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March 23, 2013 | Jim Killock

“Gaming” can be avoided: bloggers can be protected from the Crime and Courts Bill

We’re told that politicians are concerned, exempting small and medium size businesses from the Bill could lead to “gaming”. That is, a large publisher could create small subsidiaries to avoid the Leveson sticks applying to them. We believe this can be avoided. The Companies Act anticipates “gaming”, and includes protections against it.


We believe this can be avoided. The Companies Act anticipates “gaming”, and includes protections against it.

To recap, the Bill provides sticks and carrots to persuade publishers to join a self regulator.

They are the threat of all costs being awarded against you, even if you win your defence against a claim of libel; and the threat of exemplary damages. There is also a carrot of protection against costs if you have joined a self-regulator, and your accuser could have chosen arbitration.

The sticks apply, under the Courts and Crimes Bill, if you are a “relevant publisher”. This currently is anyone publishing about current affairs, with multiple authors, as a business. Thus small, semi-commercial blogs (like Labour List or Conservative Home for instance) may need to shelter under the 'voluntary' self regulation.

The proposal we and Big Brother Watch proposed (after the meeting we held with Hacked Off) is that small and medium size (news publishing) companies are also exempted. BBW drafted an amendment that has been tabled by Lord Lucas:

Insert into New Schedule 5 of the Crime and Courts Bill ‘Exclusions from definition of “relevant publisher”

9) “A publisher who does not exceed the definition of a small or medium-sized enterprise as defined in Section 382 and 465 Companies Act 2006.”

ORG asked for advice about the gaming question yesterday, after it was raised with us. Francis Davey suggested to us that the amendment could read:

Insert into New Schedule 5 of the Crime and Courts Bill ‘Exclusions from definition of “relevant publisher”

9) “A publisher, which is a company, such that either: (i) the small companies regime, defined in Section 381 of the Companies Act 2006, applies to it; or (ii) the company qualifies as medium-sized as in accordance with Section 465 of the Companies Act 2006 and which is not excluded from taking advantage of the provisions of Part 15 of the Companies Act 2006 relating to companies qualifying as medium-sized by Section 467 of that Act."

His reasoning – on a very quick, few minutes reading of the Act – is that it already anticipates that “gaming” may occur, and provides protections.

There is always a risk of gaming with these sorts of provisions, but in the case of the SME definitions in the Companies Act 2006, there is some protection.

Taking "S" companies first. Section 381 defines a small company as one that meets conditions in s.382 subject to various exclusions found in s.384. Those exclusions include being in the same group as a public company. The definition of "group" is pretty robust (and can be amended for anti-avoidance purposes). It means that if one of the large media companies created a subsidiary it could not be an "S" company.

But this only works if you use the definition in s.381 not s.382.

The drafters of the companies act must have decided to define "M" companies differently. Here s.465 is like s.382 - it has no exclusions in it. The exclusions - much like the "S" exclusions - are found in s.467. They too prevent a company from taking advantage of the rules on M companies if they are in the same group as a public company.

But this requires another tweak to the definition so that s.467 is brought in. I think that was the intention but hasty drafting is very error prone.

The message here is that we can exclude small publishers without a significant risk of “gaming”. The Companies Act anticipates this.

The very hasty process that the Courts and Crimes Bill is undergoing means that there is little time to correct the mistakes in the new clauses introduced this week. The new suggestions (others include excluding non-profits, for instance) need to be worked on by the three parties. Every effort must be made to make sure these obligations are not imposed, inappropriately, on smaller web publishers.

Take our action to let the leaders know! Over 1500 emails have been sent to David Cameron, Nick Clegg and Harriet Harman so far

Update: how the Bill might exclude non-corporate businesses: 

For a non-corporate business, an easy solution (without the anti-avoidance provisions) would be to add another excluded category:
 
"Any business that, if it were a company, would meet the qualifying conditions in section 465(3) of the Companies Act 2006." 
 
That has a turnover/employee/balance sheet set of conditions which are amended to keep in line with inflation. All you are doing is using a statutory set of numbers that already exist. They are quite large (eg c.£25 million for turnover).

You could instead use the small business definition:
 
"Any business that, if it were a company, would meet the qualifying conditions in section 382(3) of the Companies Act 2006." 
 
There is no point using *both* because the medium-sized limits are larger than the small limits so one implies the other.

 

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Comments (2)

  1. Carl Gardner:
    Mar 24, 2013 at 03:03 AM

    I write a small blog - and I'd like to be able to choose regulation. I see the potential benefit of costs protection as far more relevant to me than the potential risk of costs going the other way.

    Why should some amendment deny me this choice?

  2. Jim Killock:
    Mar 24, 2013 at 11:50 AM

    You wouldn't be denied (self) regulation which would remain open to you. You'd just have the sticks removed. Preferably you'd be able to benefit from the carrots (reduced cost risks) if you did choose to join a self regulator.



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