You could get the information from the television companies but you said you couldn't get it from the premium phone suppliers.
MR RICHARDS
That's right. That's because the investigatory powers that we have in broadcasting are licence-based, and this is a very interesting subject because it's in contrast to our information-gathering and investigatory powers that we have under the Communications Act in relation to telecommunications, or, for example, our information-gathering powers, investigatory powers under the Enterprise Act or the Competition Act, where those powers are general, and we can apply them in any case to any party, so long as we do so in pursuance of our duties. Actually, interestingly, reflecting upon this, what I would observe is that our broadcasting investigatory powers are extremely effective when it comes to broadcasters, but are limited to broadcasters, whereas in contrast, if you look at our competition powers and our economic regulatory powers, they're actually more broadly based and more substantive.
LORD JUSTICE LEVESON
But have you found this is actually an important question the limitation on your investigatory powers in connection with broadcasters a disadvantage that if you had a magic wand you would wish to change?
MR RICHARDS
I think the practical answer to that is that we haven't. I think the vast bulk, overwhelmingly, where we've needed to investigate and where we've needed to acquire or gather information relevant to a case, we've been able to do that through our broadcasting powers. I'm not going to say that it can't conceive of a situation where that limitation may not be or may be relevant, but I can't really think of a practical one. Premium rate phone incidents were the closest we've come to it. The vast majority of what we do, as we've been discussing this morning, is around the Broadcasting Code and therefore it's about the broadcasters. I think the problem with the premium rate affair was that some of the data and some of the activity where the problem was taking place in operation centres run and controlled by premium rate phone service suppliers, nothing to do with the broadcasters. They were a very different third-party supplier. And therefore that could have thrown up a challenge but I think in the event, even in that circumstance, we actually were able to access the information.
LORD JUSTICE LEVESON
You navigate your way around it, because of course the premium rate supplier has a contractual obligation to account to the broadcaster.
MR RICHARDS
Yes.
LORD JUSTICE LEVESON
So you hoover up the information that way.
MR RICHARDS
And I think that's exactly what we did.
MS PATRY HOSKINS
I guess finally on this subject, as a function of a regulator, how important in your view is the ability to launch such an investigation?
MR RICHARDS
I think it's extraordinarily important. I think the it's difficult for me to conceive of doing our job effectively in the absence of effective investigatory powers. It's such a key tool, not necessarily because we routinely use it, but because the broadcasters know that we could. And what that means is that it massively helps with compliance, with record-keeping. I think it's an absolutely critical tool in the effectiveness of a regulator.
MS PATRY HOSKINS
I was going to move on to media mergers and plurality issues unless you had any other questions, sir, on that particular topic.
LORD JUSTICE LEVESON
No. I have a little task for Mr Richards, but I'll mention it at the end, thank you.
MS PATRY HOSKINS
Yes. I'm going to ask you about your first witness statement again, Mr Richards, paragraph 24.1 onwards, dealing with media ownership and plurality. I want to understand simply here the role that Ofcom plays here. You explain at 24.1 that a variety of detailed rules apply in relation to cross-media ownership. You then explain some principles at 25.1 onwards, relating to merger control. I'm going to try and summarise what's a quite complex area quite briefly because we only really need to understand the role that you play. You do not have jurisdiction over mergers in the sectors that you regulate, by and large. Some fall within the jurisdiction of the EC merger regulation and are dealt with by the European Commission.
MR RICHARDS
(Nods head).
Q. And some are considered by the OFT and, if appropriate, the Competition Commission?
MR RICHARDS
Yes, that's right, and I think for completeness sake it's worth saying that when the OFT will lead on a relevant merger of that kind, but we would expect to work very closely with them
Q. I'll come on to that, but in terms of jurisdiction it's theirs
MR RICHARDS
Yes.
Q. It's either the European Commission's or it's the OFT's?
MR RICHARDS
That's right.
Q. I was coming on to say that the OFT and the European Commission do often ask you for significant input when a merger is being considered in an area that you regulate?
MR RICHARDS
Very considerable input usually, yes.
Q. In media mergers which involve newspaper publishing, radio or TV broadcasting, you're asked for what's known as a local media assessment?
MR RICHARDS
For local media mergers, yes.
Q. You also have a formal statutory role in relation to certain media mergers which are triggered by an intervention notice issued by the Secretary of State which specifies a particular media public interest consideration, and those are set out in paragraph 25.5 of your statement that currently recognised media public interest considerations are set out there. We would be here all afternoon if I tried to go into those but they're set out there clearly, the Chairman can note them. Where there has been an intervention notice, Ofcom is required to report to the Secretary of State on whether it may be the case that the merger may be expected to operate against the public interest.
MR RICHARDS
Yes.
Q. We are summarising it. It will then be for the Secretary of State to determine whether or not the merger should be referred to the Competition Commission for further review, and other than that, you must also carry out regular reviews, at least every three years, of statutory provisions on media ownership and the public interest test. I appreciate I've probably condensed that considerably, but I just want to understand roughly where Ofcom fits into the position. You explain at 32.1 that there have only been two occasions in which the Secretary of State has issued an intervention notice in relation to a media merger.
MR RICHARDS
Yes.
Q. And on both occasions the public interest consideration was the need, in relation to every different audience in the United Kingdom or in a particular area or locality of the United Kingdom, for there to be a sufficient plurality of persons with control of the media enterprises serving that audience. You tell us that the two occasions were firstly the acquisition by BSkyB of an almost 18 per cent stake in ITV and you set that out at paragraph 32.2 onwards. We're not going to go into that in any detail. The second occasion on which an intervention notice was issued was the recent proposed acquisition by News Corporation of the remaining shares in BSkyB which it did not already own, would that be correct? That's the very recent and well-known example, obviously.
MR RICHARDS
Yes.
DR BOWE
Yes.
Q. Again, I really don't want to go into a massive amount of detail on this, but I want to understand the role that Ofcom played in relation to that proposed acquisition. We start, I think, in the process at paragraph 32.3. You explain that the proposed acquisition was an EC merger. You remember at the start of this short session I was explaining that there could be an EC merger or an OFT jurisdiction merger. The Secretary of State's intervention notice specified the public interest consideration that we've set out, and you report it. By that stage, and it's important to note this, the European Commission had already cleared the merger for competition purposes?
MR RICHARDS
Yes.
Q. So before you were even asked to report. Ofcom recommended a reference to the Competition
LORD JUSTICE LEVESON
No, it was before Ofcom were due to report.
MS PATRY HOSKINS
That's what I meant to say. Ofcom then recommended a reference to the Competition Commission, considering that as a result of the proposed transaction there may not be a sufficient plurality of persons with control of media enterprises providing news and current affairs to UK-wide cross-media audiences, and you say: "The effect of the proposed transaction would have been to bring together one of the three main providers of TV news and the largest provider of newspapers, significantly increasing News Corporation's ability to influence opinion and control the agenda. Further, in circumstances of 100 per cent ownership and control, you did not believe that cultural safeguards and internal plurality could be relied upon to ensure plurality." And all the relevant reports are within the bundle. I don't want to take you through them but I want to accurately summarise what your role was. You reported and those were your conclusions.
MR RICHARDS
Yes.
Q. You then say at 32.5 that News Corporation offered undertakings in lieu of a reference to the Secretary of State, and they're known as UILs. You were then brought into the picture again at that stage because the Secretary of State asked you to advise on whether or not those undertakings met the plurality concerns identified in your report and also asked the OFT to advise on practicability. After a period of negotiation and public consultation, during which changes were made to the undertakings, Ofcom and the OFT recommended that the undertakings be accepted. But then, of course, as we know, events were overtaken before the Secretary of State had come to a decision, News Corporation withdrew the undertakings and then its offer to acquire the shares in BSkyB. Does that accurately and fairly summarise the role that you play? You were asked to provide two specific reports, but ultimately the decision was not that of Ofcom.
