INVESTIGATION INTO
CONTROL

Prime Television Limited

A report on the Australian Broadcasting Authority’s investigation into the possible breach of any provision of Part 5 of the Broadcasting Services Act 1992 by Prime Television Limited

Australian Broadcasting Authority
Sydney
October 1999

ISBN 0 642 27029 5

 Commonwealth of Australia 1999

This work is copyright. Apart from any fair dealing for the purposes of private study, research, criticism or review, as permitted under the Copyright Act 1968, no part may be reproduced or transmitted, in any form, or by any means or process, without the written permission of the publisher.

Publisher

Australian Broadcasting Authority
201 Sussex Street
Sydney NSW 2001

Contents

Background	4
Investigation	5
Key clauses of the original agreements	5
Analysis of original agreements	7
Negotiations between the ABA, Prime and the other parties	11
Conclusion	12
Findings	13

Schedule 1:
Prime Television Limited structure chart	15
Schedule 2:
Austereo Pty Limited and Australian Radio Network Pty Limited Company structure chart	16

BACKGROUND

In early March 1998, the Australian Broadcasting Authority (the ABA) was advised that Prime Television Limited (Prime), Austereo Pty Limited and Australian Radio Network Pty Limited had entered into certain contractual arrangements for the provision of news services in Canberra and Newcastle.

Prime Television (Northern) Pty Limited is the licensee of a commercial television broadcasting licence with the call sign NEN in the Northern NSW licence area. Prime Television (Southern) Pty Limited is the licensee of a commercial television broadcasting licence with the call sign CBN in the Southern NSW licence area. Radio Newcastle is the licensee of broadcasting licences with the call signs 2KKO and 2XXX in Newcastle. Canberra FM is the licensee of broadcasting licences with the call signs 1CBR and 2ROC in Canberra.

The agreement in Newcastle was entered into by Prime Television (Northern) Pty Limited, a company controlled by Prime (see Schedule 1 of this report) and Radio Newcastle Pty Limited (Radio Newcastle) a company controlled by Austereo Pty Limited (see Schedule 2 of this report). 

The agreement in Canberra was entered into by Prime Television (Southern) Pty Limited, a company controlled by Prime (Schedule 1), and Canberra FM Radio Pty Limited (Canberra FM), a company jointly controlled by Austereo Pty Limited and Australian Radio Network Pty Limited (see Schedule 2).

As part of its role in monitoring compliance with the Broadcasting Services Act 1992 (the Act), the ABA made preliminary inquiries of Prime, Austereo Pty Limited and Australian Radio Network Ltd relating to these arrangements (to determine whether these agreements could put Prime in breach of the Act). As a result of its preliminary inquiries, on 9 April 1998 the ABA commenced its investigation into the control implications of the agreements between Prime and the commercial radio broadcasters Radio Newcastle and Canberra FM. The investigation focussed on whether such agreements placed Prime in breach of any provision of Part 5 of the Act (in particular, paragraphs 60(a) and 61(1)(a) of the Act).

Paragraph 60(a) of the Act provides that a person must not be in a position to exercise control of a commercial television broadcasting licence and a commercial radio broadcasting licence that have the same licence area. Paragraph 61(1)(a) of the Act provides that a person must not be a director of a company that is in a position to exercise control of a commercial television broadcasting licence and a company that is in a position to exercise control of a commercial radio broadcasting licence that have the same licence area. 
In April 1998, Prime, Austereo Pty Limited and Australian Radio Network Pty Limited provided the ABA with copies of the ‘Agreement for Provision of News Services’ in Newcastle and Canberra (the original agreements).

Under these agreements, Prime would provide news services to Canberra FM and Radio Newcastle (that is, the broadcast of news bulletins and updates throughout the day). The original agreements also provided that Prime would make space in its newsroom for the equipment necessary to enable the broadcasts. In return, Canberra FM and Radio Newcastle would provide promotion spots for Prime on the radio, and acknowledge Prime as the source of the news. Prime submitted that this was the only consideration for the provision of news programs.

After a preliminary review of the original agreements, the ABA were concerned that certain provisions contained in the original agreements placed Prime and its directors in breach of paragraphs 60(a) and 61(1)(a) respectively, of the Act. During the period between April and August 1998, the ABA requested further information from Prime, Austereo Pty Limited and Australian Radio Network Pty Limited. All three companies provided further information.

