INDEPENDENT News & Media will hold its second consecutive drama-fest of an annual general meeting at Citywest Hotel tomorrow, as the group’s latest directorial showdown plays out.

The drier, but related, matter of the Government’s intentions in the area of media merger law remains unresolved, however, after Minister for Communications Pat Rabbitte failed in his attempt to put through legislation before the Dáil’s summer recess.

While the new law is expected to be based on the recommendations of the 2008 report of the Advisory Group on Media Mergers chaired by Paul Sreenan SC, media companies are still “somewhat in the dark on it in terms of detail”, notes Marco Hickey, a partner at LK Shields Solicitors who specialises in competition law and has a number of clients in the media sector.

Under the existing regime, if Denis O’Brien, who holds 29.9 per cent of INM’s shares, were to make a bid for the company, the Competition Authority would conduct a phase-one review, focusing on the effects on competition in the particular markets concerned.

If it approved the takeover, Minister for Jobs, Enterprise and Innovation Richard Bruton would have 10 days to request the authority to conduct a full phase- two study, after which, if the authority still had no problem, the Minister could, within 30 days, cite “relevant criteria” to stop the deal.

If the Sreenan group’s recommendations are adopted, the legislation will replace the term “relevant criteria” with a more clearly defined set of public- interest criteria, including the likely effect of the merger on media plurality in terms of ownership and content.

The group also suggested that there should be a separate system for notifying the Minister, so that rather than just notifying the Competition Authority, merging media companies would face a dual notification system, with a potential third party involved in the shape of the Broadcasting Authority of Ireland (BAI).

“The timelines are going to be very important,” says Hickey.

Under the existing system, the Competition Authority has 30 days to conduct its phase-one review. However, if it asks for more information from the media companies, the clock is reset – in some jurisdictions it is merely suspended.

Although it is expected that ministerial decision-making will transfer from Bruton’s department to Rabbitte’s, Hickey is not taking this as guaranteed until the legislation is drafted.

It is also possible that the Minister might delegate the responsibility of clearing a media merger to the BAI and indeed it would be politically pragmatic.

More than anything else, media businesses want clarity on the procedures and what they can say and do to satisfy the public- interest criteria, according to Hickey.

“Hopefully there will be accompanying guidelines, so we all know where we stand.”

While the purpose of updating media merger law is usually talked about in terms of preventing an undue concentration of ownership in the media sector – and often these days with reference to O’Brien’s holdings – there is a counter- argument that Ireland needs strong media entities to fend off further colonisation of the market from overseas groups.

Companies can advance what’s known as the “failing firm” defence when seeking approval for a merger or takeover from the Competition Authority.

Indeed, given the number of media assets that were bought and sold at high prices in the last decade, it is feasible that this might come into play in future media mergers.

However, the authority rarely clears a deal on this basis, Hickey observes.

“They tend to side-step it by saying ‘okay you have put forward the failing-firm defence, but actually you don’t need to go there, because it [the merger] hasn’t lessened competition’.”

The potential problem with the failing-firm defence is that there is “a temptation”, as Hickey puts it, for companies to claim to be even more of a financial wreck than they really are.