MR RICHARDS
That's right.
DR BOWE
Yes.
Q. Was there anything else that you would like to say about that?
DR BOWE
No. I think that's a full, accurate account.
MR RICHARDS
I guess the only small thing is to emphasise the nature of the negotiation period. That is a vigorous exchange. So the process between the offer of undertakings and the acceptance is not a benign exercise. I think that perhaps doesn't entirely come across from the wording.
LORD JUSTICE LEVESON
And that's between you and News Corporation?
DR BOWE
Yes.
MR RICHARDS
That's right.
MS PATRY HOSKINS
Perhaps the important point for the Chairman's interest is that in the course of considering the proposed merger, and this is what you say at 32.6, you came to the view and advised the Secretary of State that the current statutory regime is not effective to secure plurality. You said in your report that you recommended the government should consider undertaking a wider review of the statutory framework to ensure sufficient plurality in the public interest, and specifically you argued there may be value in providing for intervention where plurality concerns arise in the absence of any transaction involving media enterprises and which are not safeguarded by the current media ownership rules. Can you update us on that? As a result of that report and the views and the advice to the Secretary of State, has there been any further correspondence or input between you and the Secretary of State on these issues?
MR RICHARDS
There's been discussion of it. The Secretary of State we included that point in every single public document or every single document that we have produced on this topic, both the original report, recommendation, undertakings and I think even in a separate letter to the Secretary of State. So it has been a matter of discussion ever since the original report was submitted on 31 December in 2010. So there has been discussion about it, and our impression is that the government is considering it and certainly appears to be sympathetic or certainly understands the point that we're making in relation to the deficiency of the legislation.
DR BOWE
I would even go further than that and say I believe I'm correct in saying that when the Secretary of State spoke in Parliament on his decision following our report of 31 December 2010, he indicated personal sympathy for the view that had been expressed about there being a possible lacuna that would have to be corrected.
Q. Finally on this, I'd like to take you to section 37 of your statement, where you tell us a little more about the statutory duty to review the operation of the media ownership rules, 37.8 onwards. You explain that in some detail. I don't want to go through it other than to note that your last review was sent to the Secretary of State on 13 November 2009, and then to note this, 37.11: "The Secretary of State has recently asked Ofcom to advise him on the options for measuring media plurality across platform and to recommend the best approach. We will make this available to the Inquiry when completed." I'm aware that your witness statement has now been in for some considerable time. Has there been any update on that?
MR RICHARDS
In relation to that work?
Q. Yes.
MR RICHARDS
No, the work is under way and we will consult on it I think probably late February/March, and we will aim to conclude it by before the summer, June, July. It's probably worth emphasising two or three points. Firstly, obviously we will pick up the point about the lacuna in the legislation. Secondly, I'm sure we're obviously going to look at the issue of measurement and how you assess plurality from a from the perspective of things that you can actually quantify. Important to underline how complex that is, but we will try and do that, and that really allows you to assess spanersity of voice and things of that nature. I think the other dimension which we will also consider in light of the events of the last 12 or 18 months is that only one perspective here is the perspective of how many voices, how many different newspapers, media voices are there in the market, as it were. A second factor, and I think which is also at the heart of people's concerns about plurality, is the risks around concentration of ownership and media influence, and the conventional analysis of that is, well, how many viewers or readers do I have? But I think we can now see there is another analysis, which is what influence in the political process might I have by virtue of a control of particular media assets. And I think we will also want to look at that, whereas in the past we've tended to concentrate on the former, but I think it's now clear that that needs sufficient attention as well.
LORD JUSTICE LEVESON
That work cuts straight across some of the material that I've been asked to look at as well, so I would be very grateful if you would keep me
MR RICHARDS
Of course.
LORD JUSTICE LEVESON
as up to date as possibly can be, and speaking for myself, if it's at all possible before the end of June, because July I hope to be discussing various options and therefore I want to factor in your views.
DR BOWE
Right.
LORD JUSTICE LEVESON
I'd be very grateful. If you keep in touch with the Inquiry team
MR RICHARDS
Official.
LORD JUSTICE LEVESON
that would be valuable. Could you help me with this: you were asked a specific question about whether the proposed undertakings met the plurality concerns that you'd identified, and having negotiated the undertakings, you said they did. But parallel to that you said but actually this regime doesn't really do the job properly.
MR RICHARDS
Mm-hm.
LORD JUSTICE LEVESON
Could you please explain that a little bit, because people might feel that by saying, well, yes, it's all right, you're actually giving a green light, whereas in truth at the very most you're giving an amber light, but it may be it was your statutory remit that prevented you from going further. I think it would be quite useful if you could just elaborate upon that.
MR RICHARDS
Certainly. There's probably three points. You're absolutely right, we had a very specific question in relation to that merger and the question before us was: you've expressed a view that it should be referred, that there are concerns about plurality; would the undertakings offered be sufficient to meet that concern? What would our recommendation be there? As I think, as I'm sure is in the public domain now, the original undertakings offered to the Secretary of State and considered by us, we said that they would not be sufficient, and hence why I emphasised earlier the process of what is called negotiation. By the end of that process we felt that the specific concerns we'd recognised could be addressed by the revised undertakings, and therefore we made a specific recommendation to the Secretary of State. That was all around a specific proposal around a specific merger, an event, if you like. The weakness in the legislation is the following: the legislation is entirely driven by events, by transactions, by mergers. The problem that we immediately saw, when confronted with this specific situation, was that you could take an organisation who didn't merge or acquire anybody, but by virtue of just the dynamics in the market, by virtue of somebody else closing down an operation, for example, suddenly or gradually had a very, very, very substantial share of the media market. There has been no transaction, there has been no merger, but suddenly you turn around and over a number of years, because of organic growth or because of others exiting the market, this organisation suddenly has far too much power. At the moment, the legislation has no means of addressing that situation and that seemed to us to be a very serious deficiency, particularly so in the context of a highly dynamic market where many media enterprises are under extraordinary commercial pressure, some of them indeed rely on intra group subsidy to survive, and therefore the scope for both change and indeed exit of the market is, I think, considerable. So if we ask ourselves the fundamental question, which is: is there a regime in place which ensures that, as a country, we have a framework which ensures that there is always sufficient plurality, and we can rest assured that there is nobody with too much influence, then we don't in our view have that at present. I think the third point I'd make in relation to your question is really to echo what I said a moment ago about our future work. I think if we look at those issues again today, we would place the same amount of emphasis on the spanersity and the range of plurality and the provision of media, but I think we would also place more emphasis, in light of events, on the risk to the democratic process of the influence of concentrations of media power. I think it would be impossible for us not to do that, given what has emerged over the last year or two. So I think a bit more emphasis there, but as much emphasis on the question of the range and calculation of media voice and share of audience.
LORD JUSTICE LEVESON
I'm sure you'll appreciate that both those topics fall very much within my remit.
DR BOWE
We do.
MR RICHARDS
We absolutely do and that's why the Secretary of State has asked us to do this piece of work and we were fully expecting to provide it to yourself.
LORD JUSTICE LEVESON
I'm very grateful. As you know, one of the modules that I'm considering is the relationship between the press and politicians, which plays absolutely four square into the third of the points you've just named.
DR BOWE
We will do our utmost to ensure the work we do is available to your Inquiry and that we can keep you informed about what we are doing.
LORD JUSTICE LEVESON
I'm very grateful about that because I would be very, very keen to ensure that we didn't run down parallel tracks.
DR BOWE
Exactly, exactly, exactly.
LORD JUSTICE LEVESON
And on this topic alone, besides anything else that I might think of as I will come to, I think you can apprehend that I'll be very keen to hear you again.
