'Anti-Israel Hayom bill won't stand up to court scrutiny'

The so-called bill "for the promotion and protection of the printed media in Israel," which seeks to bar the distribution of free newspapers, has been "tailor-made to target Israel Hayom; it is inherently unconstitutional and even if it passes, it will not stand up to High Court of Justice's scrutiny," Professor Barak Medina, one of Israel's foremost constitutional law experts and the former dean of the Hebrew University of Jerusalem's Law Faculty, wrote Monday in a special legal brief on the issue.

The bill, he wrote, "is not unlike similar legislation proposals on the matter, which failed to pass. After reviewing it, I have come to the conclusion that the bill infringes on several basic rights that are protected by law, including Basic Law: Freedom of Occupation and Basic Law: Human Dignity and Liberty, as well as on freedom of speech. The bill is therefore inherently unconstitutional, and should it pass, the court will declare it null and void."

Medina's review concluded that the bill's regulatory measures would infringe on the rights of existing newspaper publishers, as well as on the rights of media employees and the public's right of freedom to speech.

"There is cause to believe that the bill is inherently 'personal' in nature, meaning that it seeks to prevent the publication of one specific newspaper -- Israel Hayom," Medina found. "It is an inappropriate goal, sufficient to render the proposed arrangement invalid."

Medina also wrote that the bill would disproportionately infringe on basic rights and would be ineffective in reaching its declared goal of protecting printed media in Israel.

"The price the bill will exact on society will significantly outweigh any benefits it may entail," Medina wrote.

In favor of competition or against it?

The bill proposes setting a minimal price for daily newspapers sold in Israel, and setting criminal and civil liability for violations.

According to Medina, this would impose restrictions on commercial newspaper publishing and would constitute a de facto order by the legislators essentially supporting price-fixing between competing companies and giving one publisher the power to dictate prices to his competitors.

The bill is ostensibly designed to aid the printed media in Israel, which is facing dire financial straits. Its preamble argues that the free distribution of some dailies effectively prevents fair pricing competition, a crucial factor in a newspaper's ability to remain solvent.

But although the bill states that "many Western democracies afford newspapers financial support as means of ensuring their operation, which is vital for democracy," it actually seeks to prevent competition by setting a minimum price, which will be set according to the cheapest price currently charged for a daily newspaper.

According to Medina, the bill "seeks to impose the full burden of financially supporting newspapers on their readers. It does not explain why the state will not follow the example of other Western democracies and assist newspapers, via tax exemptions, for example."

Medina notes in his brief that the distribution of free dailies has been customary worldwide since 1940. The practice peaked in the early 2000s, but recent years have seen a decline in their distribution. In Europe, free newspapers comprise some 20 percent of those distributed daily. The business strategy holds that while free distribution brings in lower sales revenue, it increases distribution numbers and advertising revenue.

The Internet has made full or nearly full versions of most newspapers in Israel and worldwide available online free of charge. It is, in fact, the prevalent business model today.

Medina names the London Evening Standard as only one example for a newspaper that has made the transition from sales to free distribution, to find that the latter is the more solid business strategy.

"While free distribution can, in conjunction with other factors, sometimes lead to a decrease in the circulation of priced newspapers, there is no precedent that I know of worldwide where a democracy has barred by law the free distribution of newspapers. Such legislation is found only in undemocratic states and it means only to infringe on freedom of expressing and freedom of the press, or target individual publishers," Medina wrote.

"The distribution of free newspapers coincides with public interest as it bolsters free speech and expression and freedom of the press, as well as increases competition and the public's access to wide-ranging and diverse information and opinions on various issues. Furthermore, it lowers the product's prices.

"Experience has taught us that this practice does not create a monopoly. On the contrary. It increases the number of newspapers in print and online."

Fear of a monopoly

Medina said the Israeli media had been a centralized oligopoly -- an industry dominated by a small number of publishers -- for many years. Yedioth Ahronoth has been declared a monopoly twice, in 1995 and 1999.

"The numerous local newspapers that have been distributed free of charge over the years did not infringe on Yedioth Ahronoth's monopoly. Israel Hayom's emergence on the scene had brought about a fundamental change in the industry, and in 2010 it prompted the antitrust commissioner to rescind Yedioth Ahronoth's monopoly status," Medina said.

He said the bill would spell "an increase in some publishers' revenues, while inflicting serious damage to newspaper consumers. Based on past experience, there is a real concern that if the distribution free of newspapers is barred, we will revisit the days of the monopoly. This will inflict actual harm on competition in the media.

"Furthermore, infringing on the market power of Israel Hayom may drive the price of newspaper advertising up, and indirectly contribute to an overall price hike of products in Israel."

Medina said only legislation that promotes pluralism in the media would increase competition in the industry.

"The desired policy should strive to increase [competition] -- but the bill strives to do the opposite," he wrote.

"Barring the distribution of free newspapers may worsen the centralization in the industry, as the bill fails to address the fact that there is only a handful on newspaper publishers in Israel, and each of them has vast influence on public opinion. This situation, where the public agenda is controlled by a small number of market powers, is highly problematic and the legislator must strive to remedy it -- but not via the proposed arrangement."

The bill fails to offer evidence to back its claims that the distribution of free newspapers infringes on fair competition, Medina said.

"The claim that ensuring fair competition and pluralism in the media mandates such blatant intervention and infringement on the basic rights of the owners and readers of free dailies is devoid of merit," he wrote.

"There is nothing to suggest that the distribution of free newspapers is directly linked to the drop in the revenues noted by the priced printed press; nor does the bill explain why the power afforded to the Antitrust Commission in such matters is insufficient."

Medina stressed that "while there is room to consider various arrangements that will limit the newspaper ownership of certain parties with distinct business interests, as it may infringe on advertising revenue, the bill offers no explanation as to why other alternatives have been rejected in favor of this arrangement.

"The benefits derived from this arrangement do little, if anything, to justify the damage it will inflict on basic rights, or the de facto damage to newspaper consumers, who will be deprived of access to information and diverse opinions."

He also said "the state must consider existing interests before its revises or introduces new licensing policies for a certain industry, to avoid, as much as possible, imposing new limitations on those already operating within the industry. The vested interest of an existing free newspaper's owner in Israel is extensive, and ordering him to cease using what has been proved as a successful business strategy may cause him sever damages.

"One must also consider the damage to the daily's employees, many of whom are journalists who were previously employed by other newspapers. Shutting down the newspaper or even forcing it to reduce the scope of its operations may see these employees lose their livelihood, thus constituting harsh and unjustified damage."

Medina's brief concludes, "I therefore do not believe that the Knesset can impose a new arrangement on someone already licensed to publish and distribute a newspaper free of charge in Israel.

"This bill illustrates the dangers of the current newspaper licensing practices in Israel, which allows authorities to impose supervision of their content, and allows public officials to threaten to revoke the license of media outlets they do not approve of. The danger this bill poses to democracy is immense."