Paid News”: How corruption in the Indian media undermines democracy Preface



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Revised draft report prepared on April 01, 2010, for circulation among members of the Press Council of India

Paid News”:


How corruption in the Indian media undermines democracy
Preface

      


The fifteenth general elections to the Lok Sabha took place in April-May 2009 and in order to ensure free and fair coverage by the media, the Press Council of India issued guidelines applicable to both government authorities and the press. After the elections, a disturbing trend was highlighted by sections of the media, that is, payment of money by candidates to representatives of media companies for favourable coverage or the phenomenon popularly known as “paid news”.
The deception or fraud that such “paid news” entails takes place at three levels. The reader of the publication or the viewer of the television programme is deceived into believing that what is essentially an advertisement is in fact, independently produced news content. By not officially declaring the expenditure incurred on planting “paid news” items, the candidate standing for election violates the Conduct of Election Rules, 1961, which are meant to be enforced by the Election Commission of India under the Representation of the People Act, 1951. Finally, by not accounting for the money received from candidates, the concerned media company or its representatives are violating the provisions of the Companies Act, 1956 as well as the Income Tax Act, 1961, among other laws.

The phenomenon of “paid news” goes beyond the corruption of individual journalists and media companies. It has become pervasive, structured and highly organized and in the process, is undermining democracy in India. Large sections of society, including political personalities, those working in the media and others, have already expressed their unhappiness and concern about the pernicious influence of such malpractices.

During his inaugural address at a seminar on “General Elections 2009 and Media Reporting” on May 13, 2009, that was organized by the Andhra Pradesh Union of Working Journalists at Hyderabad, Andhra Pradesh, three days before the results of the fifteenth general elections were declared, Hon’ble Chairman of the Press Council of India Justice G.N. Ray expressed grave concern about the covert emergence of the “paid news” syndrome and this issue was discussed threadbare during the seminar.
Subsequently, representations against such malpractices were received from several veteran journalists (such as the late Shri Prabhash Joshi, Shri Ajit Bhattacharjea, Shri B.G. Verghese and Shri Kuldip Nayar). They alleged that sections of the media had received illegal payments for providing favourable coverage to candidates who had stood for the Lok Sabha elections.
On June 6, 2009, the Press Council of India expressed serious concern over the phenomenon of “paid news” that doubly jeopardized the functioning of an independent media in the country and the working of Indian democracy by influencing free and fair elections. The Council noted that the press provides a service that is akin to a public utility – it exercises its right to inform because the public has a right to know. The press thus functions as a repository of public trust and has the obligation to provide truthful and correct information to the best of its ability when such information is being presented as news content. Such news content is distinct from opinions that are conveyed through articles and editorials in which writers express their views.

There is an urgent need to protect the right of the public to accurate information before voters exercise their franchise in favour of a particular candidate in the electoral fray. An opinion that was expressed in the Council is that one reason for the proliferation of the “paid news” phenomenon could be that on account of the limits on election campaign related expenditure that have been imposed by the Election Commission of India, candidates have chosen this alternative to publicize themselves, in the process posing a danger to the conduct of free and fair elections. It was suggested that the powers that are vested in returning officers appointed by the Election Commission before the elections take place are adequate for such officers to issue notices to the press to explain the basis of particular “news” reports and ascertain whether financial transactions had actually taken place between candidates and representatives of media companies.

The Press Council of India felt that in pursuance of the mandate given to the Council by Parliament, it was incumbent upon this statutory authority to examine the issue in all its dimensions through detailed research and consultations. Such an exercise was deemed necessary to maintain the faith of the public in the media and also make appropriate recommendations to check such malpractices from recurring on a wide scale before the forthcoming rounds of elections at both the Union and state levels.
On June 10, 2009, the Delhi Union of Journalists communicated with the Press Council telegraphically and expressed its concern at reports of money power having played havoc with the media coverage of the elections that had taken place. Shri S.K. Pande, President, Delhi Union of Journalists described the “paid news” phenomenon as unethical, unfair and an infringement of the right of journalists to report freely. He further informed the Council that selected journalists had been targetted by the managements of media companies for not acquiescing with such malpractices.
It may not be out of place in this context to state that the attention of the Press Council of India had been drawn as early as April 2003 by one its members (the late Shri N. Thiagrajan) about the publication of advertising material in the garb of news reports for a fee.  At that time, the Council had urged the media to introspect whether such practices enhanced the credibility of news reportage and advised that journalistic propriety demanded that advertisements should be clearly distinguishable from editorial content.