INVESTIGATION

On 9 April 1998, the ABA commenced its investigation into whether certain provisions of the original agreements for the provision of news services placed Prime and its directors in a position to exercise control of a commercial television broadcasting licence and a commercial radio broadcasting licence in the same licence area, in breach of paragraph 60(b) and 61(1)(a) of the Act. After a review of the original agreements, the ABA identified several provisions that were of concern to the ABA.
 
Key Clauses of the Original Agreements

While the original agreements in Canberra and Newcastle were (substantially) in the same terms, there were some differences. The contracts define what constitutes the news services (the services) to be delivered by Prime. The services are specifically defined for the particular licence being serviced.

Control by Prime over the content of news services delivered by Canberra FM Radio Pty Limited and Radio Newcastle Pty Limited

Under the original agreements, Prime was given full editorial control over the content and style of the services to be provided and those services could be varied by agreement (that is, Canberra FM and Radio Newcastle could not unilaterally vary the services, but first needed to obtain the consent of Prime to such a variation). In the case of the Newcastle agreement, Prime could not unreasonably withhold consent to a change. There was no clause as to reasonableness in the Canberra agreement.

Retraction and vetting broadcasts

The original agreements provided that Prime could prevent Canberra FM and Radio Newcastle from broadcasting material provided by Prime under certain conditions (such as any potential for legal action resulting from the broadcast, or any potential breach of the Broadcasting Services Act or of Prime’s broadcasting licence). 

The original agreements also contained a provision relating to the retraction of material broadcast. Prime undertook to indemnify Canberra FM and Radio Newcastle from loss suffered while broadcasting Prime’s service in compliance with the requirements of these vetting and retraction provisions.

Promotions and acknowledgment in return for news services

While the original agreements were in force, Canberra FM and Radio Newcastle must provide airtime to Prime for the purposes of ‘promotions’, and the original agreements specified the form, number and placement of the promotions. The ABA was of the view that the number and length of the advertisements to be broadcast was not insubstantial. Canberra FM and Radio Newcastle were also required to acknowledge Prime as the source of the news programs.
 
The Newcastle agreement provided:

Front of bulletin

•	This is Brett Lavaring with a KOFM news update from the Prime Television newsroom.

•	From the resources of the Prime Television newsroom, this is Brett Lavaring with a KOFM news update.

•	First with the latest from the Prime Television newsroom … this is Brett Lavaring with a KOFM news update.

•	Putting Local News first, this is Brett Lavaring from Prime Local News with a KOFM news update.

OR, back of bulletin

•	We’ll have details of these stories and more tonight in Prime Local News at 6.00 p.m.

•	Join me tonight at 6.00 p.m. for Prime Local News.

•	Details at 6.00 p.m. tonight in Prime Local News.

•	And that’s KOFM Hunter News for now … we’ll have another update next hour and all your Local News tonight at 6.00 p.m. on Prime.
Termination and exclusive dealing clause

The original agreements also provided for termination by agreement or default. Once the contract had been in force for six months, the ability of the parties to terminate was limited to termination by agreement. Canberra FM and Radio Newcastle were unable to unilaterally terminate the contract, but must have first obtained the agreement or consent of Prime to such a termination. 

In this circumstance, Prime was in a position to prevent termination. Even in the case of termination during the first six months of the term of the contract, 90 days notice must be given. Thus, if Prime were in a position to exercise control of Canberra FM and Radio Newcastle while the contract was in force, a unilateral termination by Canberra FM or Radio Newcastle would still leave Prime in that position for 90 days. 

Under the original agreements the parties also agreed that, while the contracts were in force, no one but Prime was to supply the services. 

ANALYSIS OF ORIGINAL AGREEMENTS

An analysis of the original agreements in relation to the control tests as defined in Schedule 1 of the Act is set out below.

Control of the selection or provision of a significant proportion of the programs broadcast by the licensee

Clause 2 of Schedule 1 of the Act outlines the ways in which a person may be in a position to exercise control of a licence or a company. Clause 2(1)(b)(ii) of Schedule 1 of the Act provides:

When a person is in a position to exercise control
2. (1)	For the purposes of this Schedule, a person is in a position to exercise control of a licence or a company if:
…
(b)	in the case of a licence:
…
(ii)	the person, either alone or together with an associate of the person, is in a position to exercise (whether directly or indirectly) control of the selection or provision of a significant proportion of the programs broadcast by the licensee.

