Reports that Matter

An Inquiry into the Culture, Practices and Ethics of the Press · 2012

Chapter 1: Criteria For A Regulatory Solution

Section 60 of 72

Chapter 1: Criteria For A Regulatory Solution

1.1 In order to make recommendations for a new more effective regulatory regime, as required by the Terms of Reference of the Inquiry, it is essential first to consider what a regulatory regime should be seeking to achieve. There are three aspects to this question: first, what a regulatory regime should do; second, how it should be structured to achieve that; and third, the detailed rules that are put in place to achieve the objectives. The 'what' is about outcomes and the 'how' is about processes, structures and accountabilities. The detailed rules should be dealt with in the substance of any code or regulations. These three aspects of a regulatory regime need to be considered separately as they are not necessarily dependent on each other and it may be possible to achieve the desired objectives by different combinations of solutions.

1.2 This chapter is specifically about the 'what'. In May 2012 I published on the Inquiry website a set of draft criteria for a regulatory solution that aimed to set out what any regulatory solution should seek to achieve. This was not concerned with how those outcomes should be achieved, or the structures through which they should be achieved, but simply what the outcomes should be. Those draft criteria were:

"1. Effectiveness

1.1 Any solution must be perceived as effective and credible both by the press as an industry and by the public:

(a) It must strike a balance, capable of being accepted as reasonable, legitimate and in the public interest by all. (b) It must recognise the importance for the public interest of a free press in a democracy, freedom of expression and investigative journalism, the rule of law, personal privacy and other private rights, and a press which acts responsibly and in the public interest. (c) It must promote a clear understanding of 'the public interest' which would be accepted as reasonable by press, industry and public alike. (d) It must be durable and sufficiently flexible to work for future markets and technology, and be capable of universal application.

  1. Fairness and objectivity of Standards

2.1 There must be a statement of ethical standards which is recognised as reasonable by the industry and credible by the public. This statement must identify enforceable minimum standards as well as articulating good practice that should be aimed for.

2.2 All standards for good practice in journalism should be driven by the public interest and must be benchmarked in a clear objective way to the public interest.

2.3 The setting of standards must be independent of government and parliament, and sufficiently independent of media interests, in order to command public respect.

  1. Independence and transparency of enforcement and compliance

3.1 Enforcement of ethical standards, by whatever mechanism, must be operationally K independent of government and parliament, and sufficiently independent of media interests, in order to command public respect.

1584

3.2 In particular all relevant appointments processes must be sufficiently independent of government, Parliament and media interests to command public support. 3.3 Compliance must be the responsibility of editors and transparent and demonstrable to the public. 4. Powers and remedies 4.1 The system must provide credible remedies, both in respect of aggrieved individuals and in respect of issues affecting wider groups in society. 4.2 The regulatory regime must have effective investigatory and advisory powers. 4.3 The system should also actively support and promote compliance by the industry, both directly (for example by providing confidential pre-publication advice) and indirectly (for example by kitemarking titles' own internal systems). 4.4 The system should be a good fit with other relevant regulatory and law enforcement functions. 5. Cost 5.1 The solution must be sufficiently reliably financed to allow for reasonable operational independence and appropriate scope, but without placing a disproportionate burden on either the industry, complainants or the taxpayer."

1.3 I sought comments on these draft criteria. Most of those who have submitted evidence on regulation have accepted the criteria without comment. Some, including Ofcom,1 made substantive comments on the criteria, suggesting that further consideration was needed on a number of areas. Where appropriate, I address these comments later in this Chapter. I am, however, satisfied that the broad categories are correct and they continue to form the basis of what I would hope could be achieved through the recommendations set out later in this part of the Report.

  1. Effectiveness

2.1 The ultimate test of any new regime is that it must work in practice, in terms of ensuring that the press comply with agreed standards. But that simple statement itself begs three questions. The first is what is meant by 'ensuring'; the second, what is meant by 'the press';

and the third is what is meant by 'agreed standards'. I address all of these points in this section of the report. The Inquiry has heard over and over again that aspects of the current PCC based regime may be good in principle but that they simply do not work in practice. The essential flaws of the current regime have been examined elsewhere.2 At one fundamental level, the current 'self-regulatory' regime has failed to achieve continued universal coverage of the main national newspaper titles with the withdrawal of Northern and Shell. I do not consider that it is possible for a regime to be considered effective if a major national newspaper group can choose to sit outside it without consequences. This should not be a controversial view, as it essentially echoes Lord Hunt's opinion that:3

"the credibility of the new system could be fatally undermined if any genuinely big fish seek to escape the net."

1585

Lord Hunt went on to confirm that Northern and Shell would qualify as a 'big fish' in this context.4 The very fact that the industry has sought to put forward what it believes to be a new and fundamentally different approach to self-regulation constitutes a clear recognition that the existing regime is no longer effective.

2.2 Other aspects of external regulation, including the criminal and the civil law, have significant structural weaknesses, as is more fully discussed elsewhere in the Report.5 An effective regulatory regime will need to take account of those shortcomings and find ways of rectifying them or otherwise dealing with them as far as possible.

2.3 There are a number of different aspects of effectiveness. Views on what constitutes effectiveness vary, but the broad headings included within the draft criteria have not been contested. The draft criteria indicated that, in order to be effective, a regulatory regime for the press must be accepted as credible both by the press and the public and this proposition has not been seriously disputed by anyone. This does not mean that either the industry or interest groups should have a veto over the solution, but it is important that the regime should be grounded in an understanding of the industry, the law, the rights and freedoms of both individuals and the press, and the public interest in its widest sense. A regime that fails to take any of those factors fully into account will fail to meet the expectations and needs of the public.

2.4 The draft criteria set out a broad perspective on the public interest. As with the concept of effectiveness, there are many different aspects to the public interest in this context. The public interest in the freedom of the press and freedom of expression, including the public interest in a diverse and vibrant press, are the most obvious. Any regulatory regime that compromised the freedom of the press to hold authority to account, or to investigate wrongdoing by the powerful, would not qualify as effective according to any reasonable person's definition of that term. The public interest in the rule of law is also important. The law applies to journalists and the press as it applies to everybody else. This is not to say that journalists cannot sometimes break the law in the pursuit of public interest journalism, but that does not override the general public interest in the rule of law: on the contrary, it recognises that a clear countervailing public interest must be identified before the rule of law may yield. Finally, there is a public interest in the protection of the private rights of individuals, including the right to privacy, which falls to be weighed in the balance against the public interest in free speech. Providing this requisite balance is one of the most difficult challenges for any regulatory regime.

