Murdoch faces Channel Five 'public interest' test

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Rupert Murdoch would face a special "public interest" test if he makes a bid for channel Five under a proposal introduced in Parliament last night.

Lord Puttnam has led stiff resistance to a clause in the Communications Bill that allows a major newspaper owner to buy Five (though not ITV). The clause is widely seen as being directly aimed at allowing Mr Murdoch's News Corporation to acquire a terrestrial broadcaster.

Last night, in a Lords debate on the Bill, which is facing a struggle to get through Parliament before the summer recess, Lord Puttnam proposed a compromise that may satisfy critics of the "Murdoch clause". He suggested that a public interest test be applied to all major cross-media acquisitions - currently subject only to the strictures of competition law, under the Enterprise Act.

The new test would apply to major players who want to increase their interests in other areas of media by buying newspapers, radio assets or television stations. The test would examine whether such a deal would damage the plurality of media voices and owners. Ofcom, the media regulator, would initially make this assessment and, if concerns arose, it would be passed to the Competition Commission or Office of Fair Trading to examine in depth.

The amendment would amount to a significant new hurdle for Mr Murdoch or other media magnates in acquiring more British media businesses. Although all cross-media deals would be subject to the proposed test, Lord Puttnam made clear that a possible takeover of Five was the reason for raising the issue.

"[The Enterprise Act] can't take account of the very special role the media plays in an informed democracy. Ofcom might see a problem, but unless it has the tools to address it, competition law simply won't allow it to do so," Lord Puttnam said. "We also need a powerful player on behalf of the citizen ... The public interest test."

If the Government accepts the proposal, Lord Puttnam indicated that he was willing to drop his opposition to the Bill. The Government is trying to get legislation through parliament by mid-July, in order to meet some European directives contained in it. Also, the Carlton-Granada merger, now before the Competition Commission, requires the Bill to be on the statute books because Ofcom cannot come fully into existence without it.

If the Bill fails to get through the Lords by the time Parliament breaks for the summer, the Government may have use the Parliament Act to force it through, but that may delay royal ascent until next year.

Lord Puttnam and a series of other high-profile peers such as Lord Bragg and Lord Alli, have held the Bill up. The clause also attracted criticism in the Commons, though the Government's big majority saw it through.

A senior government source said it would consider Lord Puttnam's measure "very keenly", as long as it did not "undermine the core principles of the Bill".