Regulator deals plurality blow to Fox bid for Sky

The competition regulator dealt a blow to 21st Century Fox and its planned takeover of Sky on Tuesday, as the Competition and Markets Authority said it has provisionally found that Fox taking full control of Sky “is not in the public interest” due to media plurality concerns.

Its investigation did provisionally conclude, however, that overall Fox had a “genuine commitment” to broadcasting standards in the UK.

Following a referral from the Secretary of State for Digital, Culture, Media and Sport, the CMA had been investigating the deal on the wo grounds - media plurality and commitment to broadcasting standards.

“The CMA has provisionally found that Fox taking full control of Sky is not in the public interest due to media plurality concerns, but not because of a lack of a genuine commitment to meeting broadcasting standards in the UK,” the authority said in its statement.

“The media plurality concerns identified mean that, overall, the CMA provisionally concludes that the proposed transaction is not in the public interest.”

The CMS said the concept of media plurality “goes to the heart” of the UK’s democratic process and as such was given protection in law.

It said it found that if the deal went ahead as currently proposed, it was likely to operate against the public interest as it would lead to the Murdoch Family Trust - which controls Fox and News Corporation - increasing its control over Sky, so that it would have “too much control” over news providers in the UK across all media platforms - that it television, radio, online and newspapers - and therefore too much influence over public opinion and the political agenda.

The Murdoch Family Trust’s news outlets are watched, read or heard by nearly a third of the UK’s population, and have a combined share of the public’s news consumption that is “significantly greater” than all other news providers, except the BBC and ITN, the CMA noted.

“Due to its control of News Corp, the Murdoch family already has significant influence over public opinion and full ownership of Sky by Fox would strengthen this even further.

“While there are a range of other news outlets serving UK audiences, the CMA has provisionally found that they would not be sufficient to moderate or mitigate the increased influence of the MFT if the deal went ahead.”

The CMA’s investigation also examined a range of evidence to understand whether Fox, Sky and the Murdoch Family Trust have a “genuine commitment” to broadcasting standards in the UK.

“Here, it has provisionally found that Fox taking full control of Sky is not likely to operate against the public interest.”

Its investigation provisionally concluded that, overall, Fox had a “genuine commitment” to broadcasting standards in the UK.

It said the organisation was already an established broadcaster here, having held licences for more than 20 years, and it took account of the policies and procedures Fox has in place to ensure broadcasting standards are met.

The authority found that, while there were issues with the compliance arrangements at Fox News when it was broadcasting its unedited simulcast international feed into the UK, that did not outweigh the “detailed and effective” policies and procedures that Fox had in place in relation to its UK-focussed channels.

The CMA also provisionally found that Sky had a “good record” in that regard, consistently complying with broadcasting regulation, as well as having “comprehensive and effective” policies and procedures in place to ensure broadcasting standards are met.

Its investigation took account of the fact that before 2012, there were serious shortcomings at the Murdoch Family Trust-controlled newspaper News of the World, which had failed to comply with both press standards and the law.

“However, News Corp has subsequently put in place processes and procedures to address these,” the authority said.

“The CMA has provisionally found that, since then, its newspapers’ record of compliance with press standards does not raise concerns.”

The investigation also considered the recent allegations of sexual harassment against Fox News employees in the United States.

While it said they were “serious”, it provisionally found that they were not directly related to the attainment of broadcasting standards and did not call into question Fox’s or the Murdoch Family Trust’s commitment to broadcasting standards in the UK.

“The CMA has now set out a series of potential options for addressing these problems identified in its public remedies notice,” the authority said of the next steps in the process.

“It also now welcomes responses from interested parties to its provisional decision and proposed possible remedies, including in view of the announcement by Fox on 14 December 2017 that it had agreed the sale of certain assets, including its interests in Sky, to The Walt Disney Company.”

They would be “carefully considered” before the CMA’s report is finalised and provided to the Secretary of State for Digital, Culture, Media and Sport by 1 May, the authority explained.

“He will then make the final decision on the proposed deal.”

Both Sky and Fox were quick to respond to the findings on Tuesday morning, with Sky issuing an update to the market that was light on detail.

It “noted” the provisional view of the CMA that the transaction was not likely to operate against the public interest on broadcasting standards grounds.

“Sky also notes the CMA's provisional view that the transaction may be expected to operate against the public interest on media plurality grounds, but, at the same time, that the CMA has set out possible remedies relating to these concerns, and is seeking submissions on these,” Sky’s board said in its statement.

“According to the updated administrative timetable published by the CMA, the deadline for its final report to the Secretary of State is now 1 May.

“The CMA states that it has extended the timetable due to the ‘exceptional volume of substantive submissions, the need to hold a large number of hearings and the novelty and complexity of the investigation’,” Sky added.

21st Century Fox, meanwhile, said it “welcomed” the CMA’s finding that it had a “genuine commitment” to broadcasting standards.

“Today's provisional findings move our proposed Sky transaction forward to the next phase of the regulatory review process,” the Fox board said.

“We welcome the CMA's provisional finding that the Company has a genuine commitment to broadcasting standards and the transaction would not be against the public interest in this respect.”

Regarding plurality, Fox said it was “disappointed” by the CMA's provisional findings, adding that it would “continue to engage” with the CMA ahead of the publication of the final report in May.

The Fox board noted that the CMA had elected to avail itself of the statutory eight-week extension, moving its deadline for a final decision to 1 May, adding that it still anticipated regulatory approval of the transaction by 30 June.