2.5 The Inquiry has heard evidence that different editors weigh up these countervailing public interests in different ways. That may not be unreasonable looking at individual cases alone, but from an enforcement perspective it is only fair for both the public and the press themselves that each relevant enforcement authority should be clear about the basis on which they will reach such judgments. It also seems reasonable that, if there is to be a body adjudicating on press or media standards, such a body should set out for the public and the industry some guidance on what might be meant by the public interest in this context. The PCC Code, as most recently revised, sets out the following non-exhaustive definition of the public interest:6 The protection of sources and other legal privileges of the press 68 Chapter 3: Competing public interests 69 7

1586

"The public interest There may be exceptions to the clauses marked * where they can be demonstrated to be in the public interest. 1. The public interest includes, but is not confined to: (i)   Detecting or exposing crime or serious impropriety. (ii)   Protecting public health and safety. (iii)  Preventing the public from being misled by an action or statement of an individual or organisation. 2. There is a public interest in freedom of expression itself. 3. Whenever the public interest is invoked, the PCC will require editors to demonstrate fully that they reasonably believed that publication, or journalistic activity undertaken with a view to publication, would be in the public interest and how, and with whom, that was established at the time. 4. The PCC will consider the extent to which material is already in the public domain, or will become so. 5. In cases involving children under 16, editors must demonstrate an exceptional public interest to over-ride the normally paramount interest of the child."

2.6 There are a number of references to the public interest in the Ofcom Broadcasting Code.8

There is no definition of the public interest as such, but the code does provide this:

"Examples of public interest would include revealing or detecting crime, protecting public health or safety, exposing misleading claims made by individuals or organisations or disclosing incompetence that affects the public."

2.7 The BBC includes a definition of the public interest in its editorial guidelines:9

"The Public Interest Private behaviour, information, correspondence and conversation should not be brought into the public domain unless there is a public interest that outweighs the expectation of privacy. There is no single definition of public interest. It includes but is not confined to: • exposing or detecting crime • exposing significantly anti-social behaviour • exposing corruption or injustice • disclosing significant incompetence or negligence • protecting people's health and safety • preventing people from being misled by some statement or action of an individual or organisation • disclosing information that assists people to better comprehend or make decisions on matters of public importance. There is also a public interest in freedom of expression itself.

1587

When considering what is in the public interest we also need to take account of information already in the public domain or about to become available to the public. When using the public interest to justify an intrusion, consideration should be given to proportionality; the greater the intrusion, the greater the public interest required to justify it."

2.8 Although these definitions, or examples, have a lot in common there are naturally some differences. Views have been advanced on each of them, but it is not for this Inquiry to draft a comprehensive working definition: this would be both an overly ambitious and inappropriate exercise. However, given that this is the public interest, and that it must explicitly relate to interests outside those of the media enterprise concerned, it must be reasonable to conclude that whatever interpretation of the public interest is to be used in a new regulatory regime, it should be recognised, understood and accepted by both the media and the public.

2.9 Finally on the question of effectiveness, the criteria spoke of a durable solution, and one sufficiently flexible to work in the future. It is, of course, the case that, as many witnesses have told the Inquiry, the media market is changing. Rupert Murdoch predicted that the printed press might coexist with online news sources for possibly 20 years, but he also commented that others estimated that the print versions may not survive for more than five or ten years.10 Without needing to take a view on how long the printed press will survive, it is unquestionably the case that a large proportion of people now receive at least some of their news and current affairs content, and their entertainment, from the internet. Ofcom estimated that 41% of people today use the internet for news and current affairs coverage, and that the internet accounts for 21% of news and current affairs consumption; this compares with 53% of adults using a newspaper, but newspapers account for only 11% of news and current affairs consumption.11 Furthermore, the trend towards online consumption is rising. This makes it abundantly clear that, for a regulatory regime to be effective, it must be capable of delivering any perceived benefits to online publication as much as to print.

2.10 The Inquiry has also received evidence that a single regulatory regime across all media would be desirable.12 The Inquiry has heard some evidence on the nature and effectiveness of the existing statutory regulatory framework for broadcast media; but this has been largely for the purposes of comparison with the regime currently in place for print and to learn any relevant lessons. I have not sought to take evidence on the adequacy of the regime for the broadcast sector and, accordingly, it is not my intention to examine the fitness of that regulatory regime, or to make any recommendations as to how the broadcast sector should be regulated.

2.11 Ofcom correctly commented that the published draft criteria did not mention membership.13 The criteria aimed to set out what a new regulatory regime should achieve, not the means by which it should be achieved. The draft criteria provide that a new solution should be 'capable of universal application'. My starting point, as set out above, is that any regime which did not at the very least cover all major national newspapers and their online presence, would not be effective. The Inquiry has received submissions suggesting that standards regulation might be limited to those of a particular size or with particular economic power.14 Ofcom say:15

1588

"Committed participation by the whole of industry would be fundamental to a successful new regulatory regime"

It has been made abundantly clear in the proposals presented during Module Four of the

Inquiry that the vast majority of interested parties agreed with that. All the proposals that have come to the table have sought to compel or entice the whole of industry into the tent. Any disagreement has been about whether compelling or enticing is the best way to achieve the objective of committed participation, coupled with what have been described as principled concerns about the use of legislation to compel any part of the press to do anything. I have no doubt that committed participation by the whole of industry is fundamental to an effective new regime.

2.12 My conclusion is that Criteria 1 as originally drafted continues to reflect the essential elements of a new effective regime.

  1. Fairness and objectivity of standards

3.1 The draft Criteria set out three aspects of fairness and objectivity of standards which I considered were fitting attributes of a new regulatory regime. The first was that there should be a statement of ethical standards which is recognised as reasonable by the industry and as credible by the public. This statement must identify enforceable minimum standards as well as articulating the good practice that should be targeted.

3.2 The Inquiry has not undertaken a full systematic examination of the existing Editors' Code but it has identified some deficiencies that have been identified in evidence presented to the

Inquiry.16 Many witnesses have maintained that it is a good Code; others have argued that it has weaknesses. In this context I simply note that the current Editors' Code appears to be a mix of broad statements of principle (for example "the press, whilst free to be partisan, must distinguish clearly between comment, conjecture and fact"); specific requirements (for example "even where the law does not prohibit it, journalists must not use for their own profit financial information they receive in advance of its general publication to others, not should they pass such information to others"); and requirements that can sometimes be disregarded (e.g. "the press must not identify victims of sexual assault or publish material likely to contribute to such identification unless there is adequate justification and they are legally free to do so"). In addition, there are examples of each of these types of statement which can be disapplied where doing so can be demonstrated to be in the public interest.

Professor Megone commented that a code of practice needs to be presented in the context of the specific critical contribution that a free press can make to the public interest. Overall, there is room for improvement of the current Code.17 pp66-67, line 25-6, Professor Baroness Onora O'Neil, http://www.levesoninquiry.org.uk/wp-content/ uploads/2012/07/Transcript-of-Afternoon-Hearing-16-July-2012.pdf

3.3 Second under this broad heading, the draft Criteria specified:

1589

"All standards for good practice in journalism should be driven by the public interest and must be benchmarked in a clear objective way to the public interest."

3.4 Associated News Limited (ANL) have raised a concern about this, stating that the press should be free to publish material of their choice without always having to justify it on grounds of public interest. I accept entirely that the vast majority of material published in most newspapers and magazines will not infringe other peoples' rights or the law and has no need to be justified on public interest, or any other, grounds. It was not the intention in these draft criteria to suggest that all material in a newspaper should be able to pass a public interest test. However, ANL also raised the issue of "information which might be thought to constitute a low-level interference with personal privacy" and, in the same context, observed that standards of this sort "would constrain newspapers from providing the broad mix of newspaper that…….ensures the very survival of the industry."18 Paras 25 and 42 et seq, http://www.levesoninquiry.org.uk/wp-content/uploads/2011/11/Application-of-Rule-13-of- the-Inquiry-Rules-2006.pdf Here, the authorities do recognise that a minimum threshold of interference must be attained before the right itself may be said to be infringed. Exactly how this should be formulated would be for any future code-maker to consider. Subject to that, any infringement of the substantive right must be justified.

