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Murdoch's Sky bid likely to be referred to competition authorities Murdoch's Sky bid likely to be referred to competition authorities
(about 3 hours later)
Rupert Murdoch’s plans for the £11.7bn takeover of Sky have been set back after the culture secretary accepted there were serious concerns over handing him and his family “increased influence over the UK news agenda and the political process”. Labour politicians told ministers “not to do a grubby deal with the Murdochs” in order to push through 21st Century Fox’s £11.7bn takeover of Sky after Ofcom warned there were serious concerns that any takeover would hand the family increased influence over news and politics in the UK .
Karen Bradley told the Commons that she accepted a recommendation from Ofcom to call in the Competition and Markets Authority to conduct a further six-month examination of the deal because of the “material influence” that the Murdoch family would have as a result. The MPs’ intervention came in response to culture secretary Karen Bradley telling the Commons on Thursday that she was “minded” to accept the regulator’s conclusion that the Competition and Markets Authority should conduct a full six-month examination of the deal.
She said a warning by Ofcom that media plurality would be reduced was “persuasive”. She added: “The proposed entity would have the third largest total reach of any news provider – lower only than the BBC and ITN – and would, uniquely, span news coverage on television, radio, in newspapers and online. Ofcom, Bradley added, had concluded that the extra inquiry was required because the Murdoch family would have “material influence” as a result of buying Sky – but held the door open for potential negotiations that would avoid a full inquiry.
“Ofcom’s report states that the proposed transaction would give the Murdoch Family Trust material influence over news providers with a significant presence across all key platforms.” The minister said that Fox, which is controlled by Rupert Murdoch and his sons Lachlan and James, now has until 14 July to offer concessions to Bradley in an attempt to prevent the television mega merger being referred for further scrutiny. The Murdochs had offered to fund a Sky News service for five years, with a separate editorial board, but this had been rejected by Bradley.
Bradley also told MPs that Murdoch’s company 21st Century Fox had made a series of formal pledges surrounding Sky News last week in a late attempt to push the deal through before her announcement. This included a commitment to maintain a Sky-branded news service for five years with spending at least similar to present levels, and reinforcing its independence by creating an editorial board that had a majority of independent members to determine the head of Sky News and oversee its editorial guidelines. Ed Miliband, the former Labour leader, told Bradley that she should not accept any undertakings in lieu of a full competition inquiry. He said: “Can I urge the secretary of state not to do a grubby deal with the Murdochs, because we know their history, they break every undertaking they make, from the Times to the Wall Street Journal.”
However, the secretary of state said she was minded not to accept these undertakings. Bradley will make a final decision on whether to refer the deal to the CMA after further submissions by Sky, 21st Century Fox and other interested parties, leaving open the possibility of further negotiations. The deadline for these submissions is 14 July. Tom Watson, the deputy Labour leader and shadow culture secretary, said that Bradley’s announcement was part of a practiced routine that he predicted would lead to the government approving the deal after Fox offers concessions. “Nothing about this decision is a surprise. It’s the old playbook. The secretary of state has known all along what she wants to end up doing, but she has to follow the established dance steps,” he said.
Ofcom’s report said the remedies that had already been proposed would mitigate the media plurality concerns but could be strengthened. Shares in Sky rose more than 3% after Bradley’s announcement as financial analysts claimed Fox could swiftly agree concessions with the government to secure the controversial takeover. Fox already owns 39% of Sky. Thomas Singlehurst, a media analyst at investment bank Citigroup, said: “Ultimately we think the likelihood not only of deal completion, but on a reasonable timeframe – one to three months – has increased.”
Ofcom was also asked to review whether the Murdochs would be “fit and proper” owners of Sky’s broadcasting licence despite “significant corporate failures” at Fox News, which has faced a wave of allegations about sexual and racial harassment. Bradley told MPs the warning by Ofcom that media plurality would be reduced was “unambiguous” and “persuasive”. Ofcom’s report shows that if the deal goes ahead Murdoch businesses would have the third largest total reach of any news provider – lower only than the BBC and ITN – and would uniquely operate across television, radio, newspapers and online.
On this matter, Ofcom said there was no clear evidence that senior executives at Fox were aware of sexual misconduct before complaints were made to them and that Fox and Sky’s previous compliance record with the broadcasting code was in line with comparable broadcasters. “Ofcom’s report states that the proposed transaction would give the Murdoch Family Trust material influence over news providers with a significant presence across all key platforms,” she said.
That helped shares in Sky rise by more than 3% after the announcement as investors breathed a sigh of relief that the Murdochs had passed the test – thereby clearing one hurdle to the deal – even though Fox may now have to offer concessions to push the transaction through and faces a lengthy competition inquiry. However, John Whittingdale, Bradley’s Conservative predecessor as culture secretary, praised her for the “scrupulous” handling of the takeover and played down concerns about the impact of media plurality, suggesting that the deal should go through. “When it comes to plurality, it is increasingly obvious – and the general election bore this out – that the printed press are of a waning influence and the real media giants today are Google and the social media giants,” he said.
Tom Watson, the deputy Labour leader and shadow culture secretary, criticised the announcement as part of an “old playbook” that he predicted would involve the government eventually approving the deal after Fox offered concessions. “Nothing about this decision is a surprise. It’s the old playbook. The secretary of state has known all along what she wants to end up doing, but she has to follow the established dance steps,” she said. Ofcom dismissed an assertion by Fox’s that its media presence has been diluted with media plurality flourishing from the rise of digital rivals, such as news distributors Google and Facebook and new outlets, such as Vice, BuzzFeed and the Huffington Post.
