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The Wireless Group v. Rajar: a lucky escape for the industry

What lessons can be learnt from Rajar's recent high-profile case against Kelvin MacKenzie's The Wireless Group, and how do they impact on the media? Charles Whiddington and Mark Lewis, of City law firm Field Fisher Waterhouse, discuss.

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Rajar, the industry body which commissions surveys and measures radio audiences, succeeded in striking out the high-profile claim of The Wireless Group (TWG), owner of talkSport radio, in the High Court on December 16 2004. Had the case been allowed to continue to full trial, it would have been a huge diversion of management and money. Worse, if TWG had succeeded, it could have forced a flawed and expensive electronic measurement system onto unwilling stakeholders.

Rajar surveys form the "currency" on the basis of which, for example, advertisers make decisions on placing advertisements with radio stations. Rajar is a non-profit company and is jointly owned by the BBC and the commercial radio sector through the Commercial Radio Companies Association (CRCA). In recent years there has been a tremendous growth in the number of radio stations – now at about 300 – as well as growth in the number of broadcasting platforms.

The diary method of measuring audience listening is the overwhelmingly preferred method used throughout the world by national bodies like Rajar. So far, only Switzerland, where RadioControl was invented, has adopted an electronic measurement system. Rajar has conducted the most comprehensive and detailed tests on the available technologies. Indeed, it leads the world in testing electronic measurement systems and has always been open to the adoption of an electronic system – but only when one is suitable for adoption.

In June 2003, having spent 15 months and considerable sums in testing the two electronic measurement systems which were then available (the RadioControl watch and the Arbitron People Meter), Rajar found significant problems with each of the meters and decided that it could not yet recommend either system to its industry stakeholders. It decided to continue with the diary method and to revert to the meter manufacturers to discuss with them whether they could modify their meters in order to meet the concerns which it had identified.

TWG then served notice of its intent to start court proceedings against Rajar over its failure to immediately adopt an electronic measurement system and abandon the diary methodology. TWG claimed that Rajar's refusal to adopt the electronic measurement system was causing serious financial loss, which TWG claimed, although not in court, amounted to some £66m. TWG claimed that Rajar's failure to adopt the latest technology was an abuse of its dominant market position, under the relevant competition laws. TWG also made claims in the press about fraud and conspiracy on the part of entrenched industry stations represented on Rajar's Board of Directors.

Rajar vigorously rejected all these claims, but confidentially disclosed all relevant documents to TWG demonstrating that the process of reviewing electronic measurement was continuing and that Rajar had not turned against the new technologies. Rajar tried its utmost to avoid litigation, even to the point (noted by the judge) of permitting TWG to cross-examine Rajar's witness. Nevertheless, in March 2004, TWG commenced proceedings and Rajar duly applied to the court to strike out the claim on the basis that it was misconceived, unsupported by the undisputed facts and that there was no reasonable prospect of TWG succeeding at trial.

TWG was seeking, in effect, a ruling from the court that Rajar's decision not to adopt an electronic measurement system was not objective and that it should, therefore, overturn the Board's previous decision and move to abandon the diary system in favour of an electronic system (TWG claimed in court not to mind which one). This would have had severe consequences, both for Rajar's immediate stakeholders and for the wider radio industry.

Potential consequences

  • In the first place, the first generation meters which had been tested by Rajar were found to be flawed and unreliable. During the extensive tests, numerous issues emerged, including apparent false positives (i.e. registering a participant as having listened to a station when no such listening took place) and false negatives (where the meter fails to register a listening event). In addition, there appeared to be strange listening patterns which were counter-intuitive for the particular stations involved. Also, two meters worn by the same participant recorded different and inconsistent results, which made it difficult to determine which was right.
  • Rajar would still have been faced with deciding which of two electronic measurement systems to adopt – a point stressed by the judge.
  • The costs of introducing an electronic measurement system, as well as the annual continuing survey costs, were expected to be substantially more than the current £4m annual cost of running the survey using the diary method.
  • Even at the time of Rajar's decision to refer the problems back to the meter manufacturers, they were already in the process of developing the next generation of meters which, they said, would take account of a number of the issues identified by Rajar.

    Successful strike-out applications are rare in cases concerning competition law because the facts are complex, often inter-twined with economic arguments and because it is a strong step for a court to take to deny a party the opportunity to explore the facts in full and to test the evidence in cross-examination at trial.

    In this case, the strategy of making the fullest possible confidential disclosure was vindicated in court so that the evidence before the judge was fuller than might have been expected (including the cross-examination of Rajar's witness) and he was able to strike out TWG's case on the basis of facts which were undisputed and indisputable. The judge held that TWG's claims did not match the reality of the case and expressly stated that companies must be able to take business decisions on normal commercial bases and in a normal way. He noted that when the reality of the Rajar board decision is considered, it could be seen that Rajar had not turned against the new technologies, but was taking a rational, commercial approach.

    Significance of the case

  • It frees Rajar from the diverting constraints of litigation and permits it to continue its journey towards the possible adoption of electronic measurement. This course is one which Rajar had charted in accordance with a timetable it announced in 2002 and reaffirmed in its September 2004 'Roadmap to Change'. This course has received the strong endorsement of the court and has not been changed by TWG's action.
  • The radio industry has been spared the financial burden of a costly trial and also the bulk of the costs of the action (which must be borne by TWG).
  • Rajar will be able to make an informed recommendation to the radio industry, based on the results of its stakeholder survey, conducted during 2004, and on the results of the most recent tests carried out on the three electronic meters now available on the market (the RadioControl watch, the Arbitron PPM and Eurisko's NOP World Media Monitor device).
  • Rajar's recommendations will be made with the interests of the whole of the radio industry in mind, unconstrained by the complaints of a single party. The radio industry stakeholders will also be able to make an informed choice, on the basis of tested and proven technology, for the delivery of services which they want at a price they are prepared to pay.
  • It affirms the test for striking out such competition law claims, demonstrating that such actions must be properly conceived and framed before being brought. Although such cases are complex, often involving a mix of law, facts and economics, it shows that in the right circumstances a court will not be fearful of striking out a claim which is not soundly based.

    The court's action in supporting bona fide commercial conduct by businesses such as Rajar in the context of the markets in which they operate makes sense and the decision which Rajar secured will enable it to move forward in an orderly and commercial manner in the interests of the whole industry.

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