3.5 Finally under this heading, the criteria specified that the setting of standards must be independent of Government and Parliament, and sufficiently independent of media interests in order to command public respect. In some ways this has sparked the most debate. Whilst there is universal agreement on the principle of the independent setting, there are also many proposals that would see Parliament laying down some basic criteria which such standards must attain. This is the case with, for example, the Irish Defamation Act, which has been cited by many as a successful example of how Government can incentivise independent regulation. There is also disagreement about what constitutes 'sufficient' independence of media interests. Lord Black on behalf of the industry proposed a system in which serving editors still had a majority on the committee which set the standards,19 whereas Ofcom, by contrast, considered it to be "unimaginable" to have anyone currently active within the industry as part of the standards setting body.20

3.6 It would therefore appear that, whilst everyone is willing to support the theory of independence, it is difficult to find any particular consensus on what independence looks like in practice.

3.7 My conclusion is that Criteria 2 as drafted remains the right articulation of fairness and objectivity of standards, but with an explicit recognition that not all material published in newspapers would or should need to satisfy a public interest test as opposed to providing material which merely entertains or interests the public. The standards must, however, recognise that any infringement of individual rights should only be acceptable where there is a sufficient public interest rationale.

1590
  1. Independence and transparency of enforcement and compliance

4.1 The draft Criteria provided that enforcement of ethical standards must be operationally independent of Government and Parliament and sufficiently independent of media interests.

This, by contrast with the setting of standards, has proved relatively uncontroversial. All the proposals put forward to the Inquiry included an independent approach to complaint handling, and most attempted to describe a broader independent standards enforcement role. There were, inevitably, different views on what constitutes independence, but at a level of principle this seems to be genuinely uncontentious.

4.2 The draft Criteria also provided that all relevant appointments processes must be sufficiently independent of Government, Parliament and media interests. This raises the basic conundrum of who appoints the appointers. None of those who have provided evidence to the Inquiry have suggested that the appointments processes should not be sufficiently independent of the interests listed, but there are differences around what constitutes 'sufficiently', and at what level the independence needs to be demonstrated. By way of example, in the proposal from Tim Suter, the Ofcom Content Board would need to approve the independence of the appointment process for any self-regulator, whilst the Content Board21 itself is appointed by the Ofcom Board, which is appointed by Government.22 Lord Black's proposal, on the other hand, would rely on an appointment committee composed half and half of industry appointees and lay members to appoint the Chair of a new regulator. I do not accept that an appointment procedure that allows an effective veto to the industry could be considered to be sufficiently independent. Similarly, it must be the case that in relation both to specific enforcement and overarching standards compliance the operation and decisions of the regulator are fully independent from those being regulated.

4.3 Finally under this heading, the draft Criteria specified that compliance must be the responsibility of editors, and must be transparent and demonstrable to the public. One of the strong themes emerging from the proposals submitted to the Inquiry was the emphasis on the need for companies to take more responsibility internally for compliance and for dealing with complaints about standards. This is addressed in Lord Black's proposal through the presumption that all complaints should be dealt with in the first instance by the company concerned, the requirement for a named senior executive to have responsibility for compliance and the requirement for each regulated entity to provide an annual compliance report. There may be some question as to whether it is specifically the editor, as opposed for instance to the managing editor, who should be responsible for compliance; but the Inquiry has seen nothing to suggest that the principle underlying this criteria has anything other than full support.

4.4 My conclusion is that Criteria 3 as drafted remains an appropriate benchmark for independence.

1591
  1. Powers and remedies

5.1 The draft Criteria indicated that an effective new regime must provide credible remedies, both in respect of individuals and of issues affecting wider groups in society. The concept of 'credible remedies' has been the subject of some debate. For many, the publication of an agreed correction or apology constitutes a credible remedy; for others it does not. The draft Criteria made no mention of sanctions, as opposed to remedies, but there have been representations suggesting that a new regulatory regime should include sanctions, including power to fine, as well as remedies in respect of particularly serious or systemic breaches.23 I freely accept the argument that sanctions are different in kind to remedies, in that the former aim to punish and deter breaches of standards, whilst the latter aim to provide solace for the individual affected. I further accept that an effective regulatory regime must have some form of sanction, at least for systemic or egregious breaches of standards.

5.2 There is broad agreement that there must be a system of credible remedies for individuals who have been adversely affected by a breach of standards. However, there are widely differing views when it comes to the rights of third parties or groups of people to make complaints or have access to remedies. In relation to third parties, there is a clear, and reasonable, concern about the risk of such persons or groups making a complaint where the individual directly concerned either is not troubled by the article or, more realistically, would prefer to let the matter drop. Some have argued that the subject of an article should have a veto on the consideration of a complaint. Plainly, a number of issues arise here. If the system is based solely on remedies then there is little point in taking a complaint from anyone for whom the range of potential remedies would not be meaningful. Ofcom has argued that, if there has been a breach of regulatory standards, then the regulator should have the discretion to investigate regardless of whether the subject of the relevant article wishes to take the matter further. In this context the issue is one of industry standards, not abuse of personal rights; but this is pertinent only to the extent that the regulator can issue some kind of adjudication, guidance or sanction that will inform subsequent behaviour, as well as seeking to provide redress to an individual who has suffered harm.

5.3 The British and Irish Ombudsman Association has pointed out that for practical reasons there needs to be some limitation on who can bring a complaint. This has been echoed by others, who fear that in allowing third party complaints, and in particular group complaints, the standards regime could be hijacked by groups wanting to fight political battles on the pretext of complaining about standards. In particular, ANL has argued:24

"This would potentially subvert the purpose of the regulatory system, which is to protect the rights of those affected by the press and promote high standards. It is not to provide a means by which special interest groups can seek to impose their views on society at large by controlling what is written in the press about them and the interests they represent."

1592

5.4 I am confident that, at some level, it must be possible within any effective new system for breaches of the relevant code to be drawn to the attention of the enforcement body by those affected by the breach, whether in the form of a direct personal reference or more indirectly.

There is clearly room for debate as to precisely how this may be achieved and what sort of remedies or sanctions might be appropriate should a breach of standards be found. I do not believe that it is right to characterise the desire of groups to see agreed standards upheld as an attempt to "impose their views on society at large by controlling what is written in the press about them".25 If a title has agreed to conform to certain standards then it is a reasonable expectation that they should do so without any group who maintains that those standards are not being upheld being accused of trying to interfere with freedom of expression.

5.5 The draft Criteria indicated that a new regime must have effective investigatory and advisory powers. Inevitably, there will be disagreement about what constitutes 'effective' in this context, but overall this has proved particularly uncontentious in principle, with most proposals including investigatory powers of some sort.