Watson said that undertakings provided by Murdoch on other deals had proven to be “not worth the newsprint they’re written on”. The shadow culture secretary also called on the rules surrounding the “fit and proper” test to be reviewed, saying they did not take into account the phone-hacking scandal that caused a previous attempt by Rupert Murdoch to buy Sky to collapse. In fact, Ofcom said that Murdoch’s news media is disproportionately benefiting from digital media compared to rivals. “Our analysis suggests that Sky News and The Sun may receive a disproportionate amount of consumption through intermediaries, relative to their reach and share of reference,” said Ofcom. “This analysis is supported by data from Sky and News Corp, which show high levels of consumption of their content through third-party platforms, for example Facebook Instant Articles or Snapchat.”
“If the current rules mean that James Murdoch can pass a ‘fit and proper’ test, given everything we know about his and his companies’ behaviour over phone hacking, and given everything we know about Fox’s behaviour over the ongoing sexual harassment scandal in the United States, then that says more about the rules than it does about Mr Murdoch,” Watson said. Ofcom said in its report that the proposals to fund a Sky branded news service for five years would mitigate concerns about media plurality and were more robust than undertakings offered by Murdoch when he bought the Times and Sunday Times in 1981 and the Wall Street Journal in 2007. But it added they could be strengthened.
Ed Miliband, the former Labour leader and longtime Murdoch critic, called on Bradley “not to do a grubby deal”, but John Whittingdale, Bradley’s predecessor as culture secretary, praised her for the “scrupulous” handling of the takeover. Fox said it was disappointed by Bradley’s decision not to accept the undertakings and will “make representations” to her about the decision and Ofcom’s report. The company added: “While we welcome the secretary of state’s decision on broadcasting standards, we are disappointed that she does not accept Ofcom’s recommendation stated in its report that ‘the proposed undertakings offered by Fox to maintain the editorial independence of Sky News mitigate the media plurality concerns’.”
Whittingdale added: “When it comes to plurality, it is increasingly obvious – and the general election bore this out – that the printed press are of a waning influence and the real media giants today are Google and the social media giants.” However, the Murdochs did clear one major hurdle in their attempt to buy Sky after Ofcom concluded they were “fit and proper” owners of Sky’s UK broadcasting licence.
Fox said it was disappointed by the decision. The company said in a stock market statement: “While we welcome the secretary of state’s decision on broadcasting standards, we are disappointed that she does not accept Ofcom’s recommendation stated in its report that ‘the proposed undertakings offered by Fox to maintain the editorial independence of Sky News mitigate the media plurality concerns’.” The regulator said that phone hacking at the News of the World and allegations of sexual and racial harassment at Fox News had amounted to significant corporate failure at the Murdochs companies – but this was not enough to prevent them from holding a broadcasting licence.
The regulator had submitted to Bradley the findings of three investigations looking at whether the deal would give Murdoch too much control of UK news; whether the media mogul was a fit and proper owner, and whether Fox, which owns the rightwing Fox News channel, would abide by editorial standards such as accuracy and impartiality once it took full control of broadcasting assets including Sky News. Fox already owns 39% of Sky. Ofcom found there was no “clear evidence” that senior executives at Fox were aware of sexual misconduct before 2016, and that Fox and Sky’s compliance record with the broadcasting code was in line with other broadcasters.
The regulator said that an examination of Fox and Sky’s broadcasting compliance records in the UK found that the enlarged company would not “lack a genuine commitment to the attainment of broadcasting standards” and that there were no grounds to justify a referral to competition regulators – as well as saying the “fit and proper” test had been passed. The Murdoch’s previous bid for Sky collapsed in 2011 when News Corporation was forced to withdraw its interest amid public furore over phone hacking at the News of the World.
During Murdoch’s previous bid in 2011, Jeremy Hunt, who was culture secretary, initially accepted an offer to spin off Sky News to allay media plurality issues raised by Ofcom. But that deal collapsed when Murdoch was forced to withdraw his bid amid public furore over phone hacking at the News of the World. The company bidding this time is 21st Century Fox, which owns the 20th Century Fox film studio and the Fox TV network. It was carved out of Murdoch’s News Corporation empire in the wake of the phone-hacking scandal.
The company bidding this time is 21st Century Fox, which owns the 20th Century Fox film studio and the Fox TV network. It was carved out of Murdoch’s News Corporation empire as part of the response to the phone-hacking scandal.
Murdoch’s remaining newspapers, including the Sun and the Times, are now part of a separate company, News Corp, although both it and 21st Century Fox are still controlled by the media mogul and his family.Murdoch’s remaining newspapers, including the Sun and the Times, are now part of a separate company, News Corp, although both it and 21st Century Fox are still controlled by the media mogul and his family.
Sky said it would “continue to engage with the process as the secretary of state reaches her final decision”, adding: “In the meantime, Sky welcomes today’s announcement of Ofcom’s decision that Sky would continue to be a fit and proper holder of its broadcast licences under full ownership of 21st Century Fox and will continue to operate its business as usual.” Hacked Off, which represents phone hacking victims, condemned the decision not to refer the bid to the CMA on the grounds of broadcasting standards and said the Murdochs have an “appalling record of corporate governance failures”.
Evan Harris, joint executive director of Hacked Off, said: “Karen Bradley should not waste time on ‘undertakings’. Undertakings in lieu from the Murdochs are not worth the paper they are written on, and cannot possibly be considered by the government as a remedy for Ofcom’s concerns.”