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Karen Bradley MP Tells CMA and Ofcom to Probe Fox’s Takeover Bid for Sky

Thursday, March 16th, 2017 (1:55 pm) - Score 465
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The Government’s Secretary of State for Culture, Media and Sport (DCMS), Karen Bradley MP, has today directed Ofcom and the UK Competition and Markets Authority to probe 21st Century Fox’s £11.7bn bid to takeover Sky by acquiring a 61% stake in the company (Fox already owns 39%).

The proposed deal, which was tabled at the end of last year (here), values Sky at around £18.5bn and as a result shareholders are likely to receive £10.75 (cash) per share. The deal also includes Sky’s Pay TV and related divisions in Ireland, Germany and Italy.

Rupert Murdoch’s 21st Century Fox has previously attempt to gobble Sky before (6-7 years ago), although that bid was derailed by a combination of factors, not least an ample supply of strong political objections, media / news related competition concerns and a rather significant scandal over phone hacking. Today the scandal over phone hacking has long since passed and Fox no longer has any UK newspapers on its books.

Never the less Karen Bradley MP has decided that the deal might still raise some public interest concerns and so Ofcom has been asked to investigate, while the CMA will separately be tasked with examining any potential “jurisdiction issues.”

Karen Bradley MP said (here):

“Having carefully considered the representations from the parties and the other representations I have received I can now tell the House that, today, I have issued a European Intervention Notice on the grounds of media plurality and commitment to broadcasting standards. I have written to the parties, Ofcom and the Competition and Markets Authority informing them of my decision.

While the representations from 21st Century Fox highlighted areas where it contested the position taken in my minded to letter, none of the representations have lead me to dismiss the concerns I have regarding the two public interest grounds I previously specified.

I am of the view that it remains both important, given the issues raised, and wholly appropriate for me to seek comprehensive advice from Ofcom on these public interest considerations and from the CMA on jurisdiction issues.

I note that, overall, the parties have welcomed a thorough regulatory review, and that is what will now happen as a result of the intervention notice I have issued.”

Ofcom will now have until 16th May 2017 to consider the public interest with respect to two grounds: media plurality and commitment to broadcast standards. The public interest test that Ofcom has been asked to make and the regulator’s ongoing duty under the Communications Act to assess whether a licensee is fit and proper are normally separate legal processes, although the regulator intends to deal with both in the same time-frame. Details Here.

We had half wondered whether the investigation might also be expanded to consider the impact of Fox’s agreement on Sky Broadband, particularly because a major TV and news empire might be more minded to restrict access to Internet content from rival services (Amazon Prime Video, Netflix etc.) or change their model in some other controversial way.

However such an outcome would put Sky/Fox in conflict with the EU and UK guidelines for protecting Net Neutrality (here) and would no doubt create quite a fuss, while also potentially encouraging some subscribers to swap ISP. But for now Ofcom doesn’t seem minded to consider this angle.

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