The Press Council of India, through its Chairman and its members, participated in or initiated a number of discussions and debates on this issue between May 2009 and March 2010.

On July 3, 2009, exercising the powers conferred on the Council under Sections 8(1) and 15 of the Press Council of India Act, 1978, a Sub-Committee of the Council comprising two members, namely, Shri Kalimekolan Sreenivas Reddy and Shri Paranjoy Guha Thakurta was constituted. The two members, together with the Press Council of India Chairman Justice G.N. Ray, the Council’s Secretary, Smt Vibha Bhargava and other members, met a wide cross-section of stake-holders in New Delhi, Mumbai and Hyderabad and also perused through many letters and representations that were sent to the Council. These have been listed in Annexures “A” “B” “C” and “D” at the end of the report. Annexure “E” carries the guidelines that were issued by the Press Council for the media and government authorities during elections. The report of the Sub-Committee follows.

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Introduction and Summary:
Corruption in the mass media in India and elsewhere is as old as the media itself. If there is corruption in society, it would be unrealistic to expect the media to be free of corruption. India is the world’s largest democracy. A vibrant and diverse mass media is an important pillar of democracy in the country. The independence of the media facilitates adherence to democratic norms. Article 19 of the Constitution of India confers the right to freedom of speech and expression to all citizens of the country and to the media as well.

In recent years, corruption in the Indian media has gone way beyond the corruption of individual journalists and specific media organizations -- from “planting” information and views in lieu of favours received in cash or kind, to more institutionalized and organized forms of corruption wherein newspapers and television channels receive funds for publishing or broadcasting information in favour of particular individuals, corporate entities, representatives of political parties and candidates contesting elections, that is sought to be disguised as “news”.

News is meant to be objective, fair and neutral – this is what sets apart such information and opinion from advertisements that are paid for by corporate entities, governments, organizations or individuals. What happens when the distinction between news and advertisements start blurring, when advertisements double up as news that have been paid for, or when “news” is published in favour of a particular politician by selling editorial spaces? In such situations, the reader or the viewer can hardly distinguish between news reports and advertisements/advertorials.
This report tracks the blurring boundaries between news and advertisements/advertorials and highlights the efforts made by individuals and representatives of organizations who have painstakingly chronicled the selling of editorial space for money during elections.
Over the last few years and since 2009 in particular, the phenomenon of “paid news” has acquired a new and even more pernicious dimension by entering the sphere of political “news” or “reporting” on candidates contesting elections. Numerous favourable or complimentary “news” reports and feature articles on representatives of political parties, including candidates who have been contesting elections, have appeared in newspapers across the country in the run-up to the Lok Sabha as well as state legislative assembly elections and similar kinds of information have been aired on television channels without disclosing the fact that monetary transactions have taken place between the concerned candidate or political party to which he or she belongs and the owners or representatives of particular media organizations.

The deception or fraud that such “paid news” entails takes place at three distinct levels. The reader or the viewer is deceived into believing that what is essentially an advertisement is in fact, independently produced news content. Then, candidates contesting elections to not disclose the true expenditure incurred on campaigning thereby violating the Conduct of Election Rules, 1961, which have been framed by, and are meant to be enforced by, the Election Commission of India under the Representation of the People Act, 1951. The concerned newspapers and television channels typically receive funds for “paid news” in cash and do not disclose such earnings in their company balance sheets or official statements of accounts. Thus, by not accounting for the money received from candidates, the concerned media company or its representatives are violating the provisions of the Companies Act, 1956 as well as the Income Tax Act, 1961, among other laws.

The entire operation is clandestine. This malpractice has become widespread and now cuts across newspapers and television channels, small and large, in different languages and located in various parts of the country. What is worse, these illegal operations have become “organized” and involve advertising agencies and public relations firms, besides journalists, managers and owners of media companies. Marketing executives use the services of journalists – willingly or otherwise – to gain access to political personalities. So-called “rate cards” or “packages” are distributed that often include “rates” for publication of “news” items that not merely praise particular candidates but also criticize their political opponents. Candidates who do not go along with such “extortionist” practices on the part of media organizations are denied coverage.
Sections of the media in India have willy-nilly become participants and players in such practices that contribute to the growing use of money power in politics which undermines democratic processes and norms – while hypocritically pretending to occupy a high moral ground. This has not merely undermined democracy in India but also tarnished the country’s reputation as foreign newspapers have started writing about, and commenting adversely on, such malpractices.

