GEO

Broadcasters’ new disclosure adds little transparency

25 November, 2013

Financial reporting submitted by broadcasters to the Georgian National Communications Commission (GNCC) does not provide enough information on the sources of financing.

The GNCC recently released data it had received from broadcasters in which they for the first time had to disclose sources of financing that contributed more than GEL 7,000 to their operation in the third quarter (July 1 to September 30) of 2013.

  • The majority of broadcasters failed to comply with the disclosure and did not submit a report to the GNCC, a number of those broadcasters that submitted information to the GNCC did not name their sources of income;

  • In many cases, companies that funded broadcasters cannot be identified as no company ID numbers are included in the report;

  • Often, advertising agencies and other intermediary companies are listed in the disclosure – as a result, the actual source of financing remains unknown;

  • Six broadcasters reported received financing from companies with offshore owners;

  • Several state agencies were listed as sources of financing by broadcasters, but none of these agencies has so far uploaded these contracts to the electronic state procurement system.

The information published by the broadcasting regulator included reports provided by 31 broadcasters, suggesting that many broadcasters failed to submit the disclosure forms – the GNCC currently lists 99 radio and TV stations that either hold a broadcasting license or an authorization and act under its supervision. The GNCC’s disclosure report, which aggregates all information submitted by broadcasters, lists approximately 100 different entities – including private companies, advertising companies, political parties and local government entities – as financiers of broadcasters.  

The new disclosure requirements were introduced with changes to the Law on Broadcasting that came into force in July.

“4. The commission shall set up electronic accounting forms. Besides the information determined by this law, the accounting forms should foresee the information about the funding of the broadcasters, including separate information about the income of broadcasters from advertising, sponsorship, teleshopping and information about donations made by the owner of the broadcaster or by any other person. The accounting forms shall also envision information about services rendered to broadcasters, including free or paid services provided by the owner of the broadcasting organization or any other person. Broadcasters shall submit the Commission with accounting forms after completion of each quarter by 15th of the following month.

41. Within 7 days from receiving the accounting forms filled by broadcasters in accordance with paragraph 4 of this Article, the Commission shall publish them.

42. The Commission shall make public the identity of the person if the person has placed advertising, sponsorship or teleshopping worth more than seven thousand GEL within the last three months, or if the person has donated or provided service worth more than seven thousand GEL to a broadcaster in the last three months.” Law on Broadcasting, Article 70

Several broadcasters have challenged the reporting forms that the GNCC developed to comply with the new disclosure requirements. Rustavi 2, Maestro TV, Tabula, and Georgian Association of Regional Broadcasters (GARB) in October addressed the Tbilisi city court, requesting a change of the GNCC’s financial reporting forms for broadcasters. According to the GNCC, it has set up a special working group to resolve the dispute and develop a mutually acceptable reporting form that is in compliance with the law.

TI Georgia analyzed the first disclosure report issued by the GNCC and we found that in its current form, the published data adds little to improve the transparency and accountability of broadcasters. We observed the following:

Companies that provided funding cannot be identified

A number of entities that broadcasters reported to the GNCC as sources of income cannot be found in the Georgian Public Registry, for instance Champions 11 LTD or Trade Union of Arts cannot be traced – likely because of incorrect spelling by the broadcaster when filling out the reporting form. In other cases, it is impossible to identify the entity that provided funding because there are numerous companies with the same name registered in Georgia – for instance, a search for “Intercontinental” leads to seven different results, four of which have exact same name.

Recommendation: In order to ensure that reported entities can be easily identified, the GNCC should require broadcasters to submit the company’s ID number and, if it is a company registered outside Georgia, also name the jurisdiction the company is registered in.

A lack of compliance

Several broadcasters did not disclose any names of entities they received income from. For example, Giorgi Koghuashvili, who represents a Rustavi-based cable operator indicated that there was only “1” source of income without naming it; TV Company Egrisi stated it had “various incomes” but did not specify the sources. Three other broadcasters indicated “0” sponsors and advertisers for the given time. Several broadcasters, including Marneuli TV, Radio Imedi, TV Company Tanamgzavri, and the Poti TV amateurs’ club, have indicated themselves as sponsors, without revealing the actual sources of finances. As we highlighted above, the majority of broadcasters appears to have not submitted any report at all.

Recommendation:

The GNCC should provide broadcasters with detailed guidance and instructions on what information they have to report and could set a deadline for submitting complete information for broadcasters that did not report or did not fully comply with the reporting requirements and issue warnings in case of repeated non-compliance.

