Rupert Murdoch’s £11.7bn takeover bid for Sky is to be investigated by the media regulator to see if it gives him too much control of news output in the UK and whether the Murdoch family are “fit and proper” owners following the phone-hacking scandal.
The culture secretary, Karen Bradley, has referred 21st Century Fox’s bid to buy the 61% of Sky it does not already own to Ofcom to investigate potential public interest issues on two grounds.
Ofcom, which will now have up to 40 working days, to 16 May, to report back to Bradley on the public interest concerns, will kick off its own concurrent review of whether Fox is “fit and proper” to take control of Sky’s broadcasting licence.
Bradley, who had previously said she was “minded” to refer the deal to Ofcom, told MPs she had issued a European intervention notice on the grounds of “media plurality and commitment to broadcasting standards” linked to the bid from Murdoch’s company.
Bradley, who confirmed the decision in a statement to MPs in the Commons on Thursday, said she had received more than 700 representations about the deal from third parties, “the vast majority of which supported intervention”.
Ofcom will look at whether Fox’s takeover will raise issues of UK media plurality and concentration in Murdoch’s control. The deal will give him full control of Sky News, as well as the Times, Sunday Times and Sun newspapers and the radio group TalkSport, through a separate company News Corp.
The second issue is whether Fox is committed to the required editorial standards, such as accuracy and impartial news coverage.
In parliament, Tom Watson, shadow culture secretary, questioned whether Bradley’s referral on broadcasting standards grounds would give Ofcom the power to investigate issues including phone hacking and corporate governance failures
Bradley said: “None of the representations [made by Fox] have led me to dismiss the concerns I have regarding the two public interest grounds I previously specified.”
She added: “I was clear in my original ‘minded to’ letter and statement made to the House [of Commons] on 6 March that corporate governance was one of the issues I was referring the matter to Ofcom [about]. I would expect them to look at that. Ofcom is an independent regulator. It is for Ofcom to decide what evidence they want to look at. They are open to look at whatever evidence they feel is appropriate to enable them to make their decision.”
Both Watson and fellow Labour MP Ed Miliband raised concerns that Ofcom’s 40-day time limit is not long enough to conduct a “fit and proper” review.
Miliband, the former Labour leader, said Ofcom’s “fit and proper” review conducted during Murdoch’s last aborted bid for full control of Sky in 2010 took many months. “Can [Bradley] assure us that if during this period Ofcom seek more time or powers she will grant that request?” Miliband asked in parliament on Thursday.
Watson said: “A comprehensive ‘fit and proper’ test will take time, so that all of the Murdochs’ failures of corporate governance during the phone-hacking scandal and elsewhere can be properly investigated.”
Bradley responded: “Ofcom have assured me they have the time and powers they need.”
She also rejected calls for the fit and proper test to be made a standard part of the public interest criteria in the Enterprise Act, and not sit with Ofcom. “I did very carefully consider the representations made,” she said. “It is important an independent regulator looks at ‘fit and proper’ and the government has grounds to intervene under the Enterprise Act. Those two have to be kept separate and we should not see government stepping into where the regulator should quite rightly sit.”
However, if the regulator cites problems she must decide whether to accept an undertaking from Fox to address them.
Opponents of the bid have raised concerns that Murdoch, who also owns the rightwing Fox News, will use his influence to drive the news agenda, thereby risking the “Foxification” of Sky News.
Murdoch critics have called for the bid to be blocked. Rival broadcasters are expected to lodge complaints and make representations in the UK and Europe – the European commission is also examining the deal – after expressing concerns that a Fox/Sky combination will dominate bidding for top-flight sport, TV shows and movies.
Fox News, which is also broadcast in the UK, has fallen foul of the regulator a number of times through editorial lapses. Last year, Ofcom criticised a Fox News programme for breaching the UK code when a guest said Birmingham was a city “where non-Muslims just simply don’t go”.
Ofcom has already said that Fox taking over Sky’s licence would warrant a “fit and proper review”. During its investigation following Murdoch’s previous attempt to takeover Sky in 2010, it found that Sky remained a “fit and proper” owner of a broadcast licence, despite the phone-hacking affair that embroiled the now-defunct News Corporation, then parent of Fox and Murdoch’s UK newspapers.
However, it published a scathing assessment of James Murdoch – then chief executive of his father’s UK newspaper group and chairman of Sky: – it found that his conduct repeatedly fell short of the standards expected.
The political fallout ultimately resulted in Rupert Murdoch withdrawing his bidand James standing down as chairman of Sky and quitting the UK newspaper business to run Fox, the film and TV operation, from the US.
Rupert Murdoch subsequently spun off the publishing and newspaper assets into a separate company, News Corp, and film and TV into 21st Century Fox, with independent boards, in part a corporate governance measure to facilitate another tilt at Sky.
James Murdoch, chief executive of Fox, was reappointed last year as chairman of Sky. In October, he had to rely on the support of Fox, Sky’s largest shareholder, to win approval for his return after more than 50% of independent shareholders voted against his reappointment.
At the time of the last bid, the Murdochs agreed a deal to spin off Sky News to allay media plurality concerns. This time James Murdoch has said he does not believe any “meaningful concessions” will need to be made to get the deal through.
In a letter to Bradley during the 10-day period she has had to review whether to refer the bid to Ofcom, Fox argued that in the six years since the aborted bid, the media landscape had changed beyond recognition. Fox said media plurality was flourishing with the rise of digital rivals such as Google and Facebook and news distributors and new outlets such as Vice, Buzzfeed and Huffington Post, while newspaper sales declined.
Fox also argues that splitting the publishing and TV and film operations into two companies solves corporate governance, competition and plurality issues.
Opponents argue, however, that the Murdoch family will still be the ultimate owner of both newspaper and TV assets in the UK and that that will give them too much control over UK news media.
Fox has also pledged to keep Fox News at arm’s length and “continue to broadcast news under the Sky brand maintaining its excellent record of compliance with the Ofcom broadcasting code”.
“We are confident that a thorough review of our track record over 30 years will underscore our commitment to upholding high broadcast standards, and will demonstrate that the transaction will not result in there being insufficient plurality in the UK,” said a spokeswoman for Fox.
“The media market has changed dramatically in recent years, as has our business. We believe our proposed £11.7bn investment will benefit the UK’s creative industries. We look forward to continuing to work with all stakeholders and are confident that the transaction will be approved.”
Ofcom has set a deadline of 30 March for submissions relating to the Fox/Sky takeover.
Nick Pollard, an Ofcom board member and former Sky News chief, has excused himself from the Fox investigation process.
Pollard, who led the inquiry into the failure of BBC2’s Newsnight to broadcast an investigation into allegations of sexual abuse against Jimmy Savile, worked at Sky from 1996 to 2006. “Nick Pollard is recused from any involvement in the public interest test or fit and proper assessment to avoid any perceived conflicts of interest,” said an Ofcom spokesman.
The remaining eight members of Ofcom’s board will make the final decision on the public interest test and fit and proper assessment.