By Alex Haffner, Partner, Sports Business Group, Fladgate LLP, London, UK
To no-one’s great surprise, it was announced, on 20 September 2017. that the UK Culture Secretary, Karen Bradley MP, was “referring” the proposed acquisition by 21st Century Fox of Sky, which, amongst other programming, is a significant sports broadcaster in the UK, for scrutiny by the Competition and Markets Authority (CMA).
21st Century Fox, one of two companies formed when News Corporation split up its broadcasting and publishing assets in 2013, already owns 39% of Sky. In December 2016, it announced plans to acquire the remaining 61% of the shares in Sky.
The proposed transaction qualified for competition scrutiny by the European Commission under the EU Merger Regulation (139/2004). Following formal notification by 21st Century Fox, the European Commission ruled, on 7 April 2017, that it had no concerns, from an EU Competition Law point of view.
So far, so good for Rupert Murdoch. However, UK Law (the Enterprise Act) regards certain transactions as involving matters of “public interest” which need to be reviewed by the UK government. In particular, media mergers which give rise to concerns as to: (i) “media plurality” (essentially the need for there to be a range of voices/opinions in the provision of news to the public); and/or (ii) the ability of the merged enterprise to uphold broadcasting standards.
The reader might be aware that there is “previous” here.
In 2010, Murdoch made a similar attempt to buy out the remainder of Sky (through NewsCorp). That transaction was reviewed in connection with the public interest by the UK government and the Office of Communications (Ofcom) in its role as the broadcast regulator.
However, as they neared the end of their deliberations, news broke of a phone hacking scandal involving News Corporation’s newspaper assets, with various employees arrested for having unlawfully accessed various celebrities’ and public figures’ mobile phones. There was also significant political debate with senior politicians, including the then Business Secretary (Vince Cable MP); the subject of concerns being their impartiality in the process. As a result, NewsCorp was forced to shut up shop on its offer for Sky.
Debate has raged for some time as to the level of influence which Murdoch and his business empire have on UK public opinion through their diverse media interests. To some extent, the division of his empire in two was designed to deal with such concerns. Nevertheless, given previous events, it was inevitable that his second attempt to buy out Sky would be subject to significant scrutiny and so it has proved thus far.
In making her referral to the CMA, Karen Bradley stated that the proposed transaction will be reviewed as to its impact on both of the public interest grounds (outlined above): media plurality and commitment to broadcasting standards.
Whilst the media plurality ground was always likely to be a point of concern, notwithstanding the “NewsCorp split”, the decision also to include broadcasting standards as a matter for review was likely influenced by revelations that surfaced earlier this year as to the treatment of female employees and the general corporate governance of Fox News in the US (another key part of the 21st Century Fox empire).
The CMA has six months in which to report its findings.
Essentially, it will be advising the UK Culture Secretary whether the deal should be cleared on either an unconditional or conditional basis or blocked altogether; albeit the final decision rests with the Culture Secretary.
Most informed commentators, including the author of this post, expect that the CMA will end up recommending some form of undertakings from 21st Century Fox to ensure that, going forward, Sky will remain sufficiently well managed and resourced to guarantee plurality and also that broadcasting standards remain intact.
However, what makes this particular story so captivating is the prospect of more revelations in the meantime and the need for the UK government to show that it is conducting a balanced and fair investigatory process.
As a newspaper journalist would, no doubt, say if asked to comment on this continuing story: “Watch this space!…”
The author may be contacted by e-mail at ‘firstname.lastname@example.org’