5.6 The draft Criteria also proposed that any new system should actively support and promote compliance with standards. Again, at a level of generality this has not proved to be a contentious issue, although quite who would be responsible for taking a proactive approach to promoting compliance varies from model to model. In this context, the draft Criteria suggested a few examples of ways in which active support and promotion of standards might happen. One of these was kitemarking; the provision of a kitemark is widely seen as an important part of any voluntary self-regulatory scheme. Some have suggested that the commercial value of a kitemark would be limited, but others believe that the public would want to buy a product that advertised its commitment to standards.

5.7 The draft Criteria also mentioned the example, under this rubric, of providing confidential pre-publication advice to editors. This has proved somewhat controversial, but it was not the intention of the Inquiry by including this feature in the draft criteria to advance any specific proposal. In the event, proposals have been submitted to the Inquiry under which some facet of a new regulatory system could offer confidential advice to editors, in advance of publication, on the merits of any public interest arguments that might later be relied on in actions relating to breach of privacy or breach of standards. Such advice would not be binding in any way, but the fact that advice had been sought (and either followed or ignored) could be taken into account in any subsequent enforcement action.26

5.8 Concerns have been advanced about such proposals on the grounds that any intervention prepublication is a fundamental breach of freedom of expression.27 For example, ANL contend that "for a regulator to involve itself in pre-publication decisions is to trespass on the editor's role".28 p44, lines 21-21, Rupert Murdoch, http://www.levesoninquiry.org.uk/wp-content/uploads/2012/04/Transcript-of- Morning-Hearing-26-April-2012.pdf There are additional questions to be answered about who the appropriate body would be to provide such advice, the relationship between that body and the enforcement body. Notwithstanding the concerns which have been expressed, for reasons which will be elaborated subsequently it remains my view that the provision of pre-publication advice to editors, on request, would be a useful service for a regulatory body to provide.

1593

5.9 Finally under this heading, the draft Criteria indicated that the new regime would need to be a good fit with other relevant regulatory and law enforcement functions. This, as one might have expected, is completely uncontroversial at the level of principle, but may prove more difficult to implement in practice. There have been a number of concerns raised about the boundary between whatever new regime is proposed in this context and the existing broadcasting regulation. Some suggestions envisaged bringing together all media under a unitary approach to regulation, although no-one has gone as far as suggesting a single regulator for all media. Others have expressed concern about the jurisdictional difficulties of regulating online content, and yet others about the boundary with the statutory requirements on online TV-like services imposed by the Audio Visual Media Services Directive. I share these concerns and consider that it will be important that the coverage of any new regime is clearly articulated and avoids any overlap between media regulators.29

5.10 The Inquiry has heard little about the need for any new standards system to fit within an overall effective regime, including criminal and civil law enforcement, although that is obviously essential, indeed, some witnesses have suggested that effective criminal law enforcement would be a sufficient answer to the problems exposed by the Inquiry. I have set out earlier in the report why this is not, and never will be, a credible solution. I do not see any reason why, where standards and the criminal law overlap, there should not be an expectation that the regulator would continue to perform its core regulatory functions as it would in respect of any other standards.30

5.11 My conclusion is that Criteria 4 as drafted provides a satisfactory set of requirements in relation to powers and remedies, subject to the introduction of a further point that the regime should include appropriate and proportionate sanctions for systemic or egregious breaches of standards.

  1. Cost

6.1 The draft Criteria stipulated that the solution must be sufficiently reliably financed to allow for reasonable operational independence and appropriate scope, without placing a disproportionate burden either on the industry, complainants or the taxpayer. As drafted, it is difficult for anyone to disagree with that proposition and no-one has sought to do so. However, it is very difficult at this point to predict what the cost of any of the various approaches that have been put forward to the Inquiry might be. Lord Black estimates that his proposal would cost in the region of £2.25m31 but many editors, in particular from the regional press and magazines, have expressed concerns about the robustness of this estimate and whether the industry will be able to afford the attendant costs.32 Other proposals have suggested that

1594

Government funding for part of a new regulatory regime might be reasonable, though it is worth noting that this is rejected by Lord Black as a matter of principle.33

6.2 Ofcom has argued that fixed term funding settlements are necessary to provide the level of operational independence that any regulatory body would need.34 Any funding approach which relied on year by year agreement of the regulator's budget would allow too much potential for the funding body to influence the approach to compliance and enforcement taken by the body.

6.3 A common theme running through these proposals is that it should be free for persons aggrieved to bring complaints. Obvious questions have been raised about the risk of frivolous or vexatious complaints but, making due allowance for the fact that mechanisms can be put in place to deal with those issues, essentially this is another area on which the Inquiry has seen consensus.

6.4 My conclusion is that Criteria 5 as drafted is an appropriate measure, albeit recognising that

'reliability' of funding means multi-year settlements to protect the independence of the regulator from undue influence from those funding it.

  1. Accountability

7.1 Ofcom suggested that a further criteria for the accountability of the new regime should be added. Specifically, they contended that there should be an independent review of whatever new regime is put in place after three years. Arguably, this is of particular relevance in the context of the history of press self-regulation which demonstrates that historically it has been difficult to secure any lasting effective change.35 I agree that an independent review of any new regulatory regime would be an important benchmark in testing effectiveness.

1595

Chapter 2 The Self Regulatory Model Proposed by the PCC and PressboF 1. Industry acceptance of the need for reform

1.1 In the early days of the Inquiry I made it clear that I was keen that the press industry should come forward with a credible proposal for the future regulation of standards across the press. I said that it was critical that the press should engage in the debate about how its regulation should move forward,1 that this was a problem for the industry and that the industry had to solve it.2 I also explained that it was important that a solution should be found which worked both for the press and for the public and I looked to the press to come forward with proposals that would fit that brief; however, in the meantime I would continue looking for ways to improve the system.3 It is difficult to find an objective test for what 'works for the public'. The public have three distinct roles here: first as readers of newspapers, second as citizens of a democratic country and third as the people about whom newspapers write. It is important that the interests of the public in all three roles are recognised and protected: the Prime Minister said that the test must be whether a solution works for the Dowlers and the McCanns.4

1.2 It has been common ground that PCC does not offer a credible form of self-regulation and that significant change is needed. The current PCC Chair, Lord Hunt agreed that "tinkering around the edges" would not be sufficient and that this was an opportunity for the press to come forward with "the sort of system Sir David Calcutt was asking for."5 Submissions 36 Lord Black, Chairman of the Press Standards Board of Finance (PressBoF), said he had never believed the PCC to be a regulator,6 and accepted that the PCC had failed:7

"The evidence submitted throughout the Inquiry into Press Standards has made clear that the Press Complaints Commission ultimately failed. While it had some significant achievements to its name, particularly in its early years, it proved incapable of dealing with the major ethical and cultural issues that have arisen in recent times. The scandal of phone hacking – and the PCC's inadequate response to it – underlines that point. As a result, the existing system lost the confidence of Parliament, of the public and of the judiciary, all of whose support is essential if self regulation is to flourish. Crucially, the Commission also lost the support of parts of the newspaper and magazine publishing industry. The industry accepts the need for wholesale change, but within the framework of self regulation."

