Why media dogs don’t bark

One of the great mysteries of the banking cataclysm is why the media — who after all, are supposed to be the ‘Fourth Estate’ of the realm — failed to expose the insanity of what was happening in the world of shadow banking. In a chilling article in the New York Review of Books, Guardian Editor Alan Rusbridger suggests one answer, by recounting what happened to him and his newspaper after they were sued for libel and worse by Tesco, the UK’s version of WalMart.

Some of the most critical developments concerning economics, security, the environment, and social policy are immensely complex and worthy of careful explanation. But they do not necessarily sell newspapers. News organizations in the Western world, struggling with declining audiences and revenue, are shedding journalists, closing down foreign operations, and cutting costs. But they are also increasingly inhibited by efforts—of government officials and of private corporations—to prevent them from protecting sources or from carrying out difficult investigations. Many minds are rightly focused on the regulatory, economic, technological, and legal issues that news organizations committed to serious journalism should be addressing. A starting point would be to reform one of the potential obstacles to their doing so—the British laws of libel. Do not be lulled into a false security by the word "British": in the Internet age the British laws can bite you, no matter where you live.

Rusbridger’s account explains why even public-spirited and trust-funded newspapers find it nearly impossible to report accurately and critically on the doings of complex and powerful industries.

A full-scale defamation case develops an awesome momentum of its own. Letters rain in day after day, week after week—drafted by counsel, amended by junior partners, redrafted by senior partners, few of them earning less than $500 an hour. Their tone is alternately sneering, bullying, threatening, and demanding. Within seven weeks of receiving the initial writ of libel, The Guardian’s costs alone of responding to the bombardment of Carter-Ruck demands and drafting a defense had mounted to more than $500,000. Within nine weeks Carter-Ruck submitted an estimate of their own costs to date of $808,607. The firm’s lead partner claimed $78,200 for the 93 hours and six minutes he had toiled over the case (at $850 per hour). Another partner had clocked up $67,269 for 131 hours and 54 minutes (at $510 per hour), much of which appears to have been spent composing needling letters. The accountants Ernst and Young eventually wanted $173,000—for advising Tesco’s lawyers on Tesco’s own accounts. Berwin Leighton Paisner, the specialist tax lawyers who helped set up the offshore companies The Guardian had written about, billed Tesco for a further $361,000—presumably for explaining to Tesco’s lawyers the precise nature of the company’s own tax structures. Three barristers specializing in defamation law charged Tesco a further $155,125.

These remarkable sums for explaining the tax structures were all the more ironic since Tesco was fond of contending that The Guardian’s error was an elementary, “absurd” one. The total cost for both sides of fighting the action to the bitter end—which could have ended up largely being borne by either Tesco or The Guardian—could have been in the region of $7.6 million. All this for a case where any damages would have been relatively insignificant.

It’s a sobering story. I’ve been sued twice for libel in my time, and once had an article (about Robert Maxwell) spiked for fear of litigation. Believe me, this stuff is no joke, and I’m awestruck by Rusbridger’s courage in the face of intimidation. (Remember the Jonathan Aitken case?) But at least the Guardian is owned by a Trust and so is not subjected to the vicarious expectations of the stock market. Shareholder-driven media groups will be far more chary of incurring the litigious wrath of corporations. So it’s hardly surprising that the gathering banking catastrophe went largely unreported. Imagine for example how the bastards who ran Bear Stearns or Lehman Bros into the ground would have reacted to a newspaper report that suggested their business was built on fantasy and sand.

So… Even in the old world of powerful and rich newspaper groups, the media proved to be an indifferent, erratic and deficient watchdog. A big question is whether the emerging media ecosystem of innumerable, lightly-funded reporters and journalistic organisations will do any better. Conventional wisdom might suggest not: what blogger (or ISP) will resist a threatening letter from the likes of Carter-Ruck (the libel specialist employed by Tesco to fight the Guardian)?

Jeff Jarvis has some gloomy thoughts about this in response to Alan’s article.

In my various scenarios for the future of news that relies more heavily on independent practitioners and networks, libel suits remain a huge question for which I can’t find an answer. It’s enough to ask, as Rusbridger does, why a (financially struggling) news organization would go ahead in reporting on large companies with the chance of errors and crippling punishment for them or of legal harassment. It’s another matter for an individual reporter – a Josh Marshall (even if his wife and business manager is a high-level attorney who used to work for Dow Jones) or a HuffingtonPost blogger – to take on the risk of financial ruin for the sake of reporting. The Media Bloggers Association has arranged libel insurance for bloggers, but in the face of prosecution of the level Rusbridger describes, that would be just spitting in a volcano.

There is, however, a chink of light in the gathering darkness. Rusbridger spells out in great detail the huge cost of retaining the specialist accounting and legal expertise needed to understand the Tesco transactions. But one rule of the new ecology is that there is wonderful expertise out there on the Net, and there might be ways of harnessing all that collective knowledge — rather as Linux harnessed the distributed skills of great programmers across the world to build a ferociously complex operating system; or as Larry Lessig and Charlie Nesson have crowdsourced the task of preparing legal briefs for pro bono cases.