Section 6 of the Broadcasting Services Act 1992 provides that the word:

program, in relation to a broadcasting service, means:
(a)	matter the primary purpose of which is to entertain, to educate or to inform an audience; or
(b)	advertising or sponsorship matter, whether or not of a commercial kind.

Under the original agreements, Prime had full editorial control over the content of the services, provided that Prime complied with Schedule 1 to the original agreements (which broadly defines the service). The original agreements also provided that the services may be varied by agreement and, in the case of the Newcastle agreement, Prime could not unreasonably withhold consent to such a change. 

The ABA took the view that it was unlikely that a court would find that a refusal was unreasonable merely because such refusal was based on considerations relating to Prime’s own interests. On this basis, it could be said that Prime could prevent a variation in the services in some circumstances. 

Accordingly, under the original agreements, the ABA took the view that Prime’s ability to withhold consent to a variation in the services supplied by Prime constituted a power which allowed Prime to exercise control over the selection or provision of programs broadcast by Canberra FM and Radio Newcastle. This view was not accepted by Prime, Radio Newcastle or Canberra FM. Nevertheless, while not conceding any breach of the Act, they cooperated with the ABA to reach a compromise on this issue (see ‘Negotiations between the ABA and Prime’ below). 

What constitutes a ‘significant proportion of the programs broadcast’ for the purposes of clause 2(1)(b)(ii) of Schedule 1 to the Act?

The ABA is of the view that the word ‘significant’ in these provisions does not mean ‘substantial’, although it does have a similar potential range of meanings (the common meaning of the word is ‘important’, ‘notable’, or ‘of consequence’).

In the context of the expression ‘control of a significant proportion of the programs broadcast by the licensee’, the ABA is of the view that the word ‘significant’ is to be interpreted as a proportion which is ‘of consequence’, or ‘important’, but not necessarily ‘large’. It could include a proportion which was less than half, or not large, as long as such a proportion was important or of consequence.

The ABA is also of the view that:

•	the proportion of broadcasts that could be regarded as a ‘significant proportion’ will vary from case to case and thereby depend on the surrounding circumstances; and
•	the phrase ‘significant proportion’ does not involve purely quantitative matters, but involves the making of a value judgment, based upon the facts of the particular case.

Under the provisions of the original agreements, Prime supplied Canberra FM and Radio Newcastle with their entire news service. Exclusivity provisions in the original agreements prevented Canberra FM or Radio Newcastle from obtaining news from a source other than Prime while the original agreements were in force. The ABA was, and is still of the view that the object of encouraging ‘diversity in control of the more influential broadcasting services’ in paragraph 3(c) of the Act is aimed at ensuring that there is a diversity of viewpoints among the more influential broadcasting services.

The ABA is of the view that the selection and provision of news items or issues, and the way news is reported, is one of the most important ways viewpoints are represented on radio. In the ABA’s view, other major programming formats on commercial radio which form the bulk of programming (e.g. music, entertainment) are less important, of less consequence or less significant in terms of the policy objectives of the ownership and control limits. In these circumstances, the provision of all the news programs affects the ABA’s view of the significance of the proportion of the news programs broadcast by the licensee in relation to the total of all broadcasts.

Again, this view was not accepted by Prime, Radio Newcastle or Canberra FM. Nevertheless, while not conceding any breach of the Act, they cooperated with the ABA to reach a compromise on this issue as well (see ‘Negotiations Between the ABA and Prime’ below). 

The ‘defence’ in subclause 2(2) of Schedule 1 of the Act – Is it applicable?

Subclause 2(2) provides that paragraph 2(1)(b), discussed above, does not apply in certain circumstances:

2(2)	Paragraph (1)(b) does not apply to the provision of programs by a person to a licensee under an agreement for the supply of programs to a licensee if the conditions of the agreement relate only to the programs so supplied or their promotion.

It appears that paragraphs 2(1)(b)(ii) and (iii) are intended to apply in circumstances where subclause 2(2) does not apply. As the agreements are obviously for the supply of programs the relevant question to be ascertained is whether ‘the conditions of the agreements in question relate only to the programs so supplied or their promotion’. 

The words ‘relate … to’ have traditionally been regarded as having the widest import and as requiring nothing more than a connection or association between the matters referred to. The addition of the word ‘only’ requires that the association or connection be exclusive. The result is that the conditions of the agreement must be connected or associated with the programs supplied and must not (as a matter of substance and commercial reality) be connected or associated with something other than the programs supplied. 

