Recent Scandal One in a Series of Legal Issues for News Corp

Dave Saldana, Communications Director for Free Press, argues that the recent News Corp. scandal will likely follow along the line of the company's previous US legal troubles, in which it was able to avoid penalties through campaign donations and deft lobbying...
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For some ideological opponents watching the ever-unfolding scandal involving News Corp's now-defunct News of the World, the word schadenfreude does not quite do the story justice, with every new revelation an embarrassment for Rupert Murdoch and his empire.

Many have hypothesized about whether the phone-hacking scandal could signal the end of News Corp., or at least the end of Murdoch's tenure as its unquestioned leader. The investigations are not over, so anything is still possible, but I doubt that we will see News Corp. damaged in any serious, long-term way, or that Murdoch will step down. The reason for this is simple: too much time, effort and money has been spent creating bulwarks against either scenario occurring. If there is one thing Murdoch understands, perhaps better than any single person in any industry, it is that the best way to retain power is to accumulate more.

Particularly in the US, Murdoch has gotten his way with regulators and policymakers simply by wielding his most powerful weapons—his media holdings and his checkbook. Some of the special exceptions and advantages News Corp. has secured for itself in the US include waivers of federal newspaper/broadcast cross-ownership rules, increased limits on its national television holdings, and exceptions to foreign ownership laws.

The cross-ownership rules were put in place to prevent one company from dominating the public debate in a community by controlling two of the most important media venues—the local television station and the local daily newspaper. News Corp. has fought for years to eradicate those rules, even as it has benefited from waivers that allow it to own New York City's Fox station, WNYW, as well as the New York Post, and WWOR-TV, just across the Hudson River in Secaucus, New Jersey. Oddly enough, the waiver that allows News Corp. to run WWOR expired in 2008. Despite public complaints that WWOR fails to serve the northern New Jersey community where it is based, the Federal Communications Commission (FCC) has not acted on renewing or denying the waiver.

News Corp. and the Fox network are able to reach so many Americans because of either an amazing coincidence or very deft lobbying. Prior to the Telecommunications Act of 1996, no network was allowed to own stations that covered more than 25 percent of the US population. The act upped that number to 35 percent. When in 2003 Fox's holdings broke through that barrier, the FCC did not step up to force Fox to divest itself of the offending holdings. Instead, it raised the cap to 45 percent. Congress, to its credit, recognized that 45 percent was simply too high a limit and overrode the FCC, setting a new cap. In response to an onslaught of News Corp. lobbyists, the limit was set at 39 percent—the exact amount Fox needed to avoid divestiture.

None of this would be possible if foreign ownership rules remained in play, preventing foreign companies from owning more than 25 percent of any American television or radio station. Australian-born Murdoch is now a naturalized US citizen, but that did not change the fact that News Corp. is an Australia-based company, and its 99 percent ownership of Fox broke the law.

That should have been the end of it, but Murdoch is not one to back down. He turned loose legions of lobbyists, including one who reportedly threatened then-FCC chair Reed Hundt that he would not be able to "get a job as a dog catcher" if he crossed Murdoch. The result was that the FCC concluded that the law was broken, but rather than enforce it, the FCC granted News Corp. a waiver. That is an impressive amount of power for any one company, and more importantly for Murdoch himself, to wield. For those who fear that corporations have more power than everyday citizens, they could ask for no more obvious an example.

However, it is important to realize that News Corp. is merely a symptom of a larger problem. The disease is the consolidation of media, where a handful of companies wield overwhelming power and are able to influence public issues and steer the debate to suit their ends—usually with impunity. News Corp. is an obvious example, but there are many others, ATamp;&T and Comcast among them.

The pathogen for this disease is money. Where they cannot influence policy through manipulation of the discussion of important public affairs, they can simply buy influence with policymakers outright. The perfect examples of this are News Corp's million-dollar donations to Republican gubernatorial campaigns in 2010 or Comcast's hundreds of millions in lobbying and campaign donations in support of its merger with NBC-Universal.

Or look at AT&T's conduct in the proposed merger with wireless competitor T-Mobile, as it unleashes a torrential downpour of lobbying money and campaign donations. AT&T is so sure that it will prevail that it can dismiss out of hand Senator Herb Kohl, chair of the Senate Judiciary Antitrust Subcommittee, who wrote to the FCC and Department of Justice to say that "the acquisition, if permitted to proceed, would likely cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies." In the face of this, AT&T's confidence is unflagging, because it knows it has several hundred million reasons to push for the merger, and millions of means to get it. If Rupert Murdoch's experience is any indicator, that confidence has a strong foundation.

Dave Saldana is communications director for Free Press, a non-partisan, non-profit organization dedicated to reforming the media. A First Amendment lawyer, Emmy Award-winning news producer and journalism professor, Saldana speaks and writes frequently on issues of ethics and professional standards.

Suggested citation: Dave Saldana, Recent Scandal One in a Series of Legal Issues for News Corp, JURIST - Hotline, July 22, 2011, http://jurist.org/hotline/2011/07/dave-saldana-news-corp.php.




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