Government set to refer Fox's Sky takeover to CMA over broadcasting standards

Culture Secretary Karen Bradley has told Parliament she is minded to refer 21st Century Fox's proposed takeover of Sky to the competition regulator on grounds of both broadcasting standards and media plurality.

Bradley said her discussions with media regulator Ofcom led her towards a decision to passing the matter to Competition and Markets Authority for a six-month investigation "on the grounds of genuine commitment to broadcasting standards".

In her statement to Parliament, the minister for culture also confirmed her previous intention to make a referral on the grounds of 'media plurality', with Rupert Murdoch and his sons running both companies as well as the group that publishes The Times and the Sun newspapers.

Ofcom's advice was sought after almost 43,000 opinions were submitted to the Department for Digital, Culture, Media & Sport by interested companies and individuals, most of which were against the merger going ahead, though only around 30 were "substantive" and raised potentially new evidence or commenting on Ofcom’s approach.

Bradley has written to both Fox and Sky to inform them that she is minded-to-refer the merger to the CMA over broadcasting standards issues, namely inadequate compliance procedures at Fox News and corporate governance failures.

In setting out her technical reasons for making the decision, Bradley pointed out that the legal threshold for a reference to the CMA is low and as culture minister she has the power to make a reference if she believes "there is a risk - which is not purely fanciful - that the merger might operate against the specified public interests".

Following the additional 30 substantive representations, Ofcom said that “…while we consider there are non-fanciful concerns, we do not consider that these are such as may justify a reference in relation to the broadcast standards public interest consideration”.

Said Bradley: "The existence of non-fanciful concerns means that - as a matter of law - the threshold for a reference on the broadcasting standards ground is met. In light of all representations and Ofcom’s additional advice, I believe these are sufficient to warrant the exercise of my discretion to refer."

While Ofcom was reassured by the existence of the compliance regime which provides licensees with an incentive to comply, Bradley felt parliament "intended the scrutiny of whether an acquiring party has a 'genuine commitment' to attaining broadcasting standards objectives to happen before a merger takes place".

Even though in August the Murdochs took US-produced Fox News off the air in the UK, Bradley also pointed to representation made over Fox's news style, saying: "I consider it important that entities which adopt controversial or partisan approaches to news and current affairs in other jurisdictions should, at the same time, have a genuine commitment to broadcasting standards here. These are matters the CMA may wish to consider in the event of a referral."

On corporate governance failures, Ofcom felt concerns were 'non-fanciful' in respect of the broadcasting standards ground but felt these concerns do not warrant a reference but Bradley felt it would be appropriate for these concerns to be considered further by the CMA.

"My proper concern is whether Fox will have a genuine commitment to attaining broadcasting standards objectives. However, I am not confident that weaknesses in Fox’s corporate governance arrangements are incapable of affecting compliance in the broadcasting standards context," she said.

If Bradley decides to refer, on one or both grounds, the merger will be subject to a full and detailed investigation by the CMA over a six month period, though such a referral does not signal the outcome of that investigation.