In addition, owners of media organizations have financial relationships, including share-holdings, with advertisers, resulting in only favourable information about such advertisers getting disseminated and unfavourable information against them getting blacked out. Such trends have been discernible in sections of the Indian media for some years now. The regulator of the country’s capital markets, the Securities and Exchange Board of India (SEBI), has written to the Press Council of India on the issue of “private treaties” between media companies and other corporate entities and suggested disclosure of financial holdings and mandatory enforcement of guidelines to ensure that the interests of investors are adequately safeguarded – these suggestions have been endorsed by the Press Council of India which, in 1996, drew up a set of guidelines that are particularly applicable to financial journalists.

Certain publications (such as Mint) have drawn up their own codes of ethics that are worthy of emulation as a measure of self-regulation. But self-regulation is not adequate for checking rampant malpractices and corruption that have assumed epidemic proportions in many sections of the print medium as well as the television medium.
In the area of political “paid news”, given the illegal and clandestine nature of such malpractices, it is not easy to find clinching evidence that pins responsibility for such corrupt practices on particular persons and organizations. There is, however, a huge volume of circumstantial evidence that points towards the growing use of the media for publishing “paid news” which is a form of electoral malpractice. Identical articles with photographs and headlines have appeared in competing publications carrying bylines of different authors around the same time. On the same page of specific newspapers, articles have been printed praising competing candidates claiming that both are likely to win the same elections. Nowhere is there any indication that the publication of such “news” reports has entailed financial transactions or has been sponsored by certain individuals or political parties.
When confronted with circumstantial evidence that substantiate allegations of “paid news”, the standard reaction of individuals and representatives of media organizations accused of corrupt practices is to pretend that nothing untoward has happened since the evidence is circumstantial in nature. The typical response of representatives of political parties as well as media organizations who have been named and against whom specific allegations of corruption have been levelled, is to flatly deny these allegations. In private, however, these very same people acknowledge that the cancer of “paid news” has spread deep into the country’s body politic and needs to be removed.

Such malpractices have destroyed the credibility of the media itself and are, therefore, detrimental to its own long-term interests. It needs to be noted in this context that so long as journalists (in particular, those who work in non-urban areas) are paid poverty wages or are expected to earn their livelihood by doubling up as advertising agents working on commissions, such malpractices would continue to be rampant.

It can be argued that the proliferation of the “paid news” phenomenon can be related directly to the diminution of the role and the status of editors in media organizations and the erosion of the freedom enjoyed by journalists under the Working Journalists Act. As more and more senior journalists chose to work with their employers under fixed term contracts, they opted out of the protection that was accorded to them under the provisions of the Act. Until the 1970s and the 1980s, many editors would not brook any “interference” from the management of the company they would be employed by – the number of such editors started dwindling as more and more senior journalists started acceding to every whim of their managers and employers instead of their editors. With managers playing a more influential role in the selection and presentation of news, it was not surprising that the importance of the news started getting determined by the revenues that would be generated for the media company.
Renowned journalist, the late Shri Prabhash Joshi spoke extensively in public about “paid news”. The Rural Affairs Editor of The Hindu Shri P. Sainath has written a series of articles on the phenomenon, many of which have highlighted the manner in which the electoral campaign of the Chief Minister of Maharashtra Shri Ashok Chavan was conducted through newspapers in September-October 2009. When contacted, Shri Chavan denied that neither he nor any of his associates had paid money for media coverage and said that he had nothing to do with the manner in which “news” about him was carried by publications and television channels before the state assembly elections.

The Andhra Pradesh Union of Working Journalists conducted a detailed sample survey to highlight the manner in which newspapers had published “paid news” items before the Lok Sabha elections and the state assembly elections that were conducted simultaneously in April-May 2009. Particular candidates who stood for elections in Andhra Pradesh named publications whose representatives had asked them for money to publish favourable news items about themselves. Once again, representatives of these media organizations flatly denied the allegations. One candidate (Shri Parcha Kodanda Ram Rao of the Loksatta Party in Andhra Pradesh) formally represented to the Election Commission that he had paid a particular newspaper (Eenadu) to publish favourable “news” about himself and had included the payment in his official expenditure statement.