1596

1.3 In recognition both of the failure of the current system of 'self-regulation' and the need for an industry generated proposal for the future, Lord Hunt developed a set of proposals which have been further developed by Lord Black, on behalf of the industry. A version of that proposal, representing the fruits of over 12 months work by the industry, has been submitted by Lord Black as "working documents in draft".8 There has been a process of consultation with many parts of the industry, resulting in the following statement from the Newspaper Society, the Newspaper Publishers Association (NPA), the Scottish Daily Newspaper Society and the

Professional Publishers Association:

"While a lot of detailed work is still to be done, the proposals have the broad support of the organisations and their members. The proposals are being further developed in the light of comments received as part of the ongoing consultation process. This process will take into account the deliberations and recommendations of the Leveson Inquiry and the Government responses to its findings."

1.4 It is important to recognise that publishers have not yet been asked to sign the contracts that underpin this proposal (so that at the time of publication of this report it remains open to doubt, if not considerable doubt, as to precisely what a final agreement might look like, or even whether such an agreement could be reached and which publishers would be willing to join). This Section of the Report looks at the proposal as it was submitted to the Inquiry.

  1. The proposal: overview

2.1 The proposal is based on a voluntary model described by Lord Black as "independently led self-regulation". The key features are:

(a) the creation of a new self-regulatory body, under an independent Trust Board, with

greater independence from the industry than the PCC currently has and the power to impose fines for particularly serious or systemic failures;

(b) a contractual relationship between the regulated body and each of the publishers to provide for medium term commitment to the system;

(c) a continuation of the complaints handling role of the PCC;

(d) the creation of a separate arm of the regulator with powers to investigate serious or systemic failures; and

(e) the establishment of a new industry funding body to provide financial stability for the regulatory body.

2.2 The proposal is set out in full in Lord Black's submission,9 together with a draft contractual framework,10 draft Articles of Association of the new Regulator11 and draft Regulations12 that the members (or 'regulated entities') would have to comply with. Here I describe the key relevant features of the proposal in order to consider the extent to which it is capable of delivering the objectives set out earlier.13 They will be analysed later in the Report.14

1597
  1. Governance and structures

3.1 Figure K2.1 below provides a pictorial representation of the composition of the various bodies and how they relate to each other. The regulatory body itself is comprised of the Trust Board, which has overall responsibility for the self-regulatory regime, with subcommittees dealing with complaints and compliance and investigations respectively. Sitting outside the self-regulatory body are the Industry Funding Body (IFB), which is responsible for setting and delivering the funding for the regulatory body, and the Code Committee, which is responsible for agreeing the Code with which all regulated entities will have to comply.

The Independent Press Trust

3.2 The Independent Press Trust will be established as a Community Interest Company.15 The draft Articles of Association set out the objects of the Trust:16

"The objects of the Company are to carry on activities which benefit the community and in particular to promote and uphold the highest professional standards of journalism in the United Kingdom, the Channel Islands and the Isle of Man, including by: • Establishing the Regulatory Scheme for regulating Regulated Entities; • Promoting compliance with the Editors' Code of Practice; • Encouraging conciliation between Regulated Entities and complainants; • Investigating and adjudicating on complaints from the public about Regulated Entities; • Publishing its findings; and • In accordance with the Regulatory Scheme, levying fines on Regulated Entities found to be in significant, systemic breach of the Editors' Code of Practice, such fines to be proportionate to the nature and effect of the breach; having regard at all times to the importance in a democratic society of freedom of expression and the public's right to know."

3.3 The principle decision making body of the Trust would be the Trust Board17 with a Complaints Committee which would have primary responsibility for dealing with public complaints and an Investigations and Compliance Panel.18 Operationally the Trust would be run by a Chief Executive Officer (CEO), who would be appointed by the Board and report to them. There would also be a Head of Complaints, supporting the Complaints Committee, and a Head of Standards and Compliance, supporting the Compliance and Investigation Panel, who would each report to the CEO and ultimately to the Board.19,20 p3, http://www.levesoninquiry.org.uk/wp-content/uploads/2012/07/Witness-Statement-of-Dr-Neil-Manson.pdf

1598

Trust Board CEO

Compliance and Complaints Committee Investigation Panel Head of Complaints Head of Investigations and Standards

Figure K2.1: Structure of the Independent Trust

3.4 The Trust will be able to cover companies in the UK, the Channel Islands and the Isle of

Man who are responsible for publishing printed newspaper or magazine titles in the UK, and their related websites, and web only publisher or news aggregators with content viewable in the UK.21 Membership will not necessarily be open to any company meeting those criteria.

The Industry Funding Body would have:22

"ultimate discretion to refuse membership to any publishers wishing to join the scheme, even if such a publisher falls within the definition of a regulated entity."

3.5 In his oral evidence Lord Black explained that this provision was in order to allow membership of the Trust to be refused to what he described as "top shelf publications" whose membership would be "wholly inappropriate" as the only complaints in relation to them were likely to be about taste and decency.23

3.6 As drafted, this provision does not appear to place any restrictions on who could be refused membership by the IFB, or on the reasons for such a refusal. Neither does it allow the Press

Trust itself any say in whether membership should be granted to an applicant. This could be an issue of particular concern if there were significant benefits to membership, or disadvantages attaching to non-membership.

3.7 In terms of content, the remit of the Trust covers editorial content in printed newspapers and magazines (but not books) and on websites and apps.24 The Trust would not cover broadcast content, advertising, taste and decency, impartiality, copyright issues or employment issues. In addition, the Trust will not cover issues in relation to current or possible criminal proceedings. The Trust will not cover non editorial content in newspapers or magazines, or content over which the publisher has not exercised editorial control.25

1599

3.8 The functions of the Trust are to deal with complaints and mediation and to deal with standards and compliance.26 These are dealt with in more detail below.27

The Trust Board

3.9 It is proposed that the Trust Board will guarantee the independence of the new system. It will be responsible for the management of the company's business, specifically supervising the governance of the company, managing its finances and audit, being responsible for the appointment of independent members, and liaising as necessary with the industry's trade associations.28 The Trust Board has no role in the investigation of individual complaints from members of the public. By contrast, the Trust Board has to trigger any investigation into serious or systemic breach. The Trust Board is also responsible for establishing any appeal panel in relation to an investigation and for exercising the power of sanction in response to an investigation where that is appropriate.29

3.10 The 'Regulator', or in practice the Trust Board, will have responsibility for any changes to the Regulations, although any such changes must be approved by the IFB before they are made.30

3.11 The Trust will not be responsible for the Editors' Code of Practice31 but any changes to the Code will have to be ratified by the Trust Board before they come into effect.32

The Trust Board: membership and appointments

3.12 The Trust Board is to comprise seven directors, four of whom (including the Chair) are to be independent, and three of whom are to be press directors.33 Members will serve a three year term, renewable once.34 No Trust Board member has more than one vote. The Chair has a second and casting vote in the case of a tied vote.35

3.13 The appointment of the Chair would be by a four person panel comprised of two industry members, appointed by the IFB, and two lay members, entirely independent of both the industry and the Trust and appointed by the Trust Board.36 The panel would appoint a search consultant to draw up a shortlist for the post of the Chair. The panel would then interview the shortlisted candidates and make the appointment by unanimity.37

1600

3.14 The three other independent members of the Trust Board are to be appointed through an independent appointments process determined by the Trust Board itself.38 A 'shadow'

Trust Board will be set up by Lord Hunt to manage the first appointments process. Once the first permanent appointments have been made the Shadow Board will be disbanded.39 The submission does not say whether the panel to appoint the first Chairman will be appointed by the Shadow Board or the first permanent Board appointees. The three press members of the Trust Board will be appointed by the IFB and are expected to be individuals with senior editorial or publishing experience but not currently serving editors.40

Relationship between the Trust and publishers 'regulated entities'

3.15 Publishers who join the Trust will be required to enter into a contract with the Trust which will require the publisher to:41

(a) comply with the Editors' Code;

(b) comply with the Regulations;

(c) cooperate with any standards investigation;

(d) abide by the Trust's decisions; and

(e) commit to funding for the period of the contract.