DR BOWE
Yes. Well, look, in the light of this we have of course been aware of this as an issue, but in the light of this further exchange, we will look very closely at our planned timetable on this work and, Ed, we will have a very careful think about how we can best conduct it to ensure that it were able to contribute.
LORD JUSTICE LEVESON
I'm grateful. Please do not hesitate to contact the team here.
DR BOWE
We won't.
LORD JUSTICE LEVESON
So that we can appraise you of our broad timetable.
DR BOWE
Yes.
LORD JUSTICE LEVESON
Not all of which is at least yet in the public domain.
MS PATRY HOSKINS
I don't have a huge amount to go but is this a convenient moment?
LORD JUSTICE LEVESON
Yes, certainly, certainly, we'll have a break. (3.34 pm) (A short break) (3.43 pm)
MS PATRY HOSKINS
I want to move on to ask you a few questions about self and co-regulation, the principles that underlie those. We've discussed section 3 of the Comms Act that stipulates that you should have regard to the desirability of promoting and facilitating the development and use of effective forms of co-regulation. I know it's not for you to suggest any form of model of regulation of the press but it would be helpful to understand the conditions in which you consider self and co-regulation are likely to be effective.
DR BOWE
Before we do that, and I'm sorry to interrupt your flow, there was one final point I was wanting to make at the end of our previous session about this lacuna. In terms of Ofcom's powers to look into the development of what we would call significant market power, absent a transaction, I would just like to draw the Inquiry's attention to the fact that we do have those powers already in respect of the telecoms sector and it is probably of interest to you to note that I think that is why it was so obvious to us that we did not have analogous powers in respect of the work that we did on media plurality. In other words, the proposal that one should be able to look at significant market power without waiting for a transaction to happen to trigger it is something that is widespread across the regulatory, certainly the European regulatory world of telecoms. So it's not an unusual or novel power and it's one that we practice ourselves. I'm sorry to interrupt you.
MS PATRY HOSKINS
No, that's very helpful.
LORD JUSTICE LEVESON
Thank you.
MS PATRY HOSKINS
Do you remember my question?
DR BOWE
Yes, we do.
MR RICHARDS
Perhaps I'll kick off on that. I think that every case is different, but I do think there are some features of different circumstances which tell you quite quickly whether something is likely to work as a self-regulatory or co-regulatory or statutory regulatory environment, and they by far the most important issue are what I call incentives. To my mind, if you have a situation where the incentives of the public interest or the regulatory objective may be regularly or frequently at odds with the industry's own interests, the commercial interests or the specific company's interests, you should be extremely sceptical about the scope for self-regulation. Self-regulation is likely to work where the incentives where the public interest is aligned with the industry's interest, and you have that natural reinforcing cycle. If you don't have those things, to me, I think I'm very, very sceptical about self-regulation. Now you do get that and you can get it quite often and I think a weak form of what I call a weak co-regulatory environment, which is closer to self-regulation, again the same is true. Look for aligned incentives and if you find them, you're likely to have something to work with. A very good example of that, which we may come on to, is the advertising case. The reason it's interesting is because in that situation you have the advertising industry, who sell advertising. Now, what they require to be able to do that is for there to be public trust in advertising as a product. If adverts are routinely misleading or harming or misrepresenting, then public trust in advertising would decline and their currency, their product, would be undermined. So what you have there is a situation in which the public interest in not having misleading or harmful advertising is actually very closely aligned with the advertising industry's own interests, and in those circumstances you tend to find co- or self-regulatory environments successful. Everybody broadly wants the same thing. Let me take a different example. If you take an example from our economic regulatory work, we are a price controlling company with significant market power in telecommunications, for example. In those circumstances, the interests of the public lie in having the price controlled the price as low as possible consistent with sufficient investment and sensible returns. The interest of the company lies in having the highest price possible to secure monopoly profit, so the interests are fundamentally opposed. In those circumstances, self-regulation is never ever going to work. You have to have effective independent and in this case statutory regulation. So by using those two examples, I illustrate, I think I have illustrated what to me is at the absolute heart of this issue. Ask yourself about the incentives and interests of the industry and then you will find very quickly that you can establish whether or not pure self-regulation will work. Now, there's a whole host of others factors which we might come on to, but underneath it all, that to me is the kernel of the answer.
Q. I am going to turn on to advertising now simply because it's well regarded as a successful co-regulatory relationship, the relationship between the Advertising Standards Authority and Ofcom. It's obviously interesting to understand how it works and why it works well, but I'm conscious that we have Mr Parker from the authority coming, so I don't want to go into it in a huge amount of detail. Can I summarise it again and you tell me if I've oversimplified it or relayed it back inaccurately. You have entered into a memorandum of understanding which has delegated some of your regulatory functions in the field of advertising to the authority and the Broadcast Committee of Advertising Practice. The authority is responsible pursuant to that memorandum for complaints handling and resolution and the committee is responsible for setting a code of practice and monitoring the code. There are precise wordings which we don't really need to go into. So far so good?
MR RICHARDS
Yes, absolutely.
Q. You remain the backstop regulator. In that role, you don't interfere with the day-to-day work of the authority as long as the undertakings, agreed processes and targets contained in the memorandum are met. You seek the memorandum seeks to respect the self-regulating nature of the arrangement and notes that while you retain the right to make changes to the code that's been developed by the committee, because you have to ensure that it remains appropriate, you won't normally seek to do so because you recognise that the committee is the "self" in self-regulation. Is that a sort of accurate summary?
MR RICHARDS
Yes.
Q. I want to ask you about two aspects s of that relationship. One are changes to the code, and then the application of sanctions. You explain in your witness statement, Mr Richards, that in 2007 you decided that certain types of advertising should be excluded from children's television programmes.
MR RICHARDS
Yes.
Q. They were advertising with is it foods with certain
MR RICHARDS
HFSS, so high in fat, salt and sugar.
Q. Yes. That change was imposed by Ofcom in a situation, you say, where the committee were unable to agree the changes considered necessary.
MR RICHARDS
Yes.
Q. Is that an accurate summary?
DR BOWE
Imposed by Ofcom, not on Ofcom.
Q. By.
MR RICHARDS
Yes, that's right.
Q. Again I'll come back to ask the authority about this, but I want to understand it in a nutshell. Again applications of sanctions, as the backstop regulator you can assist the authority in ensuring compliance with decisions and because it doesn't have statutory powers of sanction, it can refer complaints to you and we've already look at the DM Television ruling where just that happened?
MR RICHARDS
Yes.
Q. Now you talked about incentives and it's interesting because while the authority regulates advertisers, you regulate broadcasters.
MR RICHARDS
Yes.
Q. So there's an incentive there on broadcasters to ensure that advertisers comply with the code, would that be correct?
MR RICHARDS
Yes.
Q. Can you tell us in brief terms what you consider the benefits of that co-regulatory model for the authority to where are the disadvantages, where does it fall down?
MR RICHARDS
I think the advantages are that we were able by doing that to bring together a single port of call for advertising regulation, so the transfer of broadcast advertising responsibilities was pre-dated by the establishment of the Advertising Standards Authority in the first place, so there was a body of expertise, a body with respect, a body with established codes and a body with whom practitioners could work and knew how to do so. So it was the grafting on almost the completion of that process which seemed to make sense and I think the ASA felt the same way, so it allowed advertisers to have a single point of call for their advertising regulatory codes and guidance. From that respect I thought it seemed to us fairly straightforward. The disadvantages I don't think there are very many disadvantages. The issues that we would be concerned about all lie in the area you introduced the question with, which are: do we have in a sense delegating this, adopting a co-regulatory route do we have sufficient safeguards, should anything go wrong? Do we have confidence that we can oversee, if it is necessary? And do we have confidence in the body and its make-up? And there are various hooks in our relationship, in our memorandum of understanding with the ASA which provide for that, and I think what we've seen is that it has worked by and large extremely well. You have one or two cases of the kind that you mentioned, the HFSS case, where it's difficult for a co-regulatory body to say we're going to introduce prohibitions or limits on certain forms of advertising when that is our revenue, so it didn't surprise me that that was a moment in which we had to exercise our backstop powers, and we did so.
