Phone-Hacking Probe Unites Foes Against Regulation by Queen, ‘King Rupert’

News Corp. (NWSA)’s phone-hacking scandal has united editors and some victims over the possibility that a judge-led inquiry that started today may scrap the U.K. system of media self-regulation in favor of government limits on press freedom.

Illegal tactics by reporters at Rupert Murdoch’s now- shuttered News of the World tabloid went unchecked partly because the Press Complaints Commission doesn’t have the power to investigate misconduct, said Graham Shear, a lawyer for celebrity victims whose own phone was hacked.

The inquiry, set up in July by Prime Minister David Cameron, formally begins in London less than a week after News Corp. Deputy Chief Operating Officer James Murdoch gave testimony for a second time to lawmakers running a parallel probe of the scandal. Judge Brian Leveson is tasked with finding out how the current regulations failed and proposing new rules.

“I would like there to be a free press -- free of the state and free of corporate control,” Mark Lewis, a lawyer for dozens of hacking victims who won the first out-of-court settlement from News International in 2008, said in an e-mail. “Neither Queen Elizabeth nor King Rupert should decide what we read.”

The PCC, which is funded by the industry and has no legal powers, was criticized for its handling of the News Corp. scandal, which started in 2006 when News of the World reporter Clive Goodman and in-house investigator Glenn Mulcaire were arrested and pleaded guilty to hacking into phone messages left for members of the royal family’s household.

‘Soft Regulator’

The watchdog “is a ‘soft regulator’ pretending to be a real one; it isn’t fit for its purpose,” Shear, of Berwin Leighton Paisner LLP in London, said in an interview. “You can’t have current editors doing the regulation.”

While the PCC and the Metropolitan Police at first went along with News Corp.’s claim that the scandal was contained, evidence slowly emerged that other journalists were involved and that thousands of phones were targeted, including those of crime victims. The revelation prompted News Corp. to close the 168- year-old tabloid in July and drop its bid for full control of British Sky Broadcasting Group Plc. (BSY)

The first phase of the Leveson Inquiry covers the culture and ethics of the U.K. press, including its relationship with the public and police, who may have been bribed for stories. The PCC, with its existence at stake for failing to investigate, has given the study a mixed reception.

‘No Wish’

“I have absolutely no wish to stifle freedom of speech or expression,” Leveson said at today’s hearing, referring to his concern that phone-hacking victims who give testimony to the inquiry may again be abused by the press. Such stories would be viewed as evidence of a problem with the media, he said.

“It’s widely recognized that governmental interference in journalism is to be avoided,” PCC Director Stephen Abell, who has worked for the watchdog for more than a decade, said in a phone interview. “There’s a clear risk of statutory regulation affecting freedom of the press and freedom of expression.”

Mandatory regulation of the press could hurt profits of newspaper companies and fail to address the main problem -- that the police didn’t investigate properly, said Niri Shan, a media lawyer with Taylor Wessing LLP in London.

‘Serious Criminal Offenses’

“To put this at the PCC’s door and say they should have dealt with it, is a very narrow way of looking at it,” Shan said in a phone interview. “It really isn’t the PCC’s role to regulate serious criminal offenses.”

One of the harshest critics of the inquiry is Paul Dacre, editor of Associated Newspapers Ltd.’s Daily Mail, who told Leveson last month that News Corp.’s wrongdoing wasn’t proof that more regulation was needed. Instead, he said, it exposed government coziness with News Corp. Chairman Rupert Murdoch and police blunders during earlier hacking probes.

“Over-regulate the press and you put democracy itself in peril,” Dacre said at a hearing. “Who should decide what’s of interest to the public? Politicians? Judges? Is that really what Britain wants?”

Participants in the inquiry have said the PCC may need a “back-up” regulator with power to handle appeals of its decisions, investigate claims and issue fines in cases that are too complex for the current watchdog.

Robert Baldwin, a law professor at the London School of Economics, said the inquiry may result in a combination of self- regulation and new laws giving a watchdog powers to investigate and demand information from newspaper owners.

“It’s often difficult for victims of malpractice to discover the nature of actions taken against them,” Baldwin said in an interview. It’s important “that any new complaints body or ombudsman should possess, amongst other things, the powers to investigate.”

The PCC’s website says self-regulation works “because the newspaper and magazine publishing industry is committed to it.” That was called into question after Northern & Shell Group Ltd., whose titles include the Daily Express and OK! magazine, withdrew from the PCC in January.

Northern & Shell may rejoin a voluntary regulator if, after the Leveson inquiry, the PCC reappears in “a different, wholly beneficial form” that isn’t prejudiced against the publisher, said Sam Bowen, an external spokesman for the company.

Not in the ‘Club’

“Currently, we don’t need to be part of the club to regulate ourselves,” Bowen said in an e-mail. “We have a legal team which oversees everything that goes to print in our titles and applies principles identical to those applied by the PCC.”

Northern & Shell paid a 550,000-pound ($884,000) libel settlement in 2008 to the parents of Madeleine McCann, an English child who disappeared while on vacation in Portugal, for scores of critical articles written about them. The McCanns are among dozens of victims who may testify at the Leveson inquiry.

Abell, the PCC director, said Leveson should improve the current system of voluntary self-regulation rather than endorse new laws, possibly by “incentivizing” newspaper companies to regulate themselves rather than forcing them to do so. News Corp. misled the PCC and the company’s wrongdoing should have been uncovered by police, he said.

“The voluntary system carries real strength, but there are flaws,” Abell said. “This is an opportunity to look at every option, however unpalatable it might seem. Leaving the PCC as it is, is not an option.”

To contact the reporter on this story: Erik Larson in London at elarson4@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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