The Treasurer, John Dawkins, should be wary of allowing Canadian media enterpreneur Conrad Black to increase his company’s share of the Fairfax Group from 15 per cent to 25 per cent. Mr Black’s application is being considered by the Foreign Investment Review Board. The board has only advisory power and the decision ultimately is in the hand of Mr Dawkins. The board, which advises on general considerations of national interest, has a record of recommending in favour of more than 95 per cent of foreign investment proposals in the past. That is largely because foreign investment in Australia has been generally in the national interest. In the case of Mr Black’s proposal, however, there are factors which suggest to the contrary.
Unlike much valuable foreign investment, Mr Black’s investment would not be of otherwise unavailable capital for a new venture. There is plenty of existing Australian capital available if Fairfax were to seek it, as was proved by the public float a year ago. Shares were then issued at $1.20. The float was fully subscribed and the price is now around $1.60. Further, there is no evidence that Fairfax would gain new technology or new expertise not otherwise available to it or not now being put into the group. New expertise and new technology is another important reason for seeking foreign investment.
Just on the straight economic argument the application has little merit. It has even less merit when we are considering a media company, and in particular this media company.
Warwick Fairfax’s misguided 1987 bid for control of what would become his anyway ended in receivership late in 1990. After 150 years of stable Fairfax family control, the Fairfax group, containing three of the nation’s top five most influential newspapers, was in control of creditors, chiefly the ANZ Bank. Banks are not very good at running newspaper companies, so after a year without owenership direction they were sold. Various bidders, including an Australian one one, came forward. However, Conrad Black’s was the highest acceptable one to ANZ and other creditors, but it required government approval.
The Government’s policy is that no individual foreigner is permitted to take more than 15 per cent of a newspaper group and total foreign ownership in a group is not to exceed 20 per cent. Mr Black is at that limit. It was on those conditions that Mr Black and his Telegraph Plc were allowed to invest in Fairfax. Part of that understanding was a commitment to editorial independence and an independent board. Mr Black’s present shareholding already gives him virtual control; lifting it to 25 per cent would guarantee his control, given the splintering of the remaining shareholding.
There are serious misgivings to having a foreigner controlling such an influential newspaper group. Mr Black is on record as supporting a charter of editorial independence, and his first meeting with Fairfax journalists was so encouraging for them on that score that they said a charter was a non-issue. Since then, however, he has shown a greater interest in the journalism of both Fairfax and other companies. There’s nothing inherently wrong with that, but it could be seen as a first step to greater involvement in editorial policy which he had earlier promised would be in the hands of editors appointed by the board. It may have been a coincidence, by the editorial direction of the Jerusalem Post changed markedly after he took ownership.
Australia already has a far-too-high foreign element in press ownership and a far-too-high concentration of ownership in general. Two companies, News Ltd and Fairfax, own all but two of the national and metropolitan dailies in Australia. News Ltd admittedly is an Australian company, but its chief shareholder, Rupert Murdoch is an American citizen, albeit one born in Australia with a great Australian sympathy.
In those circumstances, an increased shareholding in Fairfax for Mr Black is both unwarranted and dangerous. The timing of his application for it, just before the election, might be a coincidence, but it could be seen as potentially coercive.
Mr Dawkins should give this application a firm “”No”. He should reaffirm the Government’s policy on foreign media ownership and give a clear message to other potential foreign investors in Australia that they cannot expect pleasant promises to give them a foot in the door and, once in, break the arrangement.