PRB 99-35E

NEWSPAPER OWNERSHIP IN CANADA:
AN OVERVIEW OF THE DAVEY COMMITTEE AND
KENT COMMISSION STUDIES

Prepared by:
Joseph Jackson
Political and Social Affairs Division
17 December 1999

TABLE OF CONTENTS

INTRODUCTION

   A. The Davey Report (1970)

   B. The Kent Commission (1981)
      1. Key Findings
      2. Key Conclusions and Recommendations
         a. Ownership and Divestment
         b. Editorial Independence
         c. Tax Breaks and Investment Incentives
         d. The Press Rights Panel
      3. Reaction to the Kent Committee Report

CONCLUSION

CHRONOLOGY

The last fifty years have been a period of considerable change and adaptation for the Canadian newspaper industry. In the 1950s and 1960s, there was a widespread tendency toward merger and monopoly fuelled by increased competition for advertising revenues. In parallel, the rapid penetration of television into Canadian homes prompted newspapers to adapt by introducing more background stories, features and visual images. Most notable for the industry during this period, however, was the gradual concentration of newspaper ownership, which prompted an overall decline in competition in the Canadian market.(1)

In 1911, there were 143 daily newspapers in Canada; there have never been as many since. Closures in towns, small cities and eventually larger cities have created numerous "one paper" communities. For this reason, the concentration of newspaper ownership in Canada has twice been the focus of a high-level study: in 1970, the Senate tabled a report by the Special Senate Committee on Mass Media (the Davey Report), and in 1981 the subject was reviewed by the Royal Commission on Newspapers (the Kent Commission). The reports of both studies asked whether a more concentrated newspaper industry unreasonably restricts the availability of diverse viewpoints on given issues, and both examined whether excessive concentration in this area is a threat to the quality and characteristics of Canadian journalism, particularly the availability of Canadian content.

This document presents an overview of key aspects of these two reports as well as their principal recommendations related to newspaper ownership. A chronology of newspaper industry events and issues since 1970 is also provided.

In 1969, Senator Keith Davey, an advertising executive and Liberal party publicist with a strong personal and professional interest in news media, persuaded the Senate to establish a special committee to investigate the mass media in Canada, particularly with respect to their influence and concentration of ownership. Although the report dealt with all media, it focused extensively on print journalism, an industry previously unregulated by the federal government.

"What matters," explained the Committee’s report, "is the fact that control of the media is passing into fewer and fewer hands, and that experts agree that this trend is likely to continue and perhaps accelerate" (Vol. 1: 6). The Committee held that "this country should no longer tolerate a situation where the public interest in so vital a field as information [is] dependent on the greed or goodwill of an extremely privileged group of businessmen" (Vol. 1: 67).

A major recommendation of the Davey Report was for the establishment of a Press Ownership Review Board that would have the power to approve or reject mergers between, or acquisitions of, newspapers and periodicals. It was to use one basic guideline: "all transactions that increase concentration of ownership in the mass media are undesirable and contrary to the public interest - unless shown to be otherwise" (italics in original; Vol. 1: 71).

The Report recognized three types of concentration: newspaper chains, mixed-media holding companies and conglomerates with some media holdings. However, even though the potential existed for some review of mixed-media concentration involving magazines and newspapers, the proposed Review Board would have been limited primarily to the examination of print media ownership (both dailies and weeklies).

In describing the criteria for the proposed Review Board, the Davey Report noted that they would be "of a fairly subjective nature" (Vol. 1: 72), but that beyond this broad guideline "it would be up to the Board to define its own criteria of the public interest." To this end, any definitions of the public interest were to "include consideration of (a) whether the proposed merger would lengthen the odds on the survival of a newspaper that might otherwise die; and (b) what would likely happen to the editorial character of the newspaper to be purchased, in view of the publisher’s past performance … [and] in relation to the profits they [would] generate" (italics in original; Vol. 1: 73).