Q. How often do you have to get the big stick out? By the big stick I mean either you force changes to the code or you enforce sanctions on behalf of the authority?
MR RICHARDS
Very rarely. In that case, in the ASA's case, I can scarcely think of any. In our history with co-regulators, so far I would say generally it is also very rare, but there have been one or two moments where I wouldn't say we have got the big stick out, there have been one or two moments when we have ensured the big stick was visible. Let me put it that way.
DR BOWE
That is, of course, to go back to the very beginning of your question, one of the ways you make co-regulation work, is that everybody knows that that backstop power, whatever it is, exists. And the fact of that is of itself important.
MR RICHARDS
Absolutely.
DR BOWE
Can I mention another quick addition to what Ed said about why we were very keen very happy to sort of partner with the ASA was not only did it have a good, established track record of respect with its industry, it also has very good complaint-handling procedures, so from the standpoint of doing a good job for consumers, we felt quite confident that here was a body that had a well-established way of doing that.
Q. I'll ask them about their complaints handling. I'm sure we'll hear about it. There are two final things I want to ask you about. The first is the thorny issue of convergence and then I'll ask you about the costs of Ofcom.
MR RICHARDS
Sure.
Q. I'm going to try and take the convergence issue quite shortly because it's an issue that you, Mr Richards, and Ofcom have considered quite recently, both in a document entitled "Protecting audiences in a converged world", which is behind tab 61, and also summarised in your recent speech to the Oxford Media Convention which is behind tab 58. Would you like to describe for us just briefly please the problems of convergence as you see it and your brief thoughts on how the regulatory system could seek to resolve those?
MR RICHARDS
I'll deal more with the former because I think the latter is obviously harder.
Q. Yes.
MR RICHARDS
The challenge of convergence I think goes right back to the question you asked me earlier today about why is broadcasting licensed. Broadcasting used to be licensed because of spectrum scarcity and the nature of the technology. We all understood that world very, very clearly. As time has passed, that world has become less and less clear and the historic boundaries between different distribution media have become more and more blurred. Let's put that in absolutely clear terms. When I was growing up, I knew there was a printing press, I knew what that was and I knew what that produced. There was a television transmitter and I knew what that was and I knew what that did. Today, when I'm consuming my media, I have no idea, necessarily, where it comes from in digital form. I know what a newspaper is and I know what terrestrial broadcasting is, but that is not where the future is. The future is in digital form and in digital form you don't have these fixed silos, these separate physical distribution media through which we can adopt separate regulatory structures. And that is at its heart. If you imagine a world not only today for those who use iPads or smartphones, but in five, ten, 15 years' time when everybody has a television which is itself immediately connected to the Internet, you have to envisage a world in which people are not only watching the linear broadcasting as we've all grown up to know it, but a world in which they are selecting applications, watching video television-like content which may in fact be being provided by a server located not only in the UK but perhaps in a completely different country. That content, which may be highly video rich, may well be provided by something that calls itself a newspaper, or it could be being provided by something that calls itself a broadcaster. Actually, in due course it's quite possible that the viewer in those circumstances would have no idea. They certainly will have no idea which distribution mechanism is providing it. They won't know if it's a satellite, IP television, terrestrial, over the air and so on. So the boundaries of digital media are highly blurred and, crucially, fairly invisible to the viewer, to the consumer, and that is the heart of the challenge. As we approach that, we can, I think, take comfort in the fact that linear broadcasting is not going to go away. Linear broadcasting, so channels BBC 1, BBC 2, ITV and so on, despite the claims of the technophiles, have proved remarkably resilient. People still like ordinary television. So we can take that as a relatively secure position for the next decade or two, I believe. But we then have to cope with the fact and think about the fact that people will also be consuming digital media that is not like that and what regulatory context do we place around that? What I said in my speech was that, and this was an initial set of views, I think you have to think about probably three principal areas. You have to think about broadcasting, and in my view that works well, don't tinker with it too much, people value it. At the other end of the spectrum you need to think about what I call the open Internet, and again this is back to something we touched upon earlier. It is now possible to just publish a blog in 15 minutes, anyone can do it, anyone can be a publisher. We have to accept that there is going to be a space, and we have to be comfortable with and I think be delighted about the fact that this extraordinary phenomenon exists and it has created remarkable freedoms and remarkable access to information. So that is going to be there and it's going to be open and I think it's a fool's errand to try and regulate it. The really difficult area is the space in between the two, and it seems to me there are two important areas there. The first is what we call video on demand, and that is the digital content, video content, which is available on demand, so that's not linear broadcasting, but to the viewer opening or downloading or accessing video on demand, it looks remarkably like television. It's very similar. And over time, the more so. My question there is: given that that is going to be on the television in the future, in the living room, do we have the right level of regulation to meet public expectations? And what our research told us was that people say if you are telling me this is going to be on my television in my living room with my family watching it, I would like a little more protection than is currently on offer, because it's more like television. That is, I think, the first problem. The second problem is the evolution of the newspaper industry into digital form. I do not know when printing presses will be retired, and I wouldn't like to make a prediction. I'm sure they will be with us for many years. But it's equally clear from everything that's happening in the newspaper industry that the digital form is as much part of the future, if not the future. It's also clear that a lot of that content is not only text and graphics, but is also likely to be increasingly audio and video rich. So you have a digital product there which a called a newspaper but which is beginning to tiptoe and in some cases move quite swiftly towards that area that we call video on demand. It hasn't often crossed that line, but it's heading towards it. You have another factor in relation to the press, which is I think the significance and scale and influence factor. If these were services which really nobody accessed, very minuscule audiences of no significance, I think we can then take a very relaxed view about it, but as we all know, newspapers, whether in digital or physical form, have significant scale influences in our society and therefore we need to think about what the right regulatory regime is. The key point I would make from a convergence perspective, just to draw those threads together, is that as the newspaper becomes more and more and over time I think ultimately in digital form, we have to make sure that that area, between the open Internet at one end and conventional linear broadcasting at the other, that is the difficult area and that is what we need to anticipate, because I think that is where we're going to end up, and in some cases fairly soon.
Q. The only other question I have is about costs. This is your second statement to the Inquiry. If I can summarise it in this way: at the seminar, one of the Inquiry seminars
LORD JUSTICE LEVESON
Hang on, you said that you've identified the problem. You said the solution was rather more difficult.
DR BOWE
The regulatory solution.
MR RICHARDS
The regulatory solution is more difficult because of all the different histories and so on. I don't what we have said is that we do not think that the solution is broadcast style licensing regulation, for all the reasons that I think a number of people have submitted to the Inquiry.
DR BOWE
And also importantly because of possibly the changing ways in which people are expecting various things from various communications media, and I would put that in very tentative terms because our recent research on this is no more than indicative, but it is the reason why Ed described this as something it's difficult to find a solution for is not only is the whole technology changing in the way Ed has described, but how people behave around it is possibly also changing, and to find something that meets people's expectations and needs is not straightforward.
LORD JUSTICE LEVESON
Thank you.
MS PATRY HOSKINS
Costs. At the seminar on 12 October reference was made about the costs of Ofcom compared to the PCC. Obviously costs of any news body would be relevant if the industry had to pay for it, so in some regards what was said was quite worrying. I think it was Mr Paul Dacre who said at the seminar that your budget of ?115 million compared rather unfavourably with the PCC's budget of ?2 million. You've provided a statement which deals with this in some detail. Can you summarise for us whether you think that's an accurate comparison or a fair comparison?