The ABA formed the view that the agreements do not fall within the exemption. The conditions do not relate only to the programs so supplied or their promotion, they relate to the use of facilities and equipment as well. Some of these provisions did relate to the programs so supplied or their promotion: these parts of the agreements dealt with the method of broadcasting of the news services and with things physically or technically ancillary to the provision or broadcasting of the news services.

Initially there were other factors that indicated that the contract was one for which the protection offered by subclause 2(2) may not be available. The first was the exclusive nature of the agreement and that the agreement gave Prime full editorial control over the content of the services to be provided.

The parties originally submitted that there were good commercial reasons for giving Prime exclusivity in the provision of news services to the radio licensees. The ABA took the view, however, that the exclusivity clause’s inclusion in the original agreements was to ensure that the radio licensees did not receive services from other news providers. Indeed, this was the reason given by the parties (on the basis that Prime assumed responsibility for the journalists previously employed by Canberra FM and Radio Newcastle radio stations). Nevertheless, while not conceding any breach of the Act, appropriate amendments were made to the exclusivity and editorial control clauses of the original agreements that addressed the ABA’s original concerns.

Further, conditions in the original agreements relate to the consideration for the provision of the news services by Prime. One clause provided that the consideration for the agreement was advertising for Prime (referred to as ‘promotions’ in the original agreements) on the Canberra FM and Radio Newcastle radio stations. This clause of the original agreement related to more than the supply of programs or the promotion of those programs. Indeed, Canberra FM and Radio Newcastle were required to provide ‘promotions’, or advertising, for Prime when they were ‘requested’ by Prime. These advertisements or ‘promotions’ were not limited to news programs supplied under the agreements, but might promote Prime generally. 

Another clause provided that, whenever news was broadcast by Canberra FM or Radio Newcastle, an ‘acknowledgment’ of Prime as the supplier of that news programming must also be broadcast. In the Newcastle agreement, however, the ‘acknowledgment’ amounts to the promotion of Prime’s television news service: for example ‘Join me tonight at 6.00 p.m. for Prime Local News’. The ABA took the view that this was not a promotion for the programs supplied by Prime to Canberra FM or Radio Newcastle.

As the promotions relate to other than the promotion of the news programs provided by Prime to the Canberra FM and Radio Newcastle radio stations, the ABA was of the view that control by Prime of the advertising or ‘promotions’ was a matter outside the protection offered by subclause 2(2). 

NEGOTIATIONS BETWEEN THE ABA, PRIME AND THE OTHER PARTIES

Having come to the preliminary conclusion that Prime was in a position to exercise control of Canberra FM and Radio Newcastle, the ABA, notified Prime, Austereo Pty Limited and Australian Radio Network Pty Limited that it proposed to publish a report detailing the breach or breaches of the Act. In accordance with section 180 of the Act, the ABA, on 4 February 1999, distributed copies of the draft investigation report to Prime, Austereo Pty Limited and Australian Radio Network for their comment.

Representatives of Prime and the other parties to the original agreements then contacted the ABA, indicating that they did not agree with the ABA’s preliminary conclusions (that Prime was in a position to exercise control of Canberra FM and Radio Newcastle). These representatives advised the ABA that (in any event) the terms in the original agreements that had given rise to the ABA’s concerns were readily capable of amendment. As a result, the ABA and Prime entered into discussions as to how Prime and the other parties could amend the original agreements to remove those terms of concern to the ABA.

As previously discussed, three particular aspects of the original agreements indicated to the ABA that Prime were in a position to exercise control of the selection or provision of programs. They were:

•	Prime having complete editorial control over the style and content of the news services provided; 

•	Prime’s ability to withhold its consent to a variation in ‘the Services’ supplied by Prime; and

•	Canberra FM and Radio Newcastle’s inability, during the term of the agreements, to obtain news services from another source.

At a meeting held on 31 March 1999 between the ABA, Prime and representatives from Austereo Pty Limited and Australian Radio Network Pty Limited, the ABA discussed the above aspects of the original agreements.

While not agreeing with the ABA’s preliminary findings (particularly in relation to Prime having complete editorial control over the content and style of the entire news services provided), Prime and the other parties to the agreements cooperated with the ABA to reach a compromise on this issue and agreed to amend the relevant clauses of the original agreements. Those amendments specifically addressed the three issues of primary concern to the ABA - editorial control, the ability to withhold consent to a variation, and the inability (during the term of the agreements) to obtain news services from another source.

