The island's media watchdog has proposed new anti-monopoly rules that could scuttle the $601 million sale of Next Media Ltd's (>> Next Media Limited) Taiwan operations to a Taiwanese group including Want Want Holdings (>> Want Want China Holdings Ltd.) owner Tsai Eng-meng, who runs a multibillion dollar snacks-to-property empire in China.
Academics and media professionals, as well as the political opposition, fear Tsai and others who make their fortunes on the mainland will push a pro-Beijing bias on Taiwan's free-wheeling media. Tsai, who already owns a top-four Taiwan daily, has denied any pro-China agenda but has attracted controversy as a vocal proponent of Taiwan unification with the mainland.
In January, the island's independent media regulator opposed an anti-monopoly amendment drafted by the opposition that would have blocked the New Media sale, saying it was too strict. Parliament rejected the measure and called on the regulator to draft a new bill.
That sparked a public backlash, and now the National Communication Commission seems to be changing its tune, showing more sensitivity about China's perceived influence in the media.
"Whether or not a group is leaning too much towards China would affect the extent of the health of the market," an NCC official, who declined to be named due to the sensitive nature of the issue, told Reuters. "We don't want to see the market overly dominated by a certain group."
Taiwan's Free Trade Commission, which will also have to sign off on the print portion of the Next Media deal, said it was well aware of public concerns and would make the review process as transparent as possible.
Perceptions of mainland influence in the media have stirred political controversy on an island that mistrusts China yet depends heavily on it for trade and investment opportunities.
China claims sovereignty over Taiwan - although many on the democratic and self-ruling island of 23 million want assurances on future independence - making the media battle for Taiwanese hearts and minds especially vital to Beijing. Chinese entities are prohibited from investing directly in Taiwanese media.
Around 100,000 people took to the streets of Taipei in January to protest against President Ma Ying-jeou's China-friendly government, in large part disgruntled with the state of the economy, but many carried signs and chanted slogans decrying the proposed Next Media deal.
In an interview with the Washington Post in January of last year, Tsai denied that he was trying to please Beijing to further his China business interests, but said that closer integration with China would be beneficial to all. "Whether you like it or not, unification is going to happen sooner or later," he was quoted as saying.
The sale would add Next Media's print business - including the top-circulation Apple Daily - to Tsai's two Taiwan TV news stations and three newspapers.
Five years ago, Tsai paid nearly $700 million for the China Times Group, which includes the China Times, another of Taiwan's four big national dailies, as well as TV channels and other publications. Two years later, he agreed to pay $2.4 billion for cable TV operator China Network Systems, which would give him an additional 28 percent share of Taiwan's cable subscribers.
Taiwan's media sector, which burgeoned after martial law was lifted a quarter century ago and boasts seven major all-news TV channels, has seen several big M&A deals in recent years involving private equity as well as Tsai and other tycoons with media ambitions.
But the regulators showed their willingness to stand firm against Tsai last month when the NCC officially blocked the cable deal, ruling that he failed to meet onerous requirements - imposed when the deal got conditional approval last July - that would sharply reduce his involvement in news broadcasting.
The NCC official told Reuters that concerns over Chinese influence in the media were a factor in the decision.
Critics worried about Tsai's rising media influence and his China ties had protested against last year's approval, fearing regulators would give the deal a pass despite the conditions.
The most recent anti-monopoly proposal, announced late last month and considered likely to pass given the regulators' blessing, could also thwart Tsai's media ambitions as it prohibits a print media tie-up with any TV news business commanding an audience share of more than 15 percent.
Several academics and media professionals said the impact would depend, however, on how audience share is calculated.
Association of Taiwan Journalists President Chen Hsiao-yi, who has criticized monopolization in the media and found the regulators' proposal lacking, said the total audience share for all news channels in Taiwan would be less than 5 percent.
"It is in fact a law that protects media monopoly," Chen said in a statement after the proposal was announced.
Tsai declined to speak to Reuters when contacted after the regulators' announcements.
Other mainland-connected participants in the bid for Next Media's assets include Chinatrust Financial Holdings Co (>> Chinatrust Financial Holding Co Ltd.), a bank with plans to branch out in the mainland, and Formosa Plastics Corp (>> Formosa Plastics Corporation), which owns petrochemical factories across China.
Chinatrust did not return phone calls seeking comment.
Formosa Plastics Group spokesman Frank Fu played down the possibility that the company might be susceptible to influence from Beijing, saying it has no financial backing from China.
Fuelling the protests and the pressure on regulators are charges that Tsai's existing newspapers have unduly favored Beijing's interests.
Chang Chin Hwa, a media professor at National Taiwan University, said her research showed that China Times' coverage of the June 4, 1989, Tiananmen Square killings has greatly diminished since 2009, after Tsai took over the publication.
"They stopped reporting on overseas protests and memorials to the June 4th incident, and they used to give widespread coverage on that," Chang said.
China Times Editor-in-Chief George Wang declined to comment on claims that the newspaper's editorial policy favors China.
Tsai has rejected accusations of a pro-China bias, writing in an open letter in the China Times last November that rivals had distorted his intentions in running that paper.
(Additional reporting by Faith Hung in Taipei, James Pomfret in Hong Kong; Editing by Edmund Klamann)
By Clare Jim and Yimou Lee