A number of senior journalists have formally complained about the phenomenon of “paid news” to the Press Council of India and the Election Commission of India, as has the Editors Guild of India. Various unions of journalists, including the Delhi Union of Journalists, have condemned such malpractices in the media. The National Alliance of People’s Movements, Lucknow, Uttar Pradesh, also prepared a report highlighting instances of “paid news” appearing in newspapers before the 2009 general elections.
The phenomenon of “paid news” has attracted the critical attention of many individuals and sections of Indian society. For instanced, the Vice President of India and Chairman of the Rajya Sabha, Shri Abdul Hamid Ansari, Union Ministers such as Information & Broadcasting Minister Smt Ambika Soni and Human Resources Development Minister Shri Kapil Sibal, spokesperson of the Indian National Congress Shri Manish Tewari, senior leader of the Bharatiya Janata Party (BJP) and Member of Parliament (MP) Shri L.K. Advani, the Leader of the Opposition in the Lok Sabha and BJP MP Smt Sushma Swaraj, the leader of the Opposition in the Rajya Sabha and BJP MP from the Rajya Sabha Shri Arun Jaitley, the General Secretary of the Communist Party of India (Marxist) Shri Prakash Karat, the Chief Minister of Andhra Pradesh Shri K. Rosaiah, noted actor Shri Amitabh Bachchan, among many others, have all expressed their concern about the “paid news” phenomenon in the country. A number of seminars and conferences on the issue have taken place.

A detailed discussion on the subject took place in the Rajya Sabha during which Information & Broadcasting Minister Smt Soni stated that the government was actively considering the option of providing more powers to the Press Council of India to check this phenomenon which is undermining the credibility of the media and democratic processes. She said the media acts as a repository of public trust for conveying factual information to the people. However, when paid information is presented as independent news content, it misleads the public and hampers the ability of people to form correct opinions.

In the final analysis, the question arises as to what can be done to check such corrupt practices in the media that compromise democratic processes. Can anything be done at all in this regard? The answers are not easy nor are they simple or clear-cut. Despite its quasi-judicial status, the Press Council of India has limited powers. The Council has the power to admonish, reprimand and pass strictures but cannot penalize the errant or those found guilty of malpractices. Besides, the Council’s mandate does not extend beyond the print medium. A proposal to amend Section 15(4) of the Press Council Act, 1978, to make the directions of the Council binding on government authorities, has been pending for a long time and should be amended to provide the Council more “teeth”.

Appointing ombudsmen in media organizations and better self-regulation are options to check the “paid news” phenomenon. However, self-regulation only offers partial solutions to the problem since there would always be offenders who would refuse to abide by voluntary codes of conduct and ethical norms that are not legally mandated. The owners of media companies need to realize that in the long term, such malpractices undermine not just democracy in the country but the credibility of the media as well. Civil society oversight can also deal with the problem, but only to an extent. New rules and guidelines can be introduced and extant ones modified or amended. For instance, there should be a debate among all concerned stakeholders as to whether a directive of the Supreme Court of India that enjoins television channels to stop broadcasting campaign-related information on candidates and political parties 48 hours before polling takes place can and should be extended to the print medium since such a restriction does not apply to this section of the media at present.

A number of politicians cutting across party lines have suggested an amendment to Section 123 of the Representation of the People Act, 1951, to declare the exchange of money for “paid news” as a corrupt practice or an “electoral malpractice”. It can be effectively argued that the existing laws of the land (including the provisions of the Indian Penal Code, the Criminal Procedure Code, the Representation of the People Act, the Income Tax Act) have the potential to check such malpractices provided the concerned authorities, including the Election Commission of India, are not just proactive but also act in an expeditious manner to apprehend those indulging in practices that are tantamount to a corrupt practice (including an electoral malpractice) or committing a fraud.

An empowered Press Council of India should appoint observers who would assist the Election Commission of India to check the “paid news” phenomenon during election campaigns. These are among the conclusions and observations that have been laid down in greater detail at the end of the report. All these steps may not entirely stop such malpractices in the Indian media but could reduce their incidence to an extent.

