On May 31, the National Communications Commission (NCC) disallowed a bid by multiple system operator Taiwan Optical Platform Co to acquire Eastern Broadcasting Co.
Strictly speaking, there are no legal clauses that give the commission a clear basis to block the acquisition.
As an assessor in this case, I recognized this lack of a legal basis.
Although I respect the commission’s power of administrative discretion, it is hard to avoid certain regrets.
One irregularity is that the commission passed the resolution based on supplementary clauses, to demonstrate its determination to oppose media monopolies, even though a proposed media antitrust law has yet to be enacted.
I suggest that, having disallowed the buyout in this case, the commission should propose its draft media antitrust law as soon as possible, otherwise it will continue to face accusations of applying its administrative discretion in a way that oversteps legal boundaries.
The commission disallowed the merger because vertical integration between cable TV systems and channels would create the largest channel agency on the cable TV platform in Taiwan. The commission determined that the sheer size of the integrated conglomerate would have a great effect on the development of the industry and on the opinion market. On these grounds, the NCC determined that such a merger would do more harm than good to the overall public interest.
However, if one examines the resolution objectively, the way the commission has applied its administrative discretion could indeed easily give rise to controversy.
As Taiwan Optical said in response to the outcome of the deliberations, the commission says that Optical’s nearly 10 percent share of cable TV subscribers puts it in a dominant position that tends toward monopoly, but Article 24 of the Cable Radio and Television Act (有線廣播電視法) states that: “The number of subscribers of the system operators, their affiliates and their directly or indirectly controlled system operators shall not exceed one-third of the total number of subscribers in the nation.”
Taiwan Optical said that it has at most 9.38 percent of subscribers, which is well within the legal limit.
Furthermore, the commission took the view that if the acquisition went ahead, Taiwan Optical would become Taiwan’s second-biggest channel agency, giving it a strong market position that might hamper competition.
In its response, Taiwan Optical said that there are 110 widely viewed channels in Taiwan and its channels account for only 11.8 percent of them.
It said that this does not contravene Article 25 of the act, which says: “Programs provided by system operators and their affiliated enterprises shall not exceed 25 percent of the usable channels,” and hardly puts it in a monopolistic position.
The opinions of the commission and Taiwan Optical form an interesting contrast, with the commission applying its administrative discretion to disallow the acquisition out of concern for its potential effect on the industry, whereas Taiwan Optical objects to the decision on the grounds that it is not breaking any laws.
This clash of opinions highlights the importance and urgency to formulate a media antitrust law, otherwise Taiwan Optical can hardly be blamed for saying that the commission acted unfairly by blocking the buyout on the grounds of market monopoly concerns.
Although there is no clear legal basis to disallow Taiwan Optical’s acquisition of Eastern Broadcasting, it is reasonable to judge that such a merger would have an effect on the industry’s development.
An antitrust bill should include regulations governing horizontal market shares and vertical integration in the media industry. It should cover the allowance and permissible scale of combined vertical and horizontal integration, cross-media ownership and permissible equity ratios. It should state whether cable TV systems such as those involved in this case can own satellite TV channels, or what proportion of equity they are allowed to own.
Furthermore, opinions posited as grounds for disallowing the merger, such as that owning two national news channels or the news channel with the third-highest viewership, would have an effect on the opinion market should be formalized as soon as possible by drawing up a media antitrust law.
Another issue is the existing restrictions on investment in radio and television businesses by political parties, government authorities and the armed forces, as stipulated in the three radio and television acts: the Radio and Television Act (廣播電視法), the Cable Television Act (有線電視法) and the Satellite Broadcasting Act (衛星廣播電視法).
The commission said that this was not a major reason for its decision, but it did not deny that it was a factor. This shows that now is a good time to discuss the rules governing party, government and armed forces investment, whether this involves amending the acts or including the matter in the proposed media antitrust regulations.
There is widespread opposition to the legal restrictions, but recently we have also been hearing objections to government ownership of media in connection with the Hakka Affairs Council’s operation of a radio channel and in reaction to regulations introduced by the commission on the establishment of government-run radio or television stations.
The bewildering thing is that some people who are energetically pushing for an end to the rules governing investment by political parties, the government and the armed forces in media entities have also been criticizing the government for owning media.
I have all along held to the consistent positions of opposing abolition of the restrictions on parties, government and the armed forces and opposing government ownership of radio and television media.
How the roles of parties, government and the armed forces investment should be regulated should be open to discussion and consensus.
Such issues include whether and how to amend the rules about penalties for noncompliant media, how to formulate exceptional provisions — such those governing the size and form of equity shares — and the content of sunrise or sunset clauses, such as setting aside things that happened in the past.
However, a basic concept of democracy is that the media and government should stick to their respective roles as the overseer and the overseen.
In view of this, I am opposed to abolishing the restrictions on political parties, the government and the armed forces investing in media entities.
Chen Ping-hung is a professor in the Graduate Institute of Mass Communication at National Taiwan Normal University.
Translated by Julian Clegg
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