MR RICHARDS
The comparison that Mr Dacre made is, no, it's wholly inaccurate, and let me explain why. The ?115 million that is our budget is a budget which covers every single one of our activities. That is all the things that you began with: fixed and mobile telecoms regulation, the management and interference management of the entire UK spectrum, consumer protection, concurrent competition powers, it now absorbs postal regulation and so on. Only a relatively small part of our activity is broadcasting standards regulation. If you ask the correct question, which is how much does our broadcasting standards regulation cost, because that seems to me the closest analogy to what the PCC does, we provided the Inquiry with an analysis to the best of our ability, which would replicate or copy the closest similar analysis that we could do. In doing so, we've erred on the side of caution, I should say. In other words, if we've done anything, we've overstated, I think, rather than understated. When you do that analysis, you discover that our budget for broadcasting standards is about ?3.4 million falling to ?3 million this year, and that's what we would expect it to be on an ongoing basis.
LORD JUSTICE LEVESON
And that includes complaint handling and
MR RICHARDS
Yes.
DR BOWE
Everything.
LORD JUSTICE LEVESON
All right.
MR RICHARDS
So there really is quite a substantial difference.
LORD JUSTICE LEVESON
Yes.
MS PATRY HOSKINS
Mr Richards and Dr Bowe, those are all my questions. Obviously the Chairman may have some additional questions, but on my behalf, thank you very much.
LORD JUSTICE LEVESON
Two things. First of all, as we've just commented, on 12 October you took part in one of our briefing sessions on regulation. Are you content that the transcript of what you said there can be incorporated into the record of the Inquiry?
MR RICHARDS
I'm content, subject to I'm not sure I've checked it, but subject to my checking it, yes, absolutely, of course.
LORD JUSTICE LEVESON
Fine. Thank you very much. It's a rather formal matter. It's only because what is within the record has to be clear.
MR RICHARDS
Yes.
LORD JUSTICE LEVESON
The second is this, and let me make it abundantly clear that I am not saying that this should be taken as a hint by anybody, and neither am I suggesting that Ofcom are anxious to move into press regulation, but it's abundantly clear from all you've said that you have a very great deal, indeed in this country a unique deal of experience of media regulation beyond the pure press. Therefore I would welcome your views, not now, I ask you just to think about it but not at the expense of your other work, on how the press could be regulated in a way that preserves their independence and of course the rights of free expression. I leave it as open textured as that, but it is something you've clearly had to think about in the context of your various activities and if you could write to me on that subject at some stage, I'd be very grateful.
DR BOWE
Thank you very much for the invitation. You are correct in your assumption that Ofcom is not seeking to regulate the press. You could not be more correct in that assumption. But of course we're very happy to try to help this Inquiry in any way we can, and we will think carefully about what we can say that might further assist you.
LORD JUSTICE LEVESON
Thank you very much indeed. Thank you both very much, and thank you for being so prepared to give up your time in a field that is not your field to help me in the work that I have to do. Thank you very much.
MS PATRY HOSKINS
I think we should move seamlessly to Mr Parker, who is the chief executive of the Advertising Standards Authority.
LORD JUSTICE LEVESON
Thank you. MR GUY SEBASTIAN PARKER (affirmed) Questions by MS PATRY HOSKINS
MS PATRY HOSKINS
Good afternoon, Mr Parker.
A. Good afternoon.
Q. The authority has provided a statement to the Inquiry. It's the statement of Lord Smith. Could I just ask you first of all to give your full name to the Inquiry?
A. Guy Sebastian Parker.
Q. Can I confirm that you've read the contents of Lord Smith's statement and that you are satisfied that its contents are true to the best of your knowledge and belief?
A. I have and I am.
Q. Can you tell us first of all who you are?
A. I'm the chief executive of the ASA.
Q. Thank you.
LORD JUSTICE LEVESON
I understand it's not been possible for Lord Smith to come.
A. That's right. He apologises.
LORD JUSTICE LEVESON
Thank you very much for stepping in.
A. Pleasure.
MS PATRY HOSKINS
Now, what is interesting here, just again so I can give you the structure of where we're going to go, what's interesting is the authority has different regulatory approaches within the same system. If I can call them true self-regulation, co-regulation with Ofcom and a third system which relays a form of self-regulation with statutory underpinning the OFT system, and I'll come back to explore the models with you briefly and then perhaps ask you about the strengths and weaknesses of the approaches as you see them. Is that fair?
A. Okay.
Q. First of all, I'm going to start with a brief overview of the ASA system. I'll start with the remit. Tell me if I fairly and accurately summarise this. The ASA's remit covers advertisements and other marketing communications I should say let's look at the statement at the same time. It's paragraph 2.4.1 onwards. It's not just broadcast advertising, which is what we've been discussing with Ofcom. It covers all sorts of other advertising. It includes newspapers and magazines and even door drops and all that sort of thing?
A. Correct.
Q. The structure of the ASA system, I'll try and summarise that, the regulatory system UK advertising regulatory system is split into three parts and overall I'll call it the ASA system.
A. Mm-hm.
Q. First of all, the CAP, the Committee of Advertising Practice, that writes the codes and is itself split into broadcast and non-broadcast, which writes broadcast and non-broadcast codes, would that be fair?
A. Yes.
Q. The codes are administered by the ASA itself, which is split into the ASA broadcast and non-broadcast as well, but is recognised generally as one body. It has no formal legal or statutory powers and works by persuasion and consensus.
A. Correct.
Q. Thirdly, there's the Advertising Standards Board of Finance, ASBOF, and the Broadcast Board of Finance, BASBOF, which raises fund to pay for this system, but I'm going to safely ignore them for today's purposes. Would that be the three elements of the ASA system?
A. Yes, it would.
Q. Lord Smith told us but by adoption you tell us that the system is predicated on this particular separation between writing the codes, administering the codes and funding the system. Can we turn to membership of the Committee of Advertising Practice, and remind ourselves that that is the body that writes and updates the codes, both broadcast and non-broadcast. You explain in your statement at 2.3.4 that the aim of the code is to uphold the principle that all advertising wherever it appears should be legal, decent, honest and truthful. The membership of that committee is set out over the page at 2.3.5. It consists of trade associations representing the three main parts of the advertising industry, namely advertising agencies, media owners and advertisers, and representatives of broadcasters licenced by Ofcom sit directly on the broadcast committee as opposed to being represented solely through trade associations. I don't know if you heard when Ofcom were describing the membership of their board they explained that they had no serving industry figures on their board, but your committee is made up, both in broadcast and non-broadcast committees, are made up of industry figures. Is that an advantage or a disadvantage in your view?
A. It's an advantage of the self-/co-regulatory system that we operate for advertising because that's one of the key ways by which the advertising and media businesses can contribute to the system, by writing the rules. Now, those rules which appear in the advertising codes, the broadcast and the non-broadcast codes, are subject to full public consultation, and indeed the last code review, which occurred in 2009, culminated in 2009, generated thousands of responses when the codes were publicly consulted upon. But yes, it's appropriate to ensure the industry buy into the system. The other key way in which the industry contributes to this system is, of course, by funding it.
Q. Do conflicts ever arise, is that a particular problem which ever arises?
A. The ASA and ultimately the ASA council are tasked with administering the codes and you may be intending to get on to them in a minute.
Q. Yes.
A. They are the independent part of the system. The chairman is independent, the majority of the members of the ASA council are independent, and there is never any undue influence upon the ASA council by any CAP members.