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How corruption in the Indian media undermines democracy

The Background:
News reports that are printed in publications or broadcast on television channels are meant to provide information that is not only of interest to the public at large but information that is supposed to be truthful or factually correct and at the same time, balanced, objective, fair and neutral. This is what clearly sets apart such information described as news from either opinions expressed in editorial articles or, more importantly, advertisements or commercials that are paid for by corporate entities, governments, organizations or individuals. When the distinction between news and advertisements start blurring, when advertisements double up as news that have been paid for, or when “news” is published or broadcast in favour of a particular politician or a political party by selling editorial space, the reader or the viewer is misled or duped into believing that an advertisement or sponsored feature is a “news” story that is truthful, fair and objective.

This report on “paid news” prepared by a Sub-Committee of two members of the Press Council of India tracks the blurring boundaries between news and advertisements or “advertorials” and highlights the efforts made by certain individuals and representatives of organizations who have painstakingly chronicled the selling of editorial space for money, especially during the April-May 2009 general elections in the country and also during the September-October 2009 elections to the state assemblies of Maharashtra and Haryana.

This report also documents the denials that have been issued by representatives of media organizations and political personalities against whom specific allegations of corruption and malpractice have been levelled and against whom a considerable volume of circumstantial evidence has been acquired, collated, documented and presented before the Press Council of India. Moreover, this report summarizes the depositions that were made by over 50 individuals and representatives of various organizations (including media organizations, journalists’ unions and political parties) before the members of the Press Council in New Delhi, Mumbai and Hyderabad and through written letters and representations and also through electronic mail.
The media industry in India and elsewhere has become increasingly difficult to regulate due to several reasons: technological developments, the globalisation of media conglomerates and the trend of certain suppliers and creators of news (public relations practitioners, advertisers and interest groups) getting closely involved with the working of media organisations. The dynamics of the media industry aside, the sheer extent of influence exercised by the media over the public at large is reason enough for subjecting the ethical practices and business activities of media organisations to critical scrutiny.

The concepts of democracy and of the market are both built on the principle of individual choice, but there is a danger that those who have accumulated wealth in the market will use it to exert influence over decisions that should be governed by democratic principles. Media institutions face particular dilemmas because these organisations represent a key element of an effective democracy while being, for the most part, commercial entities seeking success in the market by maximising profits. The commercial activities and market interests of media institutions might distort the role they play in the formation of public opinion and consequently in upholding principles and norms of democracy. Favourable coverage for those in positions of power and authority by the media, for commercial reasons, might influence the decisions made by these people.

A widespread problem is the attempt to influence public debate through the purchase of advertising space and the purchase of favourable editorial comment. Although some owners and editors of media companies try to erect a firewall – or a “Chinese Wall” – between journalists or content creators/producers, on the one hand, and buyers and sellers of advertising space, on the other, in some newspapers, magazines and television channels, this wall has too many convenient access doors. Most journalists are employees, increasingly, of large companies or organisations whose primary aim is to maximise profits and returns to shareholders. Insofar as journalists’ duties are in part defined by their role in corporate organisations, most of the ethical dilemmas they face begin with the inherent conflict between the individual’s role as a journalist providing independent information to the public and his or her employer’s quest for profit.

Corruption in the mass media in India and in other countries of the world is as old as the media itself. If there is corruption in society, it would be unrealistic to expect the media to be free of corruption. India is the world’s largest democracy. A vibrant and diverse mass media is an important pillar of democracy in this country. The independence of the media facilitates adherence to democratic norms. Article 19 of the Constitution of India confers the right to freedom of speech and expression to all citizens of the country and to the media as well. In recent years, corruption in the Indian media has gone way beyond the corruption of individual journalists and media organizations: from “planting” information and views in lieu of favours received in cash or kind, to more institutionalized and organized forms of corruption wherein publishers of newspapers and owners of television channels receive funds for publishing or broadcasting information in favour of particular individuals or corporate entities that is disguised as “news”.

What follows is first, an outline, and then, detailed accounts of such corrupt practices in sections of the media in India.
How editorial space was compromised by political “paid news”
As already observed, news is meant to be objective, fair and neutral -- this is what sets apart such information and opinion from advertisements that are paid for. When “news” is published in favour of a particular politician or a political party by selling editorial space, the phenomenon of “paid news” becomes even more pernicious. Innumerable complimentary “news” reports and feature articles on representatives of political parties, including candidates who have been contesting elections, have appeared in newspapers and broadcast on television channels across the country in the run-up to the 2009 Lok Sabha elections as well as the state legislative assembly elections. No disclosure was made that before such “news” was printed or broadcast, that money had been exchanged between the concerned candidate or political party to which he or she belongs and the owners or representatives of media organizations.

