In R (Avaaz Foundation) v Ofcom [2018] EWHC 1973 (Admin), the Administrative Court (Supperstone J) dismissed all four grounds of the judicial review brought by Avaaz Foundation ("Avaaz") of Ofcom's decision that Sky plc ("Sky")1 would remain fit and proper to hold a broadcast licence following its merger with 21st Century Fox Inc ("Fox").

Key points

The Court will not interfere lightly in a regulatory decision which involves a level of predictive judgment by a regulatory body that has the requisite expertise and experience. Subject to the parameters of rationality, it is for regulators to decide how high a threshold to apply to tests relevant to their decisions, in circumstances where there is no statutory guidance on the point. Where the revocation of a licence would have a very significant effect on a business, which itself depends on that licence, the Court's judgment is supportive of regulators setting a high threshold in their decision-making on whether or not to revoke a licence.

Background

In December 2016, Sky announced that it had received an approach from Fox to purchase the shares in Sky which it did not already own. The proposed merger subsequently came under public scrutiny. The merger was subject to a public interest review by the Secretary of State for Digital, Culture, Media and Sport (the "Secretary of State") which included whether the merged business would have a commitment to broadcasting standards. In addition, Ofcom has an ongoing duty to ensure that a broadcaster to whom it grants a licence is fit and proper, and remains so. Avaaz made submissions on Fox's record in both contexts (making various allegations of impropriety) and on whether, following acquisition by Fox, Sky would remain fit and proper to hold its statutory broadcast licences.

In order to create greater certainty, Ofcom decided to assess whether following the proposed merger Sky would remain fit and proper to hold broadcasting licences. Deciding that a broadcaster is no longer fit and proper would result in the immediate revocation of its licences. This would interfere with its business as well as the right to freedom of expression, for audiences and broadcasters alike.

Ofcom held in June 2017 that there was an insufficient basis on which to conclude that Sky would not remain fit and proper following the merger. Avaaz challenged this decision on four grounds:

  1. Ofcom mistakenly applied a high threshold to finding a broadcaster not fit and proper ("Ground 1");
  2. Ofcom took an irrational approach to assessing Fox's conduct ("Ground 2");
  3. Ofcom's assessment of Fox's failures of corporate governance was inadequate ("Ground 3"); and
  4. Ofcom's failure to take account of findings made in 2012 about James Murdoch was irrational ("Ground 4").

Decision

The Administrative Court dismissed the application on all four grounds. Notwithstanding his view that the issues had become academic (by the date of the trial, the Secretary of State had already decided that the merger could only proceed if Sky News was sold to another suitable purchaser), Supperstone J gave short reasons in respect of each ground.

On Ground 1, it was found that, as there was no guidance in statute as to the appropriate threshold to apply in assessments of a broadcaster's fitness and propriety, it was for Ofcom to assess how high that threshold should be, subject to rationality review. In any case, the threshold applied was not irrational as Ofcom had to be satisfied that any decision that a broadcaster was not fit and proper would be necessary and proportionate to the interference with the right to freedom of expression and the broadcaster's business.

On Ground 2, Avaaz argued that Ofcom had taken the wrong approach, focussing on Sky's and Fox's previous compliance records rather than whether they had a genuine commitment to broadcasting standards and relying on selective evidence (for example, only monitoring the coverage by Fox News in relation to the 2017 UK General Election, and failing to appreciate the impact of Fox's inadequate corporate governance on the integrity of its broadcasts). Supperstone J emphasised that this was not an area in which the court will lightly interfere, particularly in a case involving an assessment of future behaviour. He noted that Avaaz's criticisms were predominantly directed at the weight Ofcom placed on individual factors. Supperstone J was satisfied that Ofcom had taken a thorough approach, having reviewed compliance histories for both Sky and Fox, compared them with the records of other broadcasters, and further considered both parties' records overseas.

On Ground 3, Avaaz argued that Ofcom had either failed to have regard to Fox's history of misconduct (relating to serious allegations of sexual misconduct and racial harassment), or not given enough weight to that factor. Supperstone J considered that Ofcom had relevantly taken into account the adverse impact of non-broadcast conduct on public confidence in the regulated activity.

Ground 4 related to findings made in respect of James Murdoch in 2012, where Ofcom had found that Mr Murdoch's conduct fell short of the standard to be expected although his retention as a non-executive director of Sky did not mean that Sky was no longer fit and proper to hold broadcast licences. Supperstone J considered that Ofcom was required to conduct an assessment of Sky's fitness and propriety following its acquisition by Fox, on the basis of the evidence available to it in 2017. Ofcom rightly took evidence of Mr Murdoch's conduct in the intervening years into account and did not fail to take into account earlier findings.

Comment

The Administrative Court's reluctance to interfere in this case will no doubt provide some comfort to defendants or interested parties facing a similar public law challenge which, had it been successful, would ultimately have impacted on a prospective business transaction. Evidently, very comprehensive evidence as to the likelihood of future conduct will be required from claimants in order to be persuasive in a context where there are serious ramifications for a business (including potential human rights issues), all the while bearing in mind that the Court will defer to the regulator's expertise and experience.

Bringing a tactical judicial review with the ultimate goal of thwarting a business project may be difficult to execute successfully. Where judicial review proceedings threaten to derail a particular business project, remedial action being undertaken (or which could be undertaken) may defeat the purpose of the judicial review. The Administrative Court will not look favourably on a purely academic judicial review, as Supperstone J considered to be the case here.