New Delhi: The Telecom Regulatory Authority of India (Trai) called for a ban on practices such as “private treaties" that are followed by newspaper companies in its proposals on media ownership.

Private treaties is the practice where a newspaper enters into ad-for-equity deals with private firms. In other words, newspapers promise advertising in exchange for equity in the company. Often, such clients of publishing companies get favourable coverage.

Speaking at the conference on Tuesday, Trai chairman Rahul Khullar said that private treaties and its variants should be proscribed. “Newspapers cannot keep passing off ads as news. It is wrong," he said.

Bennett, Coleman & Co. Ltd, the country’s largest print media house that publishes The Times of India and The Economic Times, pioneered the “private treaties" business in 2004. The treaties allowed BCCL to pick up equity stakes in firms in return for promoting those “partners" via long-term advertising and promotion deals. The business now operates under Brand Capital.

BCCL’s deals business became controversial after it emerged that, in at least some instances, the deal includes positive coverage. In fact, the capital markets regulator Securities and Exchange Board of India asked media companies to provide better disclosure of such deals. In response, BCCL created a separate website for its private treaties business. BCCL is a competitor of HT Media Ltd, the publisher of Hindustan Times and Mint, which also has its own version of private treaties.

Declining to comment on Trai’s proposal to ban the private treaties business, Ravi Dhariwal, CEO (publishing) at Bennett, Coleman, said: “What Trai understands of private treaties and what we do may be poles apart. I do not wish to comment on this right now."

N. Ram, chairman of Kasturi & Sons Ltd, the publisher of The Hindu, said that private treaties was an awkward area. “How do you ban it legally? Trai can’t do it and Press Council of India is not empowered to do it. It is a bad practice, but it cannot be stopped although Sebi did come up with some disclosure norms."

Trai also recommended that newspapers should also be held accountable for another malpractice, that of paid news. Paid news is the practice where advertising or promotion masquerades as news. During elections, the practice picks up as political candidates prefer to promote themselves through advertisements disguised as news articles, in one part because this helps them game the Election Commission’s rules on spending, and in other part because news is generally more credible than advertising.

Trai suggests that both the newspaper and the politician should be liable for penal action in the event of paid news. “...it is imperative that liability reposes in both parties to the transaction if it is tried to be passed off as news."

“Paid news is a rogue practice that must be eradicated. It should be examined from a legal stand point. The Election Commission looks only at the candidate and has no power over media which is equally responsible for this practice. Either the Press Council of India should be given the power, or the law makers should impose penalties on the media houses if they are found guilty of indulging in paid news," said Ram.

Journalist Paranjoy Guha Thakurta, who wrote the report on paid news for the Press Council of India, said paid news is a clandestine transaction that will never be made public by either of the parties involved. “Clearly, this practice cannot be addressed by these guidelines. It is a deep-rooted problem."

Thakurta said that even though Trai’s recommendations on other media ownership issues are “excellent", they are unlikely to be implemented by the government.

“Owners of media and politicians in power will not antagonise each other."

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