Q. All right. I was going to come on to the ASA membership because they do administer the code, as you've explained. That includes complaints handling functions?
A. That's right.
Q. And the council decides whether the codes have been breached. Who appoints the chairman?
A. The Advertising Standards Boards of Finance, so ASBOF and BASBOF appoint the chairman in consultation with the Advertising Association, which is an organisation that represents advertising and media businesses, in consultation with the Secretary of State for the appropriate government department that might be plural because BIS and DCMS both have an interest in advertising, and in consultation with Ofcom.
Q. Who appoints the council members?
A. The chairman.
Q. How is their independence assured?
A. The majority of the ASA council members are independent members appointed by the chairman following public advertisement and following the Nolan principles. And they are not allowed to have worked in the advertising or marketing businesses, nor are they allowed to have to hold or have held any significant interest in such businesses.
Q. So how do you ensure expertise?
A. Since I've been at the ASA, which is coming on for 20 years, the ratio of advertising members, industry members, to independent members has been 2 to 1 sorry, 1 to 2. A third of the members are industry members.
Q. I understand.
A. And that's how one gets the expertise from the industry. Of the four members who are industry members, four of 12, two of them come from a advertiser background, a client background, one comes from an advertising agency background and one comes from a media background, but they're not there to represent those constituencies, they're there to bring their experience to bear.
Q. The majority are independent members?
A. Eight are independent.
Q. I turn on in the statement to 2.5 onwards. At 2.5.4 you explain: "The system works across the spectrum of self-/co-regulation, from near pure-self-regulation in most matters relating to harm, offence and social responsibility in non-broadcast advertising, through self-regulation backed by a legal framework in most matters relating to unfair, misleading or aggressive advertising to full co-regulation in broadcast advertising with Ofcom Then you set out some examples of how this system has a mixed self-/co-regulatory approach. It's fair to say I'll come back to the examples it's fair to say that the ASA system sits at different points on the regulatory system depending on what is being regulated?
A. Yes.
Q. Can I take you through the examples very briefly. The first is pure self-regulation. That's for matters relating to harm, offence and social responsibility in non-broadcast advertising. And that's you say one of pure self-regulation and the ASA administers the advertising codes without recourse to legal backstop at all. You've already explained to us that the ASA has no legal or statutory powers so how does it persuade people to take part?
A. I'm not sure persuading people to take part is the right way of looking at it, because the advertising codes that we administer are mandatory. We will apply them whether or not a company who is advertising professes to be a member of one of the trade associations that is a part of the ASA system.
Q. Yes.
A. How we persuade them to comply with the decisions that we reach is really covered in the sanctions section of my chairman's submission, which is 276.5 onwards.
Q. Yes?
A. We have a variety of sanctions that we can deploy even in cases where we have no statutory backstop.
LORD JUSTICE LEVESON
The real point is that if the media groups won't take advertising that you've sanctioned, that you've said is inappropriate, that's the end of it, isn't it?
A. It's certainly the end of it if the advertiser concerned is using a medium a paid for medium to distribute its ad, and that's a very powerful sanction.
LORD JUSTICE LEVESON
So that's why in one sense it's voluntary, but in another sense it's not voluntary at all. The advertisers want to get their advertising into the space they want it and if the people who hold the spaces won't carry the adverts because you've said there's something wrong with them, that's the end of the game.
A. Yes, although I wouldn't say it's voluntary at all, even in circumstances other than that, because if an advertiser is distributing advertising leaflets, which do fall under the advertising codes but which can't be stopped by that media refusal sanction because there is no media gatekeeper, they're just handing out leaflets, we will still apply the code to advertising leaflets that appear to breach the code and we will still publish adjudications against the advertiser, which often results in them being named and shamed in articles, for example, in media coverage, and can be a very powerful deterrent of itself.
LORD JUSTICE LEVESON
It's a deterrent for a slightly different reason, because then companies employing that technique won't want the agents of whoever is preparing this material for them to do the job because far from getting positive publicity from the work they're trying to do, they're going to get negative publicity.
A. Yes, broadly speaking that's right. We're talking about often small companies here. They may well not use advertising agencies to produce their advertising leaflets. They will just produce them themselves. But the deterrent of adverse publicity, perhaps in the local newspaper, is still a reasonable deterrent. I won't pretend it's a game changer in every case, it isn't, but it is a good deterrent. And the fact that that small company is not a member of any trade body, is not publishing its ad in a newspaper, for example, that's a member of a trade association, that it is a part of the ASA system, that doesn't matter. The ASA will still take action, it will still apply the code and it will still publish adjudications against misleading, harmful or offensive advertising.
LORD JUSTICE LEVESON
I understand that, but you have to be careful when you say it's not voluntary. You'll carry on, but whether the ultimate publisher of the advert takes any notice is a matter for him or it.
A. Yes, but that's a compliance issue, I would suggest, rather than one of it being a voluntary system. I mean, I am very clear that this is not a voluntary system. It is voluntary to contribute funding towards the system, which is another matter which we might get on to later, but you cannot choose not to comply with the advertising codes without consequences.
LORD JUSTICE LEVESON
Without consequences, yes.
MS PATRY HOSKINS
Consequences are generally industry-led sanctions, as you've explained. But ultimately if you had somebody who said "I don't like this ASA system at all, I don't like the code, I am just going to publish", they wouldn't withdraw formally necessarily but they might say "I'm going to publish, print my ads" and put them through all the doors if I feel like it.
A. Mm-hm.
Q. In that sense that would still be a possibility?
A. It would still be a possibility what, that the
Q. That they could do that without fear of
A. In defiance of the ASA? Oh yes, and some try, from time to time.
Q. And there's no statutory
A. There's no statutory backstop; correct.
Q. Fine. I then turn to self-regulation with a legal backstop. This is 2.5.6 of the statement. You say the ASA is recognised by the OFT as the established means for regulating misleading and comparative ads in non-broadcast media in the UK. On the rare occasions when you are unable to secure compliance with the code you can ask the OFT to consider taking action under the CPRs or the BPRs, the business protection regulations. "The OFT can seek undertakings from a company that it will change its ads, it can also seek injunctions from the court to prevent companies from making misleading claims in their ads."
LORD JUSTICE LEVESON
Because there's the whole consumer protection stuff, which actually would cope with the advert that you've just mentioned, or may do, depending on what they've done wrong.
A. Yes, it would do if it was an issue that fell under the CPRs or the BPRs.
MS PATRY HOSKINS
But that's not co-regulation because of course the OFT doesn't regulate advertisers. It's a specific function that it can carry out in certain specific circumstances. It genuinely is self-regulation with a legal backstop.
A. Yes, I think most people would agree with that although these are not precisely defined terms.
Q. No they are not but just the best we can trying to come up with a term that works. Then we have self-regulation with legal underpinning. This is the Gambling Act 2005. You're going to have to explain this for me.
A. I'm not so sure it's very different from the previous category, actually. The Gambling Commission under the Gambling Act 2005 took on various powers to regulate gambling, not just gambling advertising but gambling across the board, and one of the things it fairly quickly did was to all intents and purposes contract out the day to day regulation of gambling advertising to the ASA system in much the same way as Ofcom had a year or two before with broadcast advertising regulation. I wouldn't read too much into the fact that one is referred to in Lord Smith's submission as being self-regulation with a illegal underpinning and one is referred to as being self-regulation with a legal backstop. It actually amounts to much the same thing.
Q. Final we have proper co-regulation and this is the formal co-regulatory partnership with Ofcom for broadcast advertising. Ofcom remains the statutory regulator but has contracted out the day-to-day regulation to the authority and it will only intervene in certain specified circumstances. I asked Mr Richards about this but am I correct in saying that essentially Ofcom doesn't interfere with the day-to-day work of the ASA along as the undertakings and processes and targets in the memorandum of understanding are met. Would that be true, practically speaking?