Despite the Davey Report’s emphasis on the risks of concentrated newspaper ownership, the issue was largely ignored by the government of the day. Because some publishers were worried that the government would take action, however, provincial councils were established in Ontario, Quebec and Alberta in the early 1970s, followed by councils in the Atlantic provinces and British Columbia in the 1980s.

According to some industry analysts, however, these bodies are merely "pale shadows" of what the Davey Report envisioned (Miller, 1998: 43). None has drafted a comprehensive code-of-conduct for the press and most do not undertake their own investigations, instead dealing with public complaints on a case-by-case basis. Furthermore, none plays a proactive role in training, research or development and very little effort is made to use these associations to establish a dialogue between the press and the public.

On 9 May 1990, two decades years after the tabling of the Report of the Special Committee of the Senate on Mass Media, Senator Keith Davey again spoke in the Senate on the question of media concentration in Canada. He observed that the Committee had focused on three major concerns: concentration, quality and Canadian cultural survival. "Our first and primary concern … was the concentration of media ownership, especially the concentration of print ownership. Here the situation, I’m sorry to say, in the last 20 years has gone from bad to worse…" (The Senate, Debates, 9 May 1990: 1589). To support this claim, Senator Davey cited group ownership of daily newspapers, noting that, between 1970 and 1989, media concentration had increased from 45% to 57%. Notwithstanding the growth and influence of television, he argued that "print still orders society’s agenda. True, it is television which defines how we respond to those items on the agenda, but it is still print which lines them up."

In the years following the release of the Davey Report, the Committee’s forecast of increased newspaper concentration in the Canadian market became a reality. Numerous closings of newspapers took place in Quebec (Montréal-Matin, Montreal Star), Quebec City (L’Action and Chronicle-Telegraph), Winnipeg (The Tribune owned by Southam), and Ottawa (the Journal, owned by Thomson). Meanwhile, Thomson merged its newspapers in Victoria into a single daily, the Times-Colonist.

The Winnipeg and Ottawa closings (both on 27 August 1980) eliminated direct competition between Canada’s two largest newspaper groups in those cities and prompted the federal government to appoint a Royal Commission on Newspapers, with Tom Kent, a former newspaper editor, civil servant and academic as chair. Created by an order-in-council within a week of the closings, the Kent Commission was the first Canadian inquiry directly concerned with the nature of the newspaper industry. The Commission collected a vast amount of information on newspapers and journalism in Canada and its nine-volume report remains to this day a key guide to the structure and operation of Canada’s newspaper sector.

Because it was the feeling of the Kent commissioners that Canada’s newspaper industry had drifted into a situation that was "clearly and directly contrary to the public interest," a series of studies were undertaken to examine the:

1. extent of ownership across Canada;
2. responsibility of the newspaper industry to the public;
3. how the newspaper industry carried on business,
4. functioning of the newsroom;
5. Canadian news service agencies;
6. quality of public affairs reporting;
7. quality of journalism;
8. industry’s performance as a whole; and
9. future of the newspaper industry.

The Commission did not mince words in its discussion of the extent of newspaper ownership in Canada. It opened its report by stating: "Concentration engulfs Canadian daily newspaper publishing. Three chains control nine-tenths of French-language daily newspaper circulation, while three other chains control two-thirds of English-language circulation" (1981: 1). The Commission analyzed many of the economic reasons that had prompted such a high level of monopoly and concentration in the Canadian newspaper industry. In doing so, it recognized that "chain operation produce good newspapers and bad ones" and that there were differences between the chains. It also conceded that "some arguments, chiefly with respect to financial stability, can be made for chain newspapers" (1980: 177). It could find little justification, however, for cross-ownership; that is, the ownership of newspaper chains by conglomerates with major interests in other sectors.(2)

With respect to the responsibility of the newspaper industry to the public, the Commission concluded that the profession’s primary responsibility was "searching out and reporting the truth." As the Commission explained, there was a spectrum of opinion among management and ownership, at one end of which was the concept of the newspaper as a business and at the other end of which was the concept of the social responsibility of the press to seek and report the truth. The Commission further concluded that journalists place social responsibility foremost and that the reading public is generally satisfied with the state of their newspapers.