3.16 The Regulations set out the remit and functions of the Trust, the procedures for handling and mediation of complaints, the procedures for any investigations, the powers of the

Investigations and Compliance Panel, the powers of the Board to impose sanctions, including fines, and the detail of the annual certification process.42 All this is, therefore, contained within the contractual framework. The Regulations are the responsibility of the Trust, but can only be amended with the approval of the IFB.43 The contract will also set out the obligations of the Trust to deal fairly and proportionately with the contracting parties.44

3.17 The original contract will be for a minimum of five years from the inception of the system45 and then continue on an annual rolling basis.46 Contracts will be between the publisher and the Trust and all contracts will be identical.47 The Trust has the right, as one of its powers of sanction, to terminate the contract with an individual publisher.48 An individual regulated entity has no power to terminate the contract.49 If a majority of contracting parties agree to terminate the contract then all contracts can be terminated on 12 months notice, although not before the expiry of the original five year term.50 The contracts can be varied by a majority of contracting parties, and where that is agreed the other contracting parties will be bound by the change.51 If a contract is terminated, the contracting party is still liable in respect of the time during which they were party to the contract.52 If a title is transferred then the regulated entity has an obligation to use all reasonable endeavours to ensure that the new owner enters into a contract with the Trust.53

1601

3.18 A 'majority' for the purposes of contract variation and termination is yet to be defined.54 Lord Black explained that this would not be a simple majority of members, as that would mean the magazine sector would have the ability to outvote the rest of the members. Instead there would need to be a system of weighted votes that would give no sub sector the power of veto over changes and that would reflect the nature and diversity of the market.55

3.19 The regulated entities have no contractual liability towards each other.56 The Regulator has no liability for failure to exercise its powers and functions,57 and third parties have no rights under the contract,58 so victims of press abuse and those complaining about press behaviour have no enforceable rights under this system. It has been suggested that the Trust could be subject to judicial review and Lord Black said that the industry would be unlikely to contest the justiciability of the body if an action for judicial review were brought.59

  1. Complaints

4.1 There would be a Complaints Committee composed of 13 members: the Chair of the Trust, seven independent members, and five serving editors (two nationals, one Scottish, one regional and one magazine). The independent members would be appointed by the Trust. The industry members are to be nominated by their trade associations.60 As with members of the Trust Board, members of the Complaints Committee would serve for a three year term, renewable once.61 p44, lines 18-23, Jim Gray, http://www.levesoninquiry.org.uk/wp-content/uploads/2012/01/Transcript-of-Afternoon- Hearing-23-January-2012.pdf

4.2 Lord Black describes the proposed complaints handling regime as "building on the widely regarded conciliation techniques of the PCC".62 In a departure from current practice it is proposed that wherever possible a complaint should be handled directly by the editor of the publication concerned, and that only where a complaint cannot be resolved bilaterally should it become a matter for the regulator.63 Lord Black recognises that this would require the strengthening of internal compliance systems within publishers and argues that the new regulatory structure, including the annual compliance reports,64 would support this.65

1602

4.3 The Trust will consider complaints about the failure of a regulated entity to meet the standards set out in the Editors' Code. Complaints will be accepted from people who have been directly affected by the matters complained of. In addition, the Head of Complaints will have discretion to consider third party complaints where there has been a significant breach and there is substantial public interest in allowing the complaint to be brought.66 In his oral evidence Lord Black said that third party complaints on accuracy were currently accepted by the PCC, that that practice would continue under the proposed model and that the draft regulations were not intended to restrict that practice.67

4.4 A complaint must be made within two months of the date of first publication of the article complained of, or within two months of the end of correspondence between the complainant and the publisher, as long as that correspondence was started straight after publication.68

Where the disputed article is published online and remains online at the time of the complaint, the Head of Complaints may consider the complaint if the company declines to remove the article.69

4.5 The proposed process appears to mirror closely the existing PCC approach. Once a complaint has been accepted by the Head of Complaints, the Trust will write to the regulated entity with a copy of the complaint. The company must then respond and a copy of that response is sent to the complainant. Any response from the complainant then goes back to the company. If the complaint has not been resolved by that stage then the primary aim of the Trust is to find a mediated resolution. If mediation is successful then a summary of the outcome would be published on the Trust's website. If mediation is not successful the complaint is passed to the

Complaints Committee.70

4.6 The Complaints Committee must decide whether or not there has been a breach of the Code.

If the Code has not been breached then the Committee will reject the complaint. If the Code has been breached then the Committee must take a view on whether sufficient remedial action has already been taken. If the Committee considers that the breach has been remedied then the Head of Complaints must decide whether it is appropriate for details of the outcome to be published on the Trust's website, but no other action is taken. If the breach has not been remedied then the Committee will make a public ruling upholding the complaint. The company will be obliged to publish the critical ruling with due prominence.71

4.7 Due prominence is to be interpreted in line with the Code.72 The current PCC practice under the existing Code is that the prominence of publication of critical adjudications to be agreed between the PCC and the publisher. Lord Black explained that it would be for the Trust to negotiate any changes to the Code in this respect with the Code Committee.73 The proposal itself does not give the Trust any powers to insist on the location or prominence of the publication of an adjudication.

1603

4.8 The sanctions available to the Trust in relation to complaints may include informal resolution, published apologies, a formal reprimand and critical adjudication.74 The Trust will have no power to award compensation to a complainant.75 Neither will the Complaints Committee have any power to levy a fine. In the case of a particularly significant breach of the Code, the Trust may instigate an investigation which would then bring other sanctions into play.

4.9 The complainant will have the right, within 14 days of the original decision, to appeal the decision to an Independent Assessor. The Independent Assessor will have the power to confirm the decision of the Complaints Committee or refer it back to the Committee with a different decision.76 The publisher has no right of appeal against a decision of the Complaints Committee.77

4.10 The Independent Assessor will be appointed by the Trust Board for a three year term, renewable once. The Assessor must not be a member of the Complaints Committee and must not be connected with the industry.78

  1. Standards and compliance

5.1 As explained above,79 there will be a Head of Standards and Compliance, and it is proposed that there will be a small number of full time staff within the Trust who would service the Investigation and Compliance Panel. The Compliance Panel, however, would not be a permanent body but would be created on an ad hoc basis when required.80 Despite this ad hoc existence, the Panel would have a number of ongoing core functions assigned to it according to Lord Black's submission. These would include:81

(a) "overseeing the process of annual certification by publishers about ethical and governance issues among their titles; (b) monitoring and analysing the responses to that process and taking up issues that arise from them; (c) monitoring trends in individual complaints dealt with by the Complaints Committee to detect issues of concern on individual titles or across individual publishers; and (d) analysing public or Parliamentary reports about press standards within specific areas to see if there is a substantive compliance issue highlighted by the that requires investigation."