Such malpractices enabled candidates contesting elections to not disclose their true expenditures on campaigning which, if made public, would have in certain cases violated the Conduct of Election Rules, 1961, which have been framed by, and are meant to be enforced by, the Election Commission of India under the Representation of the People Act, 1951. The concerned newspapers and television channels received money for “paid news” in cash and not in the form of cheques and did not disclose such earnings in their official company balance sheets. This malpractice has become widespread and cuts across newspapers and television channels, small and large, in different languages and located in various parts of the country, and this is evident from the many examples provided subsequently in this report.

What is worse, these illegal operations have become “organized” and involve advertising agencies and public relations firms, besides journalists, managers and owners of media companies. Marketing executives use the services of journalists – willingly or otherwise – to gain access to political personalities. So-called “rate cards” or “packages” are distributed that often include “rates” for publication of “news” items that not merely praise particular candidates but also criticize their political opponents. Candidates who do not go along with such “extortionist” practices on the part of media organizations are denied coverage. Sections of the media in India have consciously chosen to become partners, participants and players in malpractices that contribute to the growing use of money power in politics that, in turn, undermine democratic processes and norms. At the same time, representatives of media organizations against whom allegations are levelled publicly condemn the practice of “paid news”. Some such individuals behave in a hypocritical manner and pretend to occupy a high moral ground.
Given the illegal and clandestine nature of such malpractices, it is not easy to find clinching evidence that pins responsibility for such malpractices on particular persons and organizations. There is, however, a huge volume of circumstantial evidence that points towards the growing use of the media for publishing “paid news” which is a form of an electoral malpractice. Identical articles with photographs and headlines have appeared in competing publications carrying bylines of different authors around the same time. On the same page of specific newspapers, articles have been printed praising competing candidates claiming both are likely to win the elections.

That “paid news” is a phenomenon that is deleterious to the credibility and independence of the media itself needs to be emphasized. Edelman, an independent public relations firm, in its 2010 Trust Barometer Survey (conducted in 22 countries worldwide, including India and six other countries in the Asia-Pacific region) stated that the Indian media has been losing its credibility and trust among the people. The study, which sampled 1,575 people in the 25-64 age group and 200 opinion leaders in India, noticed a sharp drop in trust over the past two years in television news in India. However, newspapers are ranked higher than other media in terms of credible news with people trusting newspapers more than any other medium: 38 per cent of the Indians polled trusted radio and television, while 40 per cent trusted news in newspapers. Over the past two years, trust in television news dropped sharply from 61 per cent to 36 per cent, that of business magazines has gone down from 72 per cent to 47 per cent, and that of newspapers has gone down from 61 per cent to 40 per cent. Trust in the media in India as a whole declined by 7 per cent (from 65 per cent in 2009 to 58 per cent in 2010). On the other hand, China has seen the trust in media go up from 59 per cent in 2009 to 63 per cent in 2010. However, in terms of overall trusted institutions in India, media has performed better than the government as an institution. Sixty-seven per cent of Indians trust business as an institution, followed by the Indian media in the second position, with 58 per cent Indians trusting it. Non-government organizations (NGOs) and the government are placed in third and fourth positions, respectively.

In another survey conducted by the Readers’ Digest in March 2010, called the Trust Survey, 750 Indians were asked to rank the short-listed individuals belonging to different professions. Journalists were ranked 30 out of the 40 professionals listed and were placed next only to barbers and bus drivers.

Given the kind of blatantly dishonest practices being followed in sections of the mass media in India in recent times, the levels of credibility and trust in newspapers and television channels are bound to drop further, all of which would be harmful to building a vibrant and responsive democracy in the country. The publication or broadcast of “paid news” have not merely undermined democracy in India but also tarnished the country’s reputation as foreign newspapers have already started writing about, and commenting adversely on, such malpractices. In recent months, articles about such malpractices have appeared in at least three newspapers, the Wall Street Journal (published from the United States), the Guardian (United Kingdom) and the Independent (Bangladesh), none of which edify either the media in India nor contribute to projecting a positive image of the world’s largest democracy.