A. Yes.
Q. And the memorandum also seeks to respect the self-regulating nature of the arrangements, and notes that although it has certain powers, ie forcing changes to the code, it doesn't normally seek to do so on the basis that you are the "self" in self-regulation.
A. Yes.
Q. But of course, it can assist with compliance. It can assist in ensuring compliance with decisions because you don't have the statutory powers of sanction, and we've seen the DM Television ruling of Ofcom, also the Venus TV ruling behind tab 23, we don't need to turn it up. These are situations where you refer complaints to Ofcom. I want to ask you first of all Ofcom describe the system as working very well. Would you agree?
A. I'd agree with that.
Q. Would you agree with their assessment that they very rarely have to intervene, either to make changes to the code or to impose sanctions?
A. Yes, those are very different things but it's true on both accounts. I can think of only one example which Ed Richards referred to where they intervened on the code writing side, and that was a fairly exceptional circumstance in itself, because Ofcom had already started to consult on HFSS rules and in the end they directed BCAP to use what was then the Food Standards Agency's nutrient profiling model for the TV HFSS content rules which in fact BCAP had written. So it was a slightly complicated situation. On the sanctions side, I think we have referred seven broadcasters to them in the six or seven years since they contracted out responsibilities to us.
Q. I guess I want to explore with you the extent to which you feel that you need the big stick of Ofcom. Is it useful? Does the fact that it exists mean that you're not robust as a genuinely independent regulator?
A. Yes, it is.
Q. What's the authority's view on that?
A. It's useful, very useful. As with all sanctions, whether they are statutory sanctions or not, they are vital for ensuring that those who might be tempted to push the boundaries don't do so out of fear of what might happen if they did and the deterrent effect of sanctions, I'm convinced, secures a huge amount more compliance than the actual application of sanctions. If you have your sanctions right Ed Richards referred to an armoury of sanctions but if you have an escalating series of sanctions which can be applied, then what any good regulator or good self-regulator, good complaints handling body will do is make sure they threaten the sanction before they apply it and we tend to find certainly that eight or nine times out of ten if we threaten a sanction we get compliance. We don't have to deploy it.
Q. Can I ask you about complaint handling in practice, please. First of all, do you actually need a complaint in order to intervene when a situation
A. No, we don't.
Q. Turn to section 3.2.4 onwards. This is the section on complaints and investigations. You explain that the ASA considers complaints about breaches of the advertising codes from both industry and consumers. It says just one complaint can be enough to trigger an investigation. That rather suggested to me that you needed one complaint, but I think the correct answer is you don't need a complaint?
A. We don't.
Q. You can trigger an investigation whenever you like.
A. Under our own volition.
Q. Exactly, of your own volition. You explain at 3.2.5 the number of complaints that you received about a certain number of advertisements and you explain that action led to about 10 per cent of the complaints well, I should say 2,226 ad campaigns being amended or withdrawn, and that complaints from the public represent 96 per cent of the complaints received. I suppose that begs the question who else complains?
A. Competitors and other organisations with a particular interest in a matter who we would regard as non-public complaints. The processes that we apply to handling complaints from public or non-public parties are very similar. If you're a non-public party, you can't be anonymous and you have to declare legal action on the matter in hand.
Q. Complaints are then examined carefully. If they do bring to light a possible breach of the code then they're sent off for a thorough investigation. You say this: "All decisions on formally investigated ads are made by the independent ASA Council. ASA Council members must withdraw from the discussion if there is a conflict of interest." That probably answers my next question about independence in relation to adjudications. You then say: "Adjudications set out a summary of the advertiser's response to the complaint." And that's all. There's also then a system of independent review and you explain that someone who's not happy can request a review by the independent review of the ASA adjudications, currently Mr Phillips, who can refer cases back to the council including with his recommendation on changes to the council's original decision. Is there anything else, before I come to touching on broadcast complaint handling procedures and non-broadcast complaint handling procedures, is there anything you'd like to add to that summary?
A. Only one thing and that's you referred to the fact in 3.2.5 that we that our action led to 2,226 ad campaigns being amended or withdrawn. The majority of those were as a result of the 25,000, just over, complaints about the just over 1,300 ads, but a significant number of them, around 850 of them in 2010, were the result of monitoring and compliance action that's summarised in 3.2.11.
Q. Yes. I want to ask you about broadcast complaint handling procedures. Behind tab 14 you'll find the guidance on this. If I can ask you about first of all informal or formal investigation procedures, paragraph 24 onwards, there's a choice between a formal or informal investigation procedure. Can you assist us with the differences between why one would choose a formal and why one would choose an informal investigation procedure?
A. The judgment is ours, that's the first important point to make.
Q. Yes.
A. The general rule of thumb is if the issue is relatively minor and clearcut, then we'll be minded to try to resolve it informally, and paragraph 24 explains other circumstances that might affect our decision as to whether to attempt to resolve a case informally or whether it ought to be resolved formally. I'm happy to go into the detail, if you'd like.
Q. On the second page well, paragraph 24 is on two pages but on the second page, page 6, the set of criteria, the decision to resolve cases informally is likely only to be taken in certain circumstances and you set out certain criteria which you apply?
A. That's right.
Q. Is there a risk that informality can lead to complacency?
A. I think if we weren't to apply the criteria as they're written, if we weren't to get the balance right, then yes, I think there would be that risk. As with all of these things, it is a question of a balance. We now resolve more cases informally than we resolve formally, but in 2010 we still formally investigated and publicly adjudicated on over 600 cases. I think the number for informal cases is over 1,000, which gives you a rough idea of the ratio between the two. We have a responsibility to make sure that we don't unintentionally and inadvertently send a message to the advertising business that they can get away with it and just agree to provide an assurance and promise not to do it again and hope that the ASA will resolve it informally and try that time and time again, which is why one of the criterion is if there's a pattern of unwillingness or inability to comply with the code, if there have been more than a certain number of informal resolutions in the previous period, these are factors that we weigh up. We will have to weigh them up in conjunction with an assessment of how frequently the company advertises. Of course a big advertiser producing many, many ads, spending an awful lot of money on ad space and ad airtime is of course going to attract more complaints and just the law of probability tells you is going to be subject to more problems over a period of time because of human error and so on, so we need to take that into account, but the criteria are important and if we're consistent in applying them, there ought not to be that problem.
Q. Can I turn to two final paragraphs of this maybe three final paragraphs of this guidance. Paragraph 35 on remedial action. Remembering that we are dealing with broadcast advertising cases which have the co-regulatory model with Ofcom. You say that if the ASA adjudicates that a breach has occurred but no referral to Ofcom is appropriate, then the letter of notification will inform parties of the necessary remedial action. Have you told us everything that you want to about the particular sanctions that the ASA can impose without referring to Ofcom?
A. Yes, although the sanctions that I referred to earlier are principally, not exclusively, non-broadcast.
Q. That's what I thought.
A. The power of referral to Ofcom is not to be underestimated. This is a licence-based regulatory regime and broadcasters really do not want to lose their licence. Ed Richards referred to it in his testimony as being akin to the end of the world and it really is. So that does, I think without much doubt, make it easier for us to secure compliance on the broadcast side than it sometimes is on the non-broadcast side.
Q. Paragraph 41 describes Ofcom sanctions. If obviously you think sanctions in a broadcast case should be imposed beyond your powers you can refer to Ofcom. How do you decide something is appropriate for referral?
A. Yes, the MOU between us and Ofcom goes into it in detail. It sets out four or five circumstances where I might want to refer a broadcaster to Ofcom. Let me see whether I can find them. It's on page 14, MOD100008684.