5.2 In each of these areas the Panel is expected to make recommendations to the Trust Board if they feel that an investigation should be undertaken.82 If the Board agrees that an investigation is appropriate they will then appoint an Investigation Panel from within a pool of experts, drawing on appropriate experience and expertise.83 There is an obvious scheduling difficulty here, since the recommendation that an investigation be carried out has to be made by the

1604

Panel, but a Panel is not appointed until the Board has authorised an investigation. In practice it is likely that the core functions described above would sit with the Head of Investigation and

Compliance and its small staff. It is not entirely clear whether this executive team would be overseen on an ongoing basis by a public member of the independent Trust Board, appointed by the Trust Board.84 85

Annual certification and compliance

5.3 Each regulated entity will have to submit an annual statement of its editorial practices covering the following information:86

(a) concise factual information about the publisher, including the titles published and their circulation, and the name of the publisher's compliance officer;

(b) copies of relevant manuals, codes or guidance;

(c) brief details on compliance processes, including how the publisher deals with pre-

publication advice, verification of stories, compliance with the Editors' Code, editorial complaints and the training of staff;

(d) details of any incidents during the year involving a material breach of the Editors' Code or the Regulations, and the measures taken in relation to such breaches; and

(e) details of the steps taken in response to any adverse adjudications by the Trust during the year.

The requirement to compile and submit this annual statement is set out specifically in the draft contract framework, together with requirements on the regulated entities to use their best endeavour to ensure full cooperation with, and disclosure to, the Trust.87

5.4 The matter of whether these annual statements would be made public is left open. Lord

Black told the Inquiry that the assumption was that the document would be published, with only commercial or personal confidential information redacted.88 The draft Regulations leave publication of the annual reports to the discretion of the Trust.89

5.5 When the Trust receives the annual reports they would be reviewed by the Head of Standards and Compliance, who would raise any concerns directly with the company involved, before putting a report to the Trust which would identify any issues of concern or that require further investigation.90

1605

Requirement for a named compliance officer

5.6 The draft contractual framework requires the appointment within each regulated entity of a senior individual who will take responsibility for ensuring that the regulated entity, and all its staff and subcontractors, comply with the contract.91 Lord Black describes this role as having responsibility for overseeing monitoring and compliance.92

Investigations

5.7 Both the structural aspects of the standards and investigations arm of the proposed Trust and the proactive compliance requirements placed on regulated entities are set out above.93 The Trust also has its own proactive powers of investigation, over and above specific reactive response to complaints, where there is cause for concern. An investigation by the Trust may be triggered in the following circumstances:94 (a) "where it appears there have been significant systemic breaches of the Editors' Code or in general of ethical behaviour; (b) where serious breaches of the criminal law have been found by the courts; or (c) where annual certification identifies significant and substantive issues of concern in

relation to a single incident, compliance processes or a long term pattern of code breaches."

This list of circumstances in which an investigation may take place is not exhaustive.

Investigation process

5.8 Where it appears to the Investigation and Compliance Panel (the structural difficulties in this are noted above)95 that there is a need for an investigation into a particular publisher for one of the reasons above, they would make a report to the Trust Board, together with a recommendation for an investigation.96 The Trust Board can instigate an investigation in response to a recommendation from the head of Standards and Compliance or on its own initiative.97

5.9 If the Board believes that a full investigation is required, it would decide the remit and terms of reference for an investigation. It would then write to the proposed subject of the investigation, setting out the remit and terms of reference, and explaining why an investigation was thought necessary. The Trust Board will then take any response from the regulated entity into account in reaching its decision on whether to instigate an investigation.98

5.10 Once the Trust Board has decided that an investigation should take place they appoint a member of the Trust Board to have "day to day oversight" of the investigation, which is undertaken by the Head of Standards and Compliance.99 At the same time, the Trust Board must appoint an Investigation Panel. The Panel will comprise three people, two of whom will be public representatives with no connection to the press; and the third an individual with a senior newspaper or digital background, but not a serving editor.100 The Panel are all to be appointed from a pool of people with relevant expertise whose names will be published.101

1606

5.11 The investigation would be carried out by the Head of Standards and Compliance, who must ensure that the investigation is independent, proportionate, fair, objective, open-minded and consistent.102 In pursing the investigation the Head of Standards and Compliance can request documents, answers to questions and access to key personnel. If the subject of the investigation refuses to provide the information required then the fact of the refusal, and the reasons for it, will be notified to the Investigation Panel.103 The Panel, however, have no role in resolving the situation.

5.12 If there is any dispute between the Head of Standards and Compliance and the subject of an investigation about the scope of an investigation, that dispute would be referred to the

Trust Board. If the subject of the investigation continues to refuse to provide documents that the Head of Standards has properly requested then the Trust can take legal action under the contract for specific performance. A decision to bring legal proceedings to compel production of documents has to be approved by the Trust Board. There is no equivalent power to seek specific performance in relation to access to personnel.104

5.13 Once the Head of Standards and Compliance has completed his investigation he would prepare a report detailing the conclusions and any recommendations. That report would be provided to the subject of the investigation, who then would have 28 days to provide written submissions to the Investigation Panel. The Investigation Panel would meet to consider the report from the Head of Standards and Compliance, together with any representations received from the subjects of the investigation.

5.14 At that meeting the Investigation Panel would "in most cases" hear a presentation on the report from the Head of Standards and Compliance. It is not clear in what circumstances a presentation from the Head of Standards and Compliance would not be appropriate. In all cases the Panel will invite representatives from the subject of the investigation to attend the meeting, where they will be entitled to make representations and they could be asked questions by the Panel. The representatives of the subject of the investigation would leave the meeting when the Panel discusses and reaches its decision.105

5.15 At the meeting the Panel can request further work to be done, or it can reach a preliminary conclusion. The conclusions open to the Panel are:106

(a) that there is no evidence of any, or of significant, wrongdoing;

(b) to make non-binding recommendations about best practice, whether directed specifically at the subject of the investigation or at the industry more generally; (c) to reprimand the subject of the investigation; (d) to refer a systemic failure to the Trust Board to consider a fine; (e) to direct the publication, by the subject of the investigation, of a summary of the Panel's finding. The wording and prominence of that publication are to be agreed between the regulated entity and the Trust Board;

1607

(f) to refer the matter to the Trust Board to consider a cost contribution; or (g) to require undertakings from the subject of the investigation in respect of future conduct.