The ‘Medianet’ and ‘Private Treaties’ phenomena
In pursuing its quest for profits, it can be argued that certain media organizations have sacrificed good journalistic practices and ethical norms. Individual transgressions -- reporters and correspondents being offered cash and other incentives, namely paid-for junkets at home or abroad in return for favourable reports on a company or an individual – were, until recently, considered more of an aberration than a norm. News that was published in such a manner was suspect because of the fawning manner in which events/persons were described while the reports gave an impression of being objective and fair. The byline of the journalist was stated upfront. Over the years such individual transgressions became institutionalised.

In the 1980s, after Sameer Jain became the executive head of Bennett, Coleman Company Limited (BCCL), publishers of the Times of India (TOI) group of publications, the rules of the Indian media game began to change. Besides initiating cut-throat cover-price competition, marketing was used creatively to make BCCL one of the most profitable media conglomerates in the country – it currently earns more profit than the rest of the publishing industries in the country put together though as a corporate group, the STAR group has in recent years recorded a higher annual turnover in particular years.

The media phenomenon that has caused considerable outrage of late has been BCCL’s 2003 decision to start a “paid content” service called Medianet, which, for a price, openly offers to send journalists to cover product launches or personality-related events. When competing newspapers pointed out the blatant violation of journalistic ethics implicit in such a practice, BCCL’s bosses argued that such “advertorials” were not appearing in newspapers like the TOI itself, but only in the city-specific colour supplements that highlight society trivia rather than hard news. There was another, more blatant justification of this practice not just by BCCL but other media companies that emulated such a practice after BCCL started it. If public relations (PR) firms are already “bribing” journalists to ensure that coverage of their clients is carried, what was wrong then with eliminating the intermediary – in this instance, the PR agency – it was argued.

Besides Medianet, BCCL devised another “innovative” marketing and PR strategy. In 2005, ten companies, including Videocon India and Kinetic Motors, allotted unknown amounts of equity shares to BCCL as part of a deal to enable these firms to receive advertising space in BCCL-owned media ventures. The success of the scheme turned BCCL into one of the largest private equity investors in India. At the end of 2007, the media company boasted of investments in 140 companies in aviation, media, retail and entertainment, among other sectors, valued at an estimated Rs 1,500 crore. According to an interview given by a senior BCCL representative (S. Sivakumar) to a website (medianama.com) in July 2008, the company had between 175 and 200 private treaty clients with an average deal size of between Rs 15 crore and Rs 20 crore implying an aggregate investment that could vary between Rs 2,600 crore and Rs 4,000 crore.

It is a separate matter that the fall in stock-market indices in 2008 robbed some of the sheen off the “private treaties” scheme for the BCCL management. While the value of BCCL’s holdings in partner companies came down, the media company had to meet its commitments to provide advertising space at old “inflated” valuations which also had to be shown as assessable taxable income for BCCL on which corporation tax is levied.
Even as the private treaties scheme was apparently aimed at undermining competition to the TOI, a number of the newspaper’s competitors as well as television channels started similar schemes. The “private treaties” scheme pioneered in the Indian media by BCCL involves giving advertising space to private corporate entities/advertisers in exchange for equity investment – the company officially denies that it also provides favourable editorial coverage to its “private treaty” clients and/or blacks out adverse comment against its clients.

While BCCL representatives denied receiving money for providing favourable editorial space, the integrity of news was compromised. In advertisements published in the Economic Times and the TOI celebrating the success of the group’s private treaties, on December 4, 2009, the Mumbai edition of the newspapers published a half-page colour advertisement titled “How to perform the Great Indian Rope Trick” and cited the case of Pantaloon. What was being referred was how Pantaloon’s strategic partnership with the TOI group had paid off. The advertisement read: “…with the added advantage of being a media house, Times Private Treaties, went beyond the usual role of an investor by not straining the partner’s cash flows. It was because of the unparalleled advertising muscle of India’s leading media conglomerate. As Pantaloon furiously expanded, Times Private Treaties (TPT) ensured that (it) was never short on demand. The TPT has a better phrase for it -- business sense.”