LORD JUSTICE LEVESON
"Fails to comply fully and promptly with a decision of the ASA, fails to comply fully and promptly with a reasonable request of BCAP, demonstrates a repeated disregard for decisions of the ASA or reasonable requests of BCAP, and commits one or more code breaches of sufficient seriousness to warrant in ASA's opinion a statutory sanction." Thank you.
MS PATRY HOSKINS
Can I move on to non-broadcast handling procedures fairly briefly. There's also a decision on whether there's a formal or informal investigation, where it's more serious in general terms there will be a formal investigation. Again there's an independent review but here there's not necessarily a statutory backstop to whom the ASA can refer to this case unless of course it falls within the CPRs and BPRs. To what extent to you find that you lack ultimate authority in those cases when you can't refer it to a statutory regulator?
A. It doesn't happen very often, but it does happen. It tends to happen with very, very small companies who are determined to carry on regardless. It often happens, actually, when people feel very, very passionately about what they're advertising, particularly if they're advertising a cause or an idea, and those advertising of that type of thing is covered by the non-broadcast advertising code, so you can imagine the circumstances. It might be a local campaign group who are campaigning against a proposed wind farm development and feel extremely strongly about the issue, and have put together a campaigning advertising leaflet and are handing it out in the neighbourhood, and it's sometimes difficult to enforce the advertising code against parties like that and we obviously have to weigh up in extreme circumstances whether or not it's worth us continuing to pursue it, given the size of the problem.
Q. Does the Authority have a preference for co-regulation or self-regulation? Would it like to move, for example, to a model where it was consistently a co-regulator or self-regulator? Or does the current system work well, in your view?
A. I think it works well. One of the real advantages of the ASA system is the way it's evolved. You only have to look beneath the surface at this, at first sight, very complicated mix of different models within an over-arching model to see that it must be the product of a substantial amount of evolution over quite a long period of time responding to the different circumstances that apply in different areas, and trying to find the right checks and balances or incentives that work. I think we have a good record of doing that and maybe we will come on in a minute to talking about the recent changes to the ASA system whereby we've extended the non-broadcast code to cover a lot more advertising online, particularly on websites, where we've had to think really quite deeply about new sanctions that might work in that area because that's one area where there is no media middleman. Advertisers who are making claims about their own goods and services on their own websites are not going through a media gatekeeper, for want of a better word, so we have to find something, some leverage that can be applied against those who are incapable or unwilling to comply with the code.
LORD JUSTICE LEVESON
And?
A. The first of the three new sanctions that we've developed and have started using is an enhanced name-and-shame sanction. We have a section that's very well flagged on the ASA website that's called "Non-complying Digital Advertisers", and if companies refuse to comply, then we highlight them on that list. The threat of that sanction has already worked in a significant number of cases and has resulted in internet advertisers making changes to their websites that they were initially reluctant to make. I think there are 12 companies listed at the moment. The second of the new sanctions is to ask the search engines, who are now part of the ASA system, they are members of the Internet Advertising Bureau, which sits on the Committee of Advertising Practice, to ask the search engines to suspend any paid ads that link through to the bit of the website where the claims is that are in breach of the code are appearing, and again that's been used, I think, eight times since our remit extension in March last year, so eight times in just under a year, and has proved effective. The final of the three new sanctions for this online space is where we might run our own paid search campaign highlighting the non-compliance of a particular advertiser. We are fortunate in being a reasonably well-known regulator. Our website is linked to by a lot of other organisations and it is very frequently visited and consequently our ads appear quite high up search rankings. Our adjudications automatically appear quite high up search rankings, so this can a powerful sanction.
MS PATRY HOSKINS
For your note, sir, there is a document behind tab 7 a document entitled "Extending the digital unit of the CAP code", which deals with all this in considerable detail, and new sanctions are described at 4.7 onwards.
LORD JUSTICE LEVESON
Thank you.
MS PATRY HOSKINS
So you can read that in your own time. I'll come on now to monitoring and compliance. Lord Smith says in his statement that you don't just wait for complaints to come in, you also place a significant emphasis on conducting a substantial monitoring programme. To what extent does the ASA collectively ensure that there is compliance of the code rather than sit back and wait for complaints and how does it do that?
A. There are a number of different ways. We have two compliance and monitoring teams and they carry out surveys of potentially problematic areas we tend to focus in on sectors or issues where we know there are problems and they will look at a large sample of ads and ascertain the compliance rate, but they will also pursue advertisers who have published ads who appear to break the rules. They will also act on obviously problematic ads which are drawn to our attention, either as a result of complaints we've received, where it would, in our view, be wrong for us to investigate, which might take some time, and allow an ad that is blatantly in breach of the code to carry on appearing, so they might step in and take immediate compliance action there. They will undertake what we call sector compliance. If the ASA has adjudicated against a company and the company says, not unreasonably, "It's a fair cop but everyone else in my sector is doing exactly the same thing", we take that seriously, it's not right that there shouldn't be a level playing field, and so the monitoring and compliance team may well undertake sector compliance and get in touch with the other companies, draw to their attention the appropriate adjudication and ask them for an assurance that they'll make changes to their ads. Those are some the cases in which we carry out this sort of activity.
Q. We've just been discussing the problem of one of the problems of convergence. We've discussed the document at tab 7, "Extending the digital remit of the CAP code". You've explained that. Is there anything else that you'd like to say about convergence?
A. Only that it's been, in my opinion, the biggest and most important change to the ASA system since we took on responsibility for regulating broadcast ad regulation in late 2004 and it's led to a huge increase in our workload. The reason for that is not hard to see. It matters to people. A lot of people, the vast majority of whom are members of the public, are at the very least spending a lot of time looking at websites even if they are not necessarily buying goods and services through websites and they don't want to be misled particularly by advertising that appears on those websites in the same way they don't want to be misled by ads they see anywhere else. So there's a real demand for that and it's actually been an operational challenge for us because of the huge workload. We wonder whether it might be a jurisdictional challenge in a sense that it's not always easy to draw spaniding lines between advertising claims on companies' own websites and other content. We spent a lot of time thinking about that in the run-up to the extension of our remit back in March last year. In fact, that hasn't proved to be the bugbear that we feared it might be.
Q. The fact that you've been able to deal with that so seamlessly and effectively, as I'm sure you have, is that an advantage of self-regulation? Would that have been equally easy in a possible statutory regulation, with a statutory system in place?
A. I think that is an advantage of self-regulation, yes.
Q. Finally, section 5 of this statement, you are asked about your views on strengths and weaknesses of the ASA system and you explain at 5.1 that in fact the system is often considered by policymakers as an example of best practice regulation and you explain that through your set-up and the way you exercise your functions you're able to meet the 10 best practice features of advertising self-regulation as defined by the European Advertising Standards Alliance and you set out what they are. I take it those are your submissions on the strengths of the Advertising Authority model. Is there anything you would want to add to those strengths?
A. No, I don't think so.
Q. Are there any particular lessons that you think might be learned from the ASA model that could be applied to other that might be of interest or relevance to the Chairman in the context of this particular Inquiry?
A. Other than looking at what we regard as the important component parts of advertising self-regulation and inviting you to draw any conclusions that you might want to draw from those, no, not really. I certainly wouldn't presume to know what might be the best model for press regulation. There are undoubtedly similarities between the work that the PCC does and the work that the ASA does and there are similarities between the press and the advertising business, but there are a whole host of very important differences too.
MS PATRY HOSKINS
Of course. Mr Parker, thank you very much, those are my questions.
LORD JUSTICE LEVESON
Thank you. Mr Parker, thank you very much indeed and I thank you and Lord Smith for the statement that you made and the work you've done to put it all together. Thank you very much.
A. Thank you.
LORD JUSTICE LEVESON
Right, 10 o'clock. (5.00 pm)
