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Media ownership: the 21st Century Fox/Sky merger

Published Wednesday, October 11, 2017

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

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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 The bid was withdrawn in July 2011 after the discovery of phone-hacking by journalists at the News of the World.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 Secretary of State for Digital, Culture, Media and Sport, 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 are public interest concerns about media plurality and genuine commitment to broadcasting standards.

Formal referral to the CMA took place on 20 September 2017. The terms of reference, the DMCS’ referral letter to the CMA, and the final decision letter to the parties, are all available online.

The CMA will have 24 weeks to investigate the merger and provide the Secretary of State with advice. She will then come to a final decision on whether or not the merger can proceed, including any conditions that will apply in order to do so.

On 10 October 2017, the CMA published an issues statement setting out the scope of its investigation. There is also a webpage explaining how a phase 2 inquiry works and when the public can get involved.

When can the Government intervene in media mergers?

Under part 3 of the Enterprise Act 2002, the Secretary of State for 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

Timeline

3 March 2017: the European Commission confirmed that it had received formal notification of the proposed merger.

16 March 2017: the Secretary of State issued a European Intervention Notice on two of the grounds set out in the 2002 Act: media plurality and commitment to broadcasting standards. The Secretary of State’s decision required the communications regulator, Ofcom, to report on the public interest issues. The CMA was required to report on jurisdiction issues.

In addition, Ofcom said that it would carry out its own assessment of Sky’s fitness to hold broadcasting licences in the event of the merger going ahead.

7 April 2017: European Commission ruled that the merger would “raise no competition concerns in Europe”. However the Commission noted that its findings were only concerned with the competition aspects of the proposed merger and that its clearance decision was “without prejudice to the UK's ongoing media plurality review of the proposed transaction.”

20 June 2017: the Secretary of State receives the reports from Ofcom and the CMA

29 June 2017: in an oral statement to the Commons, the Secretary of State said she was:

  • “minded to” refer the proposed merger to the CMA for a phase 2 investigation. This was on the basis of media plurality concerns raised in Ofcom’s report
  • not minded to refer the bid on the grounds of commitment to broadcasting standards
  • minded to reject 21CF’s undertakings in lieu (UIL) for “remedying, mitigating or preventing the effects adverse to the public interest which may be expected to result from the Transaction”

Further representations were invited on the Secretary of State’s “minded to” positions. The deadline for these was 14 July 2017. She would then make a final decision on whether to refer the merger to the CMA for a phase 2 investigation.

Ofcom’s fit and proper person assessment was also published. This concluded that Sky would remain a fit and proper licence holder in the event of the merger going ahead. 

20 July 2017: the Secretary of State gave a "pre-recess update" to the Commons. She said she had not had time to consider all of the further representations on her "minded to" positions. She was therefore unable to make a final decision on whether to refer the merger for a phase 2 investigation. However she confirmed that, having reviewed further representations from 21CF and Sky, and in the absence of further proposed undertakings, she was still currently minded to refer the merger on the grounds of media plurality and still minded not to accept 21CF's UIL. 

12 September 2017: in an update to the Commons, the Secretary of State confirmed her intention to refer the merger for a phase 2 investigation on the grounds of media plurality. In addition, she said she was now “minded” to refer the merger on the grounds of “genuine commitment to broadcasting standards”. 21CF and Sky would have 10 working days to make further representations. The Secretary of State would then make a final decision on whether to refer the merger to the CMA.

14 September 2017: the Secretary of State announced that she had received letters on behalf of 21CF and Sky stating that they would not be making substantive representations on her minded-to decision. She would therefore be referring the merger to the CMA for a phase 2 investigation.

20 September 2017: formal referral of the merger to the CMA.

Further material

Documents and announcements relating to the merger are available from the Gov.UK website.

 

 

Commons Briefing papers CBP-7969

Author: John Woodhouse

Topics: Broadcasting, Competition

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