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UK minister says Fox's acquisition of Sky should receive deeper scrutiny

A government minister has announced that she is minded to refer 21st Century Fox's acquisition of Sky for an-in depth Phase 2 investigation by the Competition and Markets Authority (CMA) to assess whether the merger is in the public interest.13 Sep 2017

Culture secretary Karen Bradley announced on Tuesday that she is of the view that there are "outstanding non-fanciful concerns" about whether Fox would be committed to attaining the objectives of the broadcasting standards outlined in UK communications laws should it complete its proposed £11.7 billion acquisition of Sky.

Bradley said she is "not confident" that Fox's corporate governance arrangements are sufficient to ensure the company's compliance with the broadcasting standards. She also noted concerns expressed in third party representations about the potential 'Foxification' of Sky's news coverage should the takeover go ahead as currently planned. Whilst the concern about partiality was not one of the grounds on which she is proposing to make a reference, Bradley suggested that the CMA may wish to consider this matter as part of any Phase 2 enquiry

"The first concern was raised in Ofcom’s public interest report: that Fox did not have adequate compliance procedures in place for the broadcast of Fox News in the UK and only took action to improve its approach to compliance after Ofcom expressed concerns," Bradley said. "Ofcom has now confirmed it considers this to raise non-fanciful concerns but which are not sufficiently serious to warrant referral. I consider that these non-fanciful concerns do warrant further consideration."

"The fact that Fox belatedly established such procedures does not ease my concerns, nor does Fox’s compliance history," she said. Bradley also identified corporate governance as an area for further investigation by the CMA, saying that " it is difficult to be sure that any wider failings of corporate governance at 21CF are incapable of affecting broadcasting standards compliance in circumstances where, as discussed above, 21CF failed to put in place adequate compliance procedures for the broadcast of Fox News in the UK."

Bradley said the CMA may also wish to assess the deal's impact on media plurality in the UK. "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," Bradley said.

Fox and Sky have been given until 26 September to "make representations" to Bradley on her proposed decision. Bradley said that she would seek to reach a final decision in the case as soon as she could after that date. The culture secretary has the power to intervene in media mergers under the terms of the Enterprise Act.

Bradley asked Ofcom in March to review the planned deal and make a recommendation on whether it should be allowed to go ahead.

In June, Ofcom responded and said that there was not a "reasonable basis" for it to conclude that Sky would no longer be a fit and proper holder of broadcast licences if owned and controlled by Fox.

However, in a separate public interest assessment, Ofcom flagged media plurality concerns and recommended to Bradley that she refer those issues for further scrutiny by the CMA. At the time, Bradley said she was "minded to" do just that, but now it looks like she will ask the regulator to assess the deal in a broadcasting standards context too.

Fox already owns a 39% stake in Sky. The companies previously tabled undertakings aimed at ensuring editorial independence of Sky News post-transaction. However, although Ofcom said that the undertakings would address the concerns it highlighted, Bradley said in June that she was minded to reject them.

In her latest statement, the culture secretary said: "Should I decide 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. Such a referral does not signal the outcome of that investigation."

Last month, Fox said it expected its takeover of Sky to close "by June 30".