On 23 January 2018 the Competition and Markets Authority (CMA) published its provisional finding that 21st Century Fox, Inc’s anticipated acquisition of the shares in Sky plc it does not already own is not in the public interest. As reported on in our previous newsletter, the Secretary of State for Digital, Culture, Media and Sport (SoS) referred the case to the CMA in September 2017 for a Phase II review on the public interest grounds of media plurality and commitment to the attainment of broadcasting standards.
The CMA provisionally found that, overall, the parties’ approach to broadcasting standards (including the policies and procedures they have in place), as well as their compliance records, indicate a genuine commitment to meeting UK broadcasting standards. The CMA also took account of evidence relating to wider regulatory compliance and corporate governance failures, but attached less weight to these as they are not directly related to the attainment of broadcasting standards.
In assessing the effects on media plurality, however, the CMA provisionally found that the Murdoch Family Trust (MFT), which is the largest shareholder in Fox and News Corp (whose portfolio includes The Times, The Sunday Times and The Sun), would exercise significantly increased control over Sky and Sky News following the transaction and that this would materially reduce the plurality of persons with control of media enterprises in the UK. The MFT would have too much control over news providers across all media platforms (television, newspapers, radio and online). It would therefore have too much influence over public opinion and the political agenda and there would be a risk that the diversity of viewpoints available to the public would be significantly reduced. The CMA therefore provisionally found that the transaction may be expected to be against the public interest on this ground.
The CMA provisionally identified three potential remedies: (i) prohibition of the deal; (ii) a spin-off or full divestiture of Sky News; or (iii) behavioural remedies to insulate Sky News from the MFT’s influence. The CMA also flagged that Fox’s agreement in December 2017 to sell certain assets, including its interests in Sky, to The Walt Disney Company may affect any proposed remedies.
The CMA has opened consultations on its preliminary findings and proposed remedies, which are due to close on 13 and 6 February 2018 respectively. The CMA must then provide its final report to the SoS by 1 May 2018 (extended from 6 March 2018). It is for the SoS to make the final decision on the proposed deal.