A new template for media regulation – 1(hindu)

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The news media sector, as an industry, has an unenviable record of squandering opportunities to put in place a regulatory framework that simultaneously guards the freedom of expression and ensures the ethical behaviour of media organisations. Lord Justice Leveson gave an excellent template for the U.K. media. Instead of grabbing it with both hands, the captains of major U.K. publications have opted for a much-lesser mechanism in the form of the Independent Press Standards Organisation (IPSO). The recent recommendations from the Telecom Regulatory Authority of India on cross-media ownership and the consultation initiated by the Law Commission of India under the chairmanship of Justice A.P. Shah is an opportunity before the Indian media to get its act together.

Why should we look at the legal and regulatory framework now? What are the factors that contribute to amending the existing framework? First, the news media industry has undergone profound changes in the last 20 years, and some of the governing rules for the industry are of colonial vintage. Second, the technological disruption and the emergence of convergence platforms are used by some to push for a meta-regulator for all media — print, radio, television and the Internet, without realising the nuances that differentiate the narrative logic of each of these platforms. Third, if each of them is to have its own self-regulation mechanism, what has to be done with news organisations that are not willing to join the self-regulating body? Will a forceful statutory regime be implemented for those who reject the power of a self-regulating body? Over the next few weeks, we will be exploring these questions in detail.

Market and regulation

For a change, I am not going to start with the known rights of the media that flow from Article 19 of the Indian Constitution. It may be prudent to look into the economic factors while framing the regulatory norms, laws and binding codes. This year’s Nobel Prize for economics has gone to Jean Tirole, a French economist who worked on market and regulation.
The Royal Swedish Academy of Sciences has put out a scientific background on Tirole’s work, “Jean Tirole: Market Power and Regulation”, and this column draws substantially from that publication to not only explain certain terms and conceptual framework but also differentiate the news media industry from other industries. The term “agent” in his analysis has a wider meaning to include the individual companies or the sector itself. It is drawn from the formal game-theoretic analysis.
The first element in Tirole’s exploration is about the design of the regulatory institution. He uses two terms to explain the various trajectories any institutional design may take: regulatory capture and motivated agents. Regulatory capture is a model where sector-specific regulation becomes captive to the regulated industry. In simple terms, “regulation may end up benefitting producers rather than consumers.” Tirole used various cases of collusion in hierarchical organisations to come up with a formula to arrive at an optimal response to the threat of regulatory capture. The other term, “motivated agents” goes against the models that assume that all agents are purely selfish. In Tirole’s work, some agents may want to promote social welfare or more generally “do the right thing” and had demonstrated that personal values as well as a desire for social esteem may sometimes change optimal incentives quite strongly. The Academy note puts this more precisely: “it is assumed that the agent is an impure altruist who does not primarily get satisfaction from socially desirable outcomes, but from his own contribution to those outcomes.”

Forms of competitions

For Tirole, the question here is: “how to regulate agents if the principal is uncertain about the agent’s motives. This problem is perhaps greatest when the agent takes decisions not about how hard to work but about some other action, the consequences of which appear only in the longer run. In this case, a selfish agent should ideally be tightly controlled or strongly incentivized, as before, but a pro-socially motivated agent should ideally have a free reign.” In a 2004 work, in collaboration with Eric Maskin, Tirole arrives at an interesting conclusion: “the contract is an institution that specifies: (i) who gets to make what decisions, and (ii) procedures for inducing public decision makers (informed agents) to act in the interest of the broader population (less informed principals). Their central assumption is that the informed agents are concerned not only with material benefits or other private returns to power, but also with making socially beneficial decisions and thereby leaving a valuable ‘legacy’. Since agents differ in the strength of their pro-social motives, power will sometimes be abused.” The news media can either be a regulatory captor or a motivated agent, but most often, it seems to be a combination of both.
In his study of new forms of competitions, which Tirole classifies as network competition and platform competition (sometimes described as two-sided markets), he puts newspapers clearly on the platform competition paradigm. Readers and advertisers are the two sides to which a newspaper tries to reach out and their respective expectations are very different. This twin customer base poses a range of regulatory problems too.
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