The report’s examination of how the newspaper industry carried on business looked at the relationship between the nature of ownership and the owner’s view of the newspaper’s duty to the public, and the extent to which ownership affected the percentage of newspaper income reinvested in editorial content. The Commission concluded that most conglomerate owners tended to spend a smaller percentage of their newspaper income on editorial content.

The Commission’s study of the functioning of the newsroom assessed how, and the system within which, journalists were working. The report was critical of the system and suggested that it was driving good journalists out of the profession because of inadequate pay, failing to train newsroom managers properly, and sometimes prioritizing economic considerations at the expense of responsible journalism.

With respect to the Canadian news service agencies, the Commission concluded that the Canadian Press was functioning well within the constraints placed upon it by its member newspapers. These constraints included: insufficient funding, lack of staff, an inadequate emphasis on investigative journalism, inadequate French-language service, insufficient foreign coverage, and a lack of direction from management. The report generally praised smaller news services such as Southam, United Press Canada and Thomson, but was unsure that they would survive in the wake of so many newspaper closures and mergers.

In the area of public affairs reporting, the Commission concluded that, in general, the public believed that the quality of political journalism had declined and that diverse interests were not as well represented as they had previously been.

The Commission also discussed some methods whereby the quality of journalism might be improved. It recommended press councils, ombudsmen, schools of journalism, and professional development programs for journalists and concluded that a stronger public desire for good quality journalism had arisen since the time of the Davey Report in 1970.

Finally, the Commission concluded that the growth of electronic publishing and telecommunication information systems and the rapid development of the electronic media could present a critical problem for the future of the newspaper industry. It called for both the newspaper industry and Canada as a whole to develop adequate programs for taking advantage of developments in electronic news technology.

In the final analysis, the authors of the Kent Commission Report argued that "industrial conglomerates produce poor newspapers"(1980: 177). They further noted that: "The press, which assumes a licence to criticize every other institution, is the least open of any to criticism of its own performance … [and] is singularly reluctant not only to accept criticism and acknowledge error, but even to justify its own conduct when it believes itself to be in the right" (1980: 175). With these considerations in mind, the Commission proposed several recommendations designed to rectify this situation.

In the area of ownership and divestment, the Commission proposed legislation to:

• prohibit the expansion of existing chains owning or controlling five or more daily newspapers;
• prohibit any future chain from acquiring more than five papers;
• prevent a conglomerate from purchasing a daily newspaper by prohibiting purchases where the value of the purchaser’s non-newspaper assets exceeded the value of the newspaper;
• prohibit ownership of newspapers and radio or television stations where 50% or more of the radio/television market was within the paper’s market;
• require the break-up of regional monopolies, such as that of the Irving family in New Brunswick, by prohibiting the ownership of two or more newspapers having 75% or more of the circulation, in one language, in a defined geographical area;
• prohibit ownership of both a daily newspaper published in more than one province and any other daily newspaper (thus requiring Thomson to sell either the Globe and Mail or all of its other newspapers);
• allow a minimum of five and a maximum of ten years from proclamation of the legislation for divestiture of newspapers whose ownership became illegal on proclamation;
• create an administrative agency (the Press Rights Panel) which would apply the ownership and divestiture rules and have the power, in certain areas, to permit exceptions to them;
• allow a minimum of five and a maximum of seven years for any subsequent divesting order made by the Press Right Panel;
• require any paper intending to close down to publish notice of that intention and thereafter not to close down until after the expiration of a defined period;
• prohibit the sale of assets of any paper intending to close operation until the ownership had satisfied the Press Rights Panel that there was no economically viable offer that would allow the paper to continue as a going concern.

