Regulators have no power to step in when local authorities spread political messages through their publications, industry executives admitted yesterday.
A committee of MPs was told gaps existed in controls governing councils that set up and their own newspapers in competition with local commercial titles.
In evidence to the Commons culture, media and sport committee, John Fingleton, chief executive of the Office of Fair Trading, and Ed Richards, chief executive of Ofcom, said their organisations did not cover the area.
In previous sessions of its inquiry into the future for local and regional media, the committee heard from figures in the newspaper industry about the problems facing local titles as a result of advertising revenue lost to council-run publications.
Asked who would be able to look at concerns over “political propaganda” where only the viewpoint of the ruling councillors is expressed, Richards said: “The answer to the question is nobody.
“We have no remit on that. The OFT has no remit on that. I think it is a lacuna.
“If there is a serious issue in respect of (a) use of tax payers’ money and (b) the consequences for independent journalism in any given locality, I think it’s something Parliament has to decide what it wants to do about it.”
Fingleton said it would be necessary to explore whether local authorities were setting up publications because it was an “efficient” way of reaching the population or because of a “darker” motive.
Problem of council-run papers causing “harm to the democratic process” could occur, he said, but “that is not a competition issue”.
The OFT would have to look, he added, at whether readers or advertisers were harmed by any impact on local advertising, adding: “It seems here the harm is to competitors.”
“The extent to which this is really harmful in the market is something we have struggled to understand,” Fingleton said.
He said the local newspaper market was worth around £3bn value while local authorities spending on their titles was around £50m.
Fingleton said the OFT would have to have evidence that local authorities were able to monopolise local markets and raise prices as a result.
“There’s an issue about what local authorities are doing in this space. It’s not as big an issue as the internet and the decline generally facing newspapers,” he added.
Richards told the committee there was no external ruling on the distinction between advertising and editorial in local press, unlike television where issues such as product placement were regulated.
“There is in broadcast,” he said. “I am not aware of one in the newspaper or freesheet arena at all. I think that is completely unregulated. In broadcasting we have rules about separation of advertising and editorial.
“Those are UK laws and European laws and are well understood and tested.”