In many media organizations, news is sought to be distinguished from material that is paid for, called advertisements or “advertorials”, by using different or distinctive fonts, font sizes, boundaries and/or disclaimers such as “sponsored feature” or even the letters “advt” printed in a miniscule font size in a corner of the advertisement – which may or may not escape the attention of the reader. However, in certain instances, even a fig-leaf of a disclaimer was done away with. For instance, a year-long series of articles on the skin-care product, Olay, in Delhi Times, the city supplement of the Times of India, would appear to have fallen into the category of “paid news” even if this was denied by the newspaper. Whereas BCCL representatives have often argued that the companies private treaties scheme is open to public scrutiny since the companies in which BCCL has picked up stakes is in the public domain and listed on its official website, the influence such companies wield on editorial content is a matter of contention and debate.

An advertising campaign by razor blade manufacturing company, Gillete, called “war against lazy stubble”, broadcast on the CNN-IBN television news channel, showcased features, interviews of celebrities, as well as panel discussions on the topic of whether a man should shave or not with a foregone conclusion: “Indian women prefer clean shaven men”. It was claimed that the Gillette-CNN-IBN “exclusive partnership” was a mutually beneficial alliance. There are many other such examples of “advertorials”.
Suggestions by Securities and Exchange Board of India to Press Council of India:
On July 15, 2009, Shri S. Ramann, Officer on Special Duty, Integrated Surveillance Department of the Securities and Exchange Board of India (SEBI) wrote to the Chairman, Press Council of India, Justice G.N. Ray observing that many media companies were entering into agreements called “private treaties” with companies whose equity shares are listed on stock exchanges or companies that were coming out with a public offer of their shares. The media companies were picking up stakes in such companies and in return, were proving coverage through advertisements, news reports and editorials. The SEBI, which has been set up under the Securities and Exchange Board of India Act, 1992, and is mandated to protect the interests of investors, felt that such promotional and brand building strategies in exchange for shares, “may give rise to conflict of interest and may, therefore, result in dilution of the independence of (the) press vis-à-vis the nature and content of the news/editorials relating to such companies”.

The SEBI pointed out that “private treaties” may “lead to commercialization of news reports since the same would be based on the subscription and advertising agreement entered into between the media group and the company”. Furthermore, “biased and imbalanced reporting may lead to inaccurate perceptions of the companies which are the beneficiaries of such private treaties”. Hence, the SEBI “felt that such brand building strategies of media groups, without appropriate and adequate disclosures, may not be in the interest of investors and financial markets as the same would impede in them taking a fair and well-informed decision. The SEBI suggested the following:



  1. Disclosures regarding the stake held by the media company may be made mandatory in the news report/article/editorial in newspapers/television channels relating to the company in which the media group holds such a stake.

  2. Disclosure on percentage of stake held by media groups in various companies under such “private treaties” on the website of media groups may be made mandatory.

  3. Any such disclosures relating to such agreements such as any nominee of the media group on the board of directors of the company, any management control or other details which may be required to be disclosed and which may be a potential conflict of interest for the media group, may also be made mandatory.

The SEBI communication to the Press Council of India pointed out that a “free and unbiased press is crucial for the development of the securities market, particularly with respect to aiding small investors to take a well informed decision” and urged the Council to address this issue at the earliest.


In this context, the Council referred to the existing guidelines for financial journalists that had been framed in 1996, which include the following:


  1. Financial journalists should not accept gifts, loans, trips, discounts, preferential shares or other considerations which compromise or are likely to compromise his position.

  2. It should be mentioned prominently in a report about a company that the report has been based on information provided by the company or its financial sponsors.

  3. When trips are sponsored for visiting establishments of a company and hospitality extended, the author of the report who has availed of such facilities must invariably state these in his report.

  4. A reporter who exposes a scam or brings out a report for promotion of a good project should be encouraged and awarded.
  5. A journalist who has a financial interest in a company (including holding of shares) should not report on that company.


  6. The journalist should not use for his personal benefit or for the benefit of his relations or friends, information received by him in advance for publication.

  7. No newspaper owner, editor or anybody connected with a newspaper should use his relationship with the newspaper to promote his other business interests.

  8. Whenever there is an indictment of a particular advertising agency or advertiser by the Advertising Standards Council of India, the newspaper in which the advertisement was published must publish news of the indictment prominently.

After deliberating on the issue, the Press Council of India endorsed the views expressed by the SEBI and stated that the relevant guidelines should be made applicable and mandatory not only to financial journalists but to owners of media companies as well. This would be in the interests of transparency and fairness and would reduce the incidence of biased news about companies being published that is inimical to the interests of investors.




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