The Commission proposed that all daily papers other than those qualifying as "individual" papers should employ their managing editors under a written contract guaranteeing their editorial independence from the newspaper publisher.(3) This contract would give the managing editor (acting within the budget set by the owner) full responsibility for:

• editorial policy within the parameters of the newspaper’s principles and objectives as set out in the contract;
• editorial expenses;
• the content of the newspaper (excluding advertising); and
• labour relations, including the hiring and firing of employees.

The proposed contract would also have given the managing editor the right to comment adversely on the activities of the owners and any associates, and prohibited the proprietor from attempting to override the managing editor’s judgement as to what could be published.

The Commission proposed that tax breaks be offered to:

• investors seeking to start newspapers;
• investors seeking to acquire newspapers made available through a divestiture order;
• investors seeking to acquire newspapers facing closure; and
• newspapers meeting a defined ratio of editorial to non-editorial expenditures, with surcharges imposed on newspapers that failed to meet such ratios;

The Commission also proposed that grants be offered to Canadian wire services in order to encourage the expansion of Canadian and international activities.

Echoing the Davey Report’s vision of a Press Ownership Review Board, the Commission proposed a Press Right Panel to oversee the Canadian newspaper industry. This Panel would have been an independent agency reporting to Parliament through the Minister of Justice, and would have had the powers of a superior court of record. As such, it would have been empowered to determine whether any proposed purchase of a newspaper or creation of a new newspaper was permissible or whether divestiture was necessary.

Reactions to the recommendations of the Kent Royal Commission on Newspapers were vociferous in many circles. In particular, newspaper publishers were vehemently opposed to the creation of the proposed Press Rights Council, suggesting that this would merely pave the way for government control of a free press. Furthermore, many attacked the Commission’s methodology, particularly because it had not answered a basic question: "Are chain-owned monopoly newspapers worse than the old individually owned competitive newspapers?"(Desbarats, 1996: 79). Given this fundamental flaw, the Kent Commission’s report soon faded from the public eye.

Though some recommendations did reach the stage of draft legislation under the Liberal government of Prime Minister Trudeau, most of these disappeared because of strong opposition in the House and the election of Prime Minister Mulroney’s Conservative government in 1984. The only notable exception was a 1982 government instruction to the Canadian Radio-television and Telecommunications Commission (CRTC) to deny new broadcasting licences or renewals to applicants who owned daily newspapers in the same market. This directive, however, allowed for exceptions "in the public interest"; in the course of its enactment - until its withdrawal by the Mulroney government – this exception was applied to nearly every case heard by the Commission.

Both the Davey Report and the Kent Commission examined a question that goes far beyond the issue of newspaper ownership in Canada. Throughout the 1990s, monopoly ownership and the concentration of ownership into fewer and fewer hands have increased in all communications sectors. This situation, which is hardly unique to Canada, is partly the result of economic circumstances that prioritize reduced competition – and therefore risk – in order to increase profit margins. It is also partly due to societal and government reluctance to intervene in the operation of the free market economy and the so-called "free press." However, as the Kent Commission noted in its 1981 report:

In a country that has allowed so many newspapers to be owned by a few conglomerates, freedom of the press means, in itself, only that enormous influence without responsibility is conferred on a handful of people. For the heads of such organizations to justify their position by appealing to the principle of freedom of the press is offensive to intellectual honesty. (1981: 217)

Thus, the ongoing trend toward concentration and chain ownership means that the link between newspaper ownership and content continues to require clarification. At the same time, given that previous federal studies – particularly the Kent Commission – were largely undermined by a lack of reliable quantitative data, any new examination of this matter would require substantive research. Indeed, without a stronger grasp of the complex array of economic, social, cultural and technological factors that make up today’s communications media, it would be difficult for today’s policy makers to determine whether federal intervention in newspaper ownership would be warranted.