The ABA took the view that the amended agreements provided a more balanced approach to the process of selection as well as the provision of programming broadcast by Canberra FM and Radio Newcastle.

CONCLUSION

For the reasons outlined above, the ABA has decided to cease its investigation of possible breaches by Prime of provisions of Part 5 of the Broadcasting Services Act (in particular, whether sections 60(a) and 61(1)(a) of the Act have been breached as a result of agreements between Prime and Radio Newcastle Pty Limited and Canberra FM Radio Pty Limited).

The ABA is satisfied that Prime and the other parties, by agreeing to amend the agreements as outlined above, have remedied any breaches of the Act that the ABA may have originally believed placed Prime in a position to exercise control of Canberra FM Radio Pty Limited and Newcastle Radio Pty Limited.

The ABA considers that the provision of news services by commercial radio broadcasters is a matter of fundamental importance to maintaining diversity of views as intended by the ownership and control rules set out in the Act.

Findings

Newcastle licence area and the Northern NSW licence area

Marjorie Brislee, George Brown, Ronald Cotton, Peter Evans, Daryl Guihot, Patrick Jackman, Paul Ramsay, Michael Siddle and Bernard Stanton are directors of companies in a position to exercise control of Prime.

Prime is in a position to exercise control of Prime Television (Northern) Pty Limited.

Prime Television (Northern) Pty Limited is in a position to exercise control of the commercial television broadcasting licence with call sign NEN in the Northern NSW licence area.

Prime is in a position to exercise control of commercial television broadcasting licence with call sign NEN in the Northern NSW licence area.

Radio Newcastle Pty Limited is in a position to exercise control of commercial radio broadcasting licences with call signs 2KKO and 2XXX in the Newcastle licence area.

Prime is not in a position to exercise control of commercial radio broadcasting licences with call signs 2KKO and 2XXX in the Newcastle licence area because it is not in a position to exercise control of a significant proportion of the programs broadcast by Radio Newcastle Pty Limited.

The Newcastle licence area is entirely within the Northern NSW licence area. The Newcastle licence area and the Northern NSW licence area are therefore treated as if the two licence areas were one.

Prime is not in a position to exercise control of a commercial television broadcasting licence and a commercial radio broadcasting licence that have the same licence area.

Prime is not in breach of paragraph 60(a) of the Broadcasting Services Act in the Newcastle/Northern NSW licence area.

Marjorie Brislee, George Brown, Ronald Cotton, Peter Evans, Daryl Guihot, Patrick Jackman, Paul Ramsay, Michael Siddle and Bernard Stanton are not in breach of paragraph 61(1)(a) of the Broadcasting Services Act in the Newcastle/Northern NSW licence area. 

Canberra licence area and the Southern NSW licence area

Marjorie Brislee, George Brown, Ronald Cotton, Peter Evans, Daryl Guihot, Patrick Jackman, Paul Ramsay, Michael Siddle and Bernard Stanton are directors of companies in a position to exercise control of Prime.

Prime is in a position to exercise control of Prime Television (Southern) Pty Limited.

Prime Television (Southern) Pty Limited is in a position to exercise control of the commercial television broadcasting licence with call sign CBN in the Southern NSW licence area.

Prime is in a position to exercise control of commercial television broadcasting licence with call sign CBN in the Southern NSW licence area.

Canberra FM Radio Pty Limited is in a position to exercise control of commercial radio broadcasting licences with call signs 1CBR and 2ROC in the Canberra licence area.

Prime is not in a position to exercise control of commercial radio broadcasting licences with call signs 1CBR and 2ROC in the Canberra licence area because it is not in a position to exercise control of a significant proportion of the programs broadcast by Canberra FM Radio Pty Limited.

The Canberra licence area is entirely within the Southern NSW licence area. The Canberra licence area and the Southern NSW licence area are therefore treated as if the two licence areas were one.

Prime is not in a position to exercise control of a commercial television broadcasting licence and a commercial radio broadcasting licence that have the same licence area.

Prime is not in breach of paragraph 60(a) of the Broadcasting Services Act in the Canberra/Southern NSW licence area.

Marjorie Brislee, George Brown, Ronald Cotton, Peter Evans, Daryl Guihot, Patrick Jackman, Paul Ramsay, Michael Siddle and Bernard Stanton are not in breach of paragraph 61(1)(a) of the Broadcasting Services Act in the Canberra/Southern NSW licence area.