Further consideration of these sanctions is made below.107

5.16 The decision of the Panel must be sent in draft to the subject of the investigation, who has 14 days to make comments on the draft, including correcting mistakes or arguing that anything has been misunderstood or that incorrect conclusions have been reached. Having received those representations the Panel will then reach a final decision.108

5.17 The subject of the investigation can ask for a review of that decision by writing to the Trust Board within 14 days of receiving the decision of the Panel. A review can be sought on the grounds that either the process or the decision were fundamentally flawed.109 The Trust Board will consider the evidence, including any new evidence submitted to it, and decide whether to accept the review request. If the Trust Board accepts the review request then they will establish a Review Panel.110 The composition of a Review Panel is exactly the same as that of an Investigation Panel but must not contain any of the members of the original investigations panel.111

5.18 The Review Panel would consider all the information provided to the Investigation Panel and, at their discretion, any new evidence provided. The draft decision of the Review Panel would be sent to the subject of the investigation who will have 14 days to make representations including, as at the earlier stage, to correct any mistakes, argue that anything has been misunderstood or that the wrong conclusions have been reached.112

5.19 The Review Panel would consider any representations made by the subject of the investigation and then reach a final conclusion, against which there is no further right of appeal.113 There is no role in this process for anyone who has been the victim of any of the behaviour under investigation. Complainants have no power to submit evidence or to provide submissions on the decisions.114 Complainants will generally not be aware of an investigation until a final decision is published.

5.20 The decision of the Investigation Panel, or, if there is a review, the decision of the Review Panel, and the reasons for it, would normally be published.115

1608

Sanctions

5.21 The range of sanctions available to the Trust starts with a 'reprimand' about which no further information is provided. It is not clear how a reprimand would be issued, or whether it would be published, although publication of a summary of the Panel's findings is also an available sanction. The Trust can also require, and monitor, undertakings in respect of future conduct.

5.22 If the Investigation Panel (or the Review Panel) concludes that there has been a systemic failure the Trust Board has the power to levy fine on the relevant regulated entity.116 A

'systemic failure' is one:117 http://corporate.sky.com/media/press_releases/2012/bskyb_announces_board_changes

"where it appears there has been one or more significant or serial or widespread breach or breaches of the Editors' Code or of ethical standards which indicate a systemic or serious failure at one or more Regulated Entity".

5.23 The Trust Board would decide the level of the fine. The criteria to be followed by the Trust

Board in determining the level of fines is to be set out in the Financial Sanctions Guidelines.

The Financial Sanctions Guidelines are to be issued by the IFB.118 A draft of those guidelines has been provided and would allow the Trust Board to impose a fine of up to 1% of the turnover related to the publication found to have committed a systematic failure up to a maximum of £1,000,000.119

5.24 In setting the level of any fine the Trust Board has to take account of the following factors:120

(a) the nature of the regulated entity;

(b) the nature of the systemic failure and its impact;

(c) whether the systemic failure was inadvertent or deliberate or reckless;

(d) any aggravating or mitigating factors (including whether the regulated entity brought

the failure to the attention of the Trust, cooperation with the investigation, whether the management were aware of the failure and what steps, if any, they took to prevent it, and the previous record of the publisher);

(e) any adjustments for deterrence; and

(f) any discounts for early settlement.

5.25 Finally, it is open to the Trust Board to require the regulated entity to make a contribution to costs. The Regulations indicate that there will be separate guidance on how the Trust Board should determine a cost contribution, but this is not covered in the material provided to the

Inquiry.121

  1. Potential for growth

6.1 The proposal allows for the addition of an arbitral arm to deal with matters of libel and/ or privacy issues. Lord Black states that a proposal along these lines has not been included in the submission to the Inquiry because the nature of any such arbitral system would be dependent on changes to the law, including the Defamation Bill currently before Parliament.

1609

The Inquiry is told that the industry is keen to pursue this option and is satisfied that the proposal submitted is sufficiently flexible to allow for such a development.122

  1. Funding

7.1 The proposed system would be fully funded by the industry through the payment of membership fees to the Trust. The funding arrangements for the standards and compliance part of the structure are slightly different, and are explained below, but again the process is fully funded by the industry. Lord Black, on behalf of the industry, has said that it would be inappropriate for the taxpayer to make any contribution towards a system of self-regulation. Similarly, it would be wrong to require complainants to pay any charge in relation to complaints. The fully funded self-regulatory proposal is submitted to the Inquiry as a sign of the industry's commitment to protecting the public and putting right things which have gone wrong.123 124

7.2 The funding for the Trust will be guaranteed as part of the contract. Publishers will commit to making payments for the duration of the contract.125 The core cost (excluding compliance and standards work to be funded separately) is estimated to be around £2.25 million per annum.126 The fees payable by each publisher will be calculated according to an "agreed formula".127 That formula is to be set by the IFB and can be changed at their discretion.128 Lord Black has told the Inquiry that it is:129

"impossible to predict how [the costs of the new system] might be fairly and proportionately divided within the industry."

7.3 At a subsectoral level, the shares of the cost of the PCC are generally 54% for national newspapers, 39% for Scottish and regional newspapers, and 7% for magazines. These proportions have changed for the 2012 financial year, with national newspapers taking a 59.1% share, Scottish and regional newspapers a 34.4% share and magazines a 6.5% share.130 The current distribution of costs for the PCC between national newspapers has never been disclosed on a publisher by publisher basis as they are considered to contain commercially confidential information.131 The Inquiry has been told that the national newspaper publishers are currently looking at the funding formulae to see how they could better reflect the realities of new business models.132 Lord Black expressed the hope that whatever funding formula emerges from this process it might be possible to be more transparent about precisely who was paying what.133

1610

7.4 The IFB will publish the list of publishers who have signed a contract with the regulator and an annual record of the proportions of funding met by different parts of the industry.134

7.5 The IFB has the responsibility both to set the formula and to collect the membership fees from the publishers. There is no mechanism set down for the IFB to agree the overall level of funding with the Trust Board. Lord Black explained that the core costs are expected to be reasonably predictable at £2.25m,135 that these were significant sums for the industry in the current commercial climate,136 but that he had no doubt that sufficient funding would be made available to allow the regulator to fulfil its function.137

7.6 The standards and compliance costs are more difficult to predict and consequently will be subject to a different funding approach.138 The Trust will be established with a ring-fenced enforcement fund of £100,000 to cover the costs of the Investigations and Compliance Panel.

It is anticipated that, over time, the costs of the compliance arm will be met from fines levied on publishers found responsible for wrong doing. Once the enforcement fund reaches

£500,000 the original £100,000 contribution will be repaid to its initial contributors.139

The Code and the Code Committee

8.1 The whole proposal relies on the existence of the Editors' Code as the statement of standards to which publishers commit when entering into a contract with the Trust. The Editors' Code is currently owned by the Code Committee, which is comprised of 13 serving editors, drawn from across the industry.140 Under the proposal, that structure would remain in place, but there would be five additional members: the Chair and the Chief Executive of the Trust, and three further public members appointed by the Trust Board. The Chair of the Code Committee would be elected by the members of the Committee from among the editorial members.141

8.2 Under the draft contractual structure the Code is the responsibility of the IFB, although the relationship between the Code Committee and the IFB is not spelled out in detail. Any changes to the Code would need to be approved by the Trust Board before they could come into effect.142