Product placement

The directive of the Securities and Exchange Board of India to media companies to disclose details of their ‘private treaties’ on their websites will hopefully curb the ill-effects of a wrong and deleterious journalistic practice which has gained currency in recent times. SEBI has also mandated that media houses should disclose in news reports their stakes in the companies that are written about. Private treaty arrangements are actually more a management practice that has impacted journalism than a journalistic idea. They are agreements under which a media house picks up a stake in a company and in return provides media coverage, obviously favourable, to that company through advertisements, news reports and the like. Media companies gain from the financial stake they acquire and from the company’s advertisements; the company benefits from the media coverage it gets.

The investor in the company and the reader or the viewer are the losers because they may get wrong or misleading information about the companies. SEBI has taken the step because the investor is entitled to full financial disclosure and information about the activities of the companies he is investing in. It has noted that commercial considerations, resulting from the operation of private treaties, can lead to biased and motivated reporting which is not in the interest of investors and the financial markets. But the issue is not just of financial propriety but of journalistic ethics too. The conflict of interest created by the management’s interest in the company being reported about can result in warped and biased reporting. The objectivity and independence of the media are lost in the process. SEBI had taken up the issue of private treaties with the Press Council of India, which is a quasi-judicial media watch dog. The Press Council has accepted SEBI’s proposals but it has no real power to enforce them. SEBI is better placed in that respect as it has powers to check the conduct of companies listed in the stock market.

The private treaty arrangement is similar to the paid news phenomenon seen during the last elections whereby candidates got coverage in return for monetary consideration. The paid news practice was seen only during elections. But private treaties are more deleterious because they have become a permanent feature of the business model of many media companies. By blurring the distinction between news and advertisements and promoting private over public interest, they shortchange the reader and the viewer.

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