Fox’s Sky takeover goes to regulator

The UK government has confirmed it will refer 21st Century Fox’s proposed buyout of European pay TV giant Sky to competition authorities.

Karen Bradley

UK culture secretary Karen Bradley had said she would refer the takeover to the Competition and Markets Authority (CMA) on the grounds of media plurality.

Having received additional guidance from UK broadcasting regulator Ofcom, Bradley said she was now also “minded to refer” the deal to the CMA on the grounds of “genuine commitment to broadcasting standards.”

Parties have 10 days to respond to the concerns before Bradley will make a final decision.

The decision to refer Fox’s proposed £11.7bn (US$15.1bn) takeover of Sky to competition authorities on the grounds of media plurality had been widely expected, but concerns over a commitment to broadcasting standards came as a surprise.

Sky shares sunk by around 3% as traders reacted to the news, with the CMA scrutiny expected to take six months. The delay will prompt a US$222m payment from Sky to its shareholders.

Bradley initially referred the deal to Ofcom in March, and a series of setbacks have since frustrated Fox as it attempts to complete the buyout.

“I have the power to make a reference if I believe there is a risk – which is not purely fanciful – that the merger might operate against the specified public interests,” Bradley said.

Fox chief Rupert Murdoch already owns The Times and The Sun newspapers in the UK and there are fears his 100% ownership of Sky, including its Sky News operation, could hand him too much influence.

Rupert Murdoch

Fox proposed some undertakings to Ofcom to alleviate the concerns, including setting up a separate editorial board for Sky News and retaining the news division’s current funding levels for five years.

While Ofcom said the remedies would mitigate the plurality risk, Bradley said “none of the representations received” regarding plurality had “persuaded me to change my position.”

Bradley added that she had also received 43,000 “representations” regarding the takeover, with around 30 “substantive.” Almost all were related to the “commitment to broadcasting standards,” prompting the referral decision.

She said the lack of procedures for broadcast compliance in Britain for the US version of Fox News, which was closed down in the UK last month, warranted more consideration, while corporate governance failures should also be explored further.

21st Century Fox said it was disappointed by the move and urged Bradley not to delay the process any longer.

“Ofcom, the expert independent regulator on UK broadcasting, undertook a robust and rigorous review of our commitment to the Broadcast Code, concluding 21st Century Fox and Sky have records of compliance consistent with other comparable licence holders, including the public service broadcasters,” the company said in a statement.

“We are surprised that after independent regulatory scrutiny and advice, and over four months to examine the case, the secretary of state is still unable to form an opinion. We urge the secretary of state to take a final decision quickly. We look forward to engaging with the CMA on their in-depth review as soon as possible.”

Sky issued its own statement, saying: “We are disappointed by this further delay and that the secretary of state is now minded to refer the proposed acquisition to the CMA in relation to broadcasting standards, despite Ofcom, as the independent broadcast regulator, maintaining its advice that there are not sufficient concerns to justify such a reference.

“Nevertheless, we will continue to engage with the process as the secretary of state reaches her final decision.”

Fox’s previous attempt to buy Sky was aborted in 2011 following the phone-hacking scandal that hit Murdoch’s UK newspaper empire.

More recently, the company has been hit by reports of sexual harassment at its US cablenet Fox News. Those allegations saw Fox News veterans Roger Ailes and host Bill O’Reilly leave the company. Ailes subsquently passed away earlier this year.

Around US$13m was reportedly paid to five women to settle their complaints over O’Reilly’s alleged behaviour.

Sky agreed to sell the remaining 61% of its business not owned by Fox late last year.