Advertising agencies, not actual sources are disclosed

Almost all broadcasters reported the direct source of income, rather than the actual source. This might be the result of vague wording in the law. As a result, broadcasters named mostly advertising and media agencies that manage marketing budgets of companies as their sources of income. From a consumer point of view, this information is of very limited use, as the viewer cannot easily establish which companies are the actual source of income for the broadcaster and is not able to understand which sponsors, advertisers or donors might have enough economic leverage to somehow influence a broadcaster’s editorial line.

Here are some of the advertising agencies and media sales houses from the GNCC list: Magi Style Media (the company partly owned by former GNCC chairman Irakli Chikovani), Better Fly, Creator, Region Media Market, New Media Ajara, Advertising Agency Delta Media, Ad Corporation, TV Line, Media Policy, Media Port, MPG Georgia, Georgia Media Exchange, Publicis Dialogue, Proesko, Brandhouse, Inter Media, Nova Productions, TBC TV, Preda and Newsroom.

Imedi TV among other sources listed a number of UK-based advertising agencies as sources of revenue: Optimum Media Limited (a subsidiary of DDB CIS U.K. Limited), Publicis Hepta Group; Starcom Mediavest LLP, Media 10, Sky Media and Saatchi & Saatchi.

Recommendation:

The GNNC should establish if the current wording of the law can be interpreted in a way that would mandate broadcasters to publish the names of the companies that are the source of funding instead of those of intermediary companies such as advertising agencies, whose naming adds little value for the public.

Telecom providers as sources of income

Several broadcasters have named cable and satellite operators (Channel 7, TV ERA, Black Sea Site, Satellite Service) and telecommunication companies – Magticom, Mobitel, Silknet, Caucasus Online – as sources of income.   

Offshore financing

Several broadcasters named sources of financing that are controlled by offshore entities in secrecy jurisdictions, where company ownership cannot be traced. Preventing anonymous offshore entities from controlling – and bankrolling – broadcasting license holders was one the ideas of the authors of the 2013 financial transparency amendments and of 2011 amendments that banned offshore entities from owning broadcasting license holders and required them to disclose beneficial owners. Of course, it remains legal for companies owned by offshore entities to provide funds, either through advertising or other ways, to broadcasters.

  • Global Media Group (GMG) reported TBC TV as one of its sources of income, which is owned by TBC TV Entertainment Holding, 30% of which is owned by Fonthill Ventures Limited, British Virgin Islands;

  • Radio Art reported Geomultimedia LTD as one of its sources of finance, 50% of which is owned by Kentrock Express AG, a shell-entity from Panama;

  • Rustavi 2 reported Mobitel as one of its sources of finance. The company, which operates the mobile phone operator Beeline Georgia, is owned by three different British Virgin Islands entities, two of which are owned by the Russian publicly listed company VimpelCom (which since the 2012 parliamentary elections has increased its shareholding in Beeline Georgia from 51% to 80%); TI Georgia has previously highlighted that there are strong indications of the beneficiary minority shareholders in Beeline (formerly holding 49%, now 20%) are closely linked to the beneficiary owners of Rustavi 2;

  • Civil Education Fund (Tabula TV) disclosed that it receives funding from the company Weekly News Analytical Magazine Tabula, 51% of which is owned by UCG Green Power LTD, which is fully owned by Rylf Management SA, Panama;

  • Imedi TV and Kavkasia reported that it received funding from Georgia Media Exchange LTD, 80% of which is owned by Vostok Media Exchange, which appears to be a shell entity registered in Malta.

Revenues from political parties and government entities

Several broadcasters listed political parties and government entities as advertisers or sponsors, but in none of the cases broadcasters disclosed the amount of money they have received. According to the reports (which are likely to be incomplete),

  • Nino Burjanadze’s Democratic Movement - United Georgia advertised on the local TV channels Guria, Rioni, and Channel 25 (Batumi);

  • Former president Mikheil Saakashvili’s United National Movement advertised on Rustavi 2 and Mze;

  • The President’s Administration advertised on Rustavi 2;

  • The Security Police allocated funds to Imedi TV;

  • Gurjaani Municipality (Gamgeoba) allocated funds to Gurjaani TV;

  • Rustavi City Hall allocated funds to the TV-Radio company of Kvemo Kartli.

All purchases and contracts of government entities have to be made public on the e-procurement website of the State Procurement and Competition Agency. This spending is often reported to the web-platform by municipalities with several weeks of delay, at this point neither the contract of Rustavi City Hall nor that of Gurjaani Municipality or of the President’s Administration are available online. Political parties have to disclose party and campaign finances in broad terms with the State Audit Office.

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Author: Nana Sajaia
Media