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Media ownership: the 21st Century Fox/Sky merger

Published Wednesday, July 18, 2018

This Library briefing paper looks at the proposed merger of 21st Century Fox and Sky plc.

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When can the Government intervene in media mergers?

Under part 3 of the Enterprise Act 2002, the Secretary of State for Digital, Culture, Media and Sport can intervene in broadcasting and cross media mergers where they give rise to the following public interest concerns:

  • the need, in relation to every different audience in the United Kingdom or in a particular area or locality of the United Kingdom, for there to be a sufficient plurality of persons with control of the media enterprises serving that audience;
  • the need for the availability throughout the United Kingdom of a wide range of broadcasting which (taken as a whole) is both of high quality and calculated to appeal to a wide variety of tastes and interests; and
  • the need for persons carrying on media enterprises, and for those with control of such enterprises, to have a genuine commitment to the attainment in relation to broadcasting of the standards objectives set out in section 319 of the Communications Act 2003

The proposed 21st Century Fox/Sky merger

In 2010, News Corporation tried to take over British Sky Broadcasting (now Sky plc). The bid was withdrawn in July 2011 after the discovery of phone-hacking by journalists at the News of the World.

21st Century Fox (21CF) was one of two companies formed from News Corporation in 2013 (the other company was News Corp). The Executive Chairman of 21CF is Rupert Murdoch. 21CF owns 39% of Sky plc. The Chairman of Sky is James Murdoch.

In December 2016, 21CF announced plans to acquire the 61% share of Sky Plc which it does not already own. Critics claim that if the merger goes ahead it will be a “disaster” for media plurality. There are also concerns about the corporate behaviour of 21CF.

On 14 September 2017, Karen Bradley, the then Secretary of State, announced that she would be referring the merger to the Competition and Markets Authority (CMA) for a “phase 2” investigation. The grounds for the referral were:

  • public interest concerns about media plurality; and
  • a genuine commitment to broadcasting standards.

Formal referral to the CMA took place on 20 September 2017.

On 23 January 2018, the CMA provisionally found that the merger would not be in the public interest due to media plurality concerns, but not because of a lack of a genuine commitment to broadcasting standards.

The CMA sent its final report to Matt Hancock, the then Secretary of State, on 1 May 2018. The report, published on 5 June 2018, found that the proposed merger could be expected to operate against the public interest with respect to media plurality. The CMA concluded - and recommended to the Secretary of State - that the most effective and proportionate remedy would be the divestiture of Sky News to Disney or another suitable buyer. In a Commons statement of 5 June, Matt Hancock said that he accepted the CMA’s findings and recommendation.

On 19 June 2018, the Government published updated undertakings offered by 21CF to divest Sky News to Disney, alongside new undertakings offered by Disney. In a written statement on the same day, Matt Hancock said that he proposed to accept the undertakings but that he was required to formally consult on them for 15 days. The consultation notice and undertakings are available from Gov.UK.

On 12 July 2018, the Government published its notice of acceptance of final undertakings given by 21CF and Walt Disney. In a written statement, Jeremy Wright, the new Secretary of State, said that this marked the final stage of the public interest consideration of the proposed merger and that it was now a matter for Sky shareholders to decide whether to accept 21 CF’s bid. The responses to the June 2018 consultation, the final undertakings by 21CF and Walt Disney, and associated documents, are available from Gov.UK.

 

 

 

 

 

 

Commons Briefing papers CBP-7969

Author: John Woodhouse

Topics: Broadcasting, Competition

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