Government and Institutions

Press regulation: more economics, less politics

Recent developments in press regulation in the UK may not be completely ‘bonkers’, to use David Cameron’s word, but they have come perilously close. Perhaps we shouldn’t be surprised that politicians, judges and celebrity campaigners haven’t combined to produce a better response to the perennial demands that ‘something must be done’ to rein in the tabloids.

It may therefore be helpful to step back and review the issues in economic terms. Here are some first thoughts which will feed into a discussion paper on media and advertising to be published in September. They follow on from some earlier reflections on fake news.

Let’s begin with four general points. First, the media should be viewed in the same way as any other economic activity. This means that, in general, consumers should be free to decide what to watch, hear and read, without having their choices limited by politicians, regulators or a handful of dominant producers.

Second, it follows that any restriction on media freedom needs to clear a very high hurdle. That said, there are some potential market failures that regulation or some other form of intervention could usefully address. For example, the gross invasion of someone’s privacy could be seen as an externality – a cost imposed on a third party – which market forces alone may not correct.

Third, regulation can take many forms. One option would be direct control by the government, as is common in authoritarian regimes. But no-one (hopefully) would support this approach. There are already concerns that the UK is slipping down the global league tables for press freedom.

A far more attractive alternative would be a regulatory body which is more or less independent of the state. This covers a wide range of options, from an arms-length body with some statutory powers to self-regulation by the industry itself. The latter clearly wouldn’t work in the case of a monopoly. But self-regulation may be effective in a relatively competitive market where reputation and peer pressure are important, and consumers can easily vote with their feet. The Advertising Standards Authority is widely held up as an example of best practice here, having successfully gained the confidence of the industry, government and consumers.

All these options – but perhaps especially in the case of self-regulation – can be supplemented by the normal operation of the legal system, including criminal prosecutions for the most egregious behaviour. The threat of civil action (facilitated by no-win-no-fee agreements) may also provide an effective means for aggrieved individuals to protect their rights.

Fourth, whatever form of regulation is chosen, it is important that different media outlets are treated equally. Regulation should not distort the market by favouring particular newspapers, or by treating one technology (e.g. print) more harshly than another (e.g. internet).

So how does the current system stack up? In 2011 the Cameron government ordered an inquiry under Lord Justice Leveson to investigate the ‘culture, practices and ethics of the press’, in response to concerns over phone-hacking and payments to police officers. This led to the establishment of a Press Recognition Panel (PRP), tasked with approving new and existing regulatory bodies. So far, the only approved regulator is a new organisation called IMPRESS.

However, most publishers have chosen to be regulated by the industry’s own Independent Press Standards Organisation (IPSO), which is effectively the successor to the old Press Complaints Commission. And some (including the publishers of the Financial Times, Guardian and Private Eye) have chosen not to be regulated at all.

There are a several oddities here. For a start, why should there be more than one regulator for the same activity? But this isn’t perhaps as bizarre as it sounds. Once you have accepted the principle of self-regulation, it makes sense for a bit of competition to determine which regulator is most effective. (Some economists like to joke about the apparent illogicality of having only one Monopolies Commission.) IPSO is clearly winning this fight.

Other observers may baulk at the idea that some publishers are not regulated at all. However, they are still constrained by the backstops of criminal and civil law. Indeed, most of the outrageous things that tabloids have been accused of doing are already illegal – including harassment, hacking phones and bribing police officers. If existing laws were simply enforced properly, many of the problems would go away. And there have, of course, already been criminal prosecutions and large civil damages paid as a result of the scandals that led to the Leveson inquiry.

Nonetheless, there are still a couple of issues to be resolved. The first is the unique status of IMPRESS. Arguably, market forces will see it naturally wither on the vine. Perhaps it would already be doomed without the support of one large benefactor, Max Mosley, who has previously had (for want of a better way of putting it) a difficult relationship with the tabloid press. But this would matter less as long as IMPRESS is competing on equal terms with IPSO. As the only state-recognised regulator, there is a clear risk that it will not.

Indeed, this problem might have been much worse if the Conservatives had not committed (in the 2017 general election manifesto) to repeal Section 40 of the Crime and Courts Act 2014. This Section would have meant that newspapers who failed to sign up to a state-recognised regulator (and IMPRESS is currently the only option) could be liable both for their own and their opponents’ costs following a libel or privacy action, even if they won the case.

In principle, this could have been dealt with (in part) by recognising IPSO too. But whatever the politics here, the bigger point is that Section 40 was awful economics. By making it almost costless and risk-free to bring a libel or privacy action against an ‘unregulated’ newspaper, the system would have been distorted in favour of claimants. And even though the threat passed by Section 40 has (presumably) passed, there is still pressure for some form of stick to force publishers to choose one regulatory body over another. This seems to defeat the point of allowing self-regulation in the first place.

The second issue is whether the additional protections for the individual under civil law are strong enough. For what it is worth, the Editors Code operated by IPSO (and the equivalent by IMPRESS) already look comprehensive enough to me.  Others have suggested a new and stronger right to privacy, balanced by a strengthening of the defence of public interest. There is some good economics that can be applied here too and this will be the subject of another blog. However, the next blog in this series will discuss whether traditional and new media are competing on a fair and level playing field. (Spoiler – it seems not.)


Julian Jessop is an independent economist with over thirty years of experience gained in the public sector, City and consultancy, including senior positions at HM Treasury, HSBC, Standard Chartered Bank and Capital Economics. He was Chief Economist and Head of the Brexit Unit at the IEA until December 2018 and continues to support our work, especially schools outreach, on a pro bono basis.

1 thought on “Press regulation: more economics, less politics”

  1. Posted 07/09/2018 at 19:54 | Permalink

    Thank you for the great article

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