The SoS is not bound to follow Ofcom’s recommendation to make a reference to the CC, but he will be aware that any of the parties that opposed the deal in the Ofcom stage might challenge a decision to accept undertakings in lieu. At the same time, he will also be conscious that News Corp is not known to hide from a fight and could apply to review a reference decision.
Mergers decisions by the OFT, the CC or, as appropriate, the SoS can be challenged by way of an application for review made to the Competition Appeal Tribunal (CAT). The CAT is required to apply judicial review principles21 - it is not a merits review where the CAT can rehear all of the evidence put before Ofcom and the SoS and substitute its own view. This was confirmed by the Court of Appeal in relation to the challenges to the SoS’s previous intervention on media plurality grounds in the Sky/ITV case.22
An application to the CAT must be made within the four weeks following notification of the relevant decision, subject to an extension in exceptional circumstances. The CAT generally takes around six months to reach a decision, although it can reach a decision in a matter of weeks or even days in an urgent case.
The CAT’s decision can be appealed to the Court of Appeal on points of law.23
Who can apply for review?
Any person aggrieved by a decision of the SoS or the authorities in relation to the reference may apply to the CAT for a review of that decision.24 “Any person aggrieved” includes a wide group of parties. For example, in the Sky/ITV case it was accepted that Virgin Media had standing to apply to the CAT for review of the SoS’s decision and the CC’s report. This suggests a competing media organisation would be able to apply to challenge a decision to clear the transaction with undertakings. A challenge might also come from an industry association. For example, in the LloydsTSB/HBOS case in 2008, the CAT accepted that the Merger Action Group, an unincorporated association of bank customers formed for the purposes of opposing the merger, had standing.
What can be appealed?
An appeal can be made against any decision by the SoS or the advising authorities in connection with the reference. This includes a decision by the SoS to make a reference, or not to make a reference; a decision to accept undertakings in lieu of a reference to the CC; or the final decision by the SoS at the end of a CC investigation, including on remedies. An aggrieved person is also entitled to apply for review of the conclusions and recommendations of the authorities’ advisory reports, including Ofcom’s report and the CC’s final report.
Grounds for review
The SoS will be aware that the grounds on which his decision, and/or the Ofcom report, can be challenged are actually quite limited. A successful challenge would need to establish the SoS’s decision (or if relevant the Ofcom report on which he has relied) is unsafe on one of the following grounds:
- Illegality: That the SoS (or Ofcom) has misinterpreted the relevant law, for example by apply the wrong legal test.
- Irrationality: That the SoS (or Ofcom) has disregarded a relevant consideration or taken into account an irrelevant consideration, or the decision (or Ofcom recommendation) is so unreasonable that no reasonable decision maker could have taken it.
- Procedural impropriety: That the SoS (or Ofcom) decision is tainted by bias, or a failure to provide an opportunity to be heard, consult properly or provide adequate reasons.
The SoS will therefore be looking to protect his decision by ensuring that he has applied the correct legal test and consulted widely, giving all affected parties a sufficient opportunity to influence his thinking. He will need to ensure that his conclusions are adequately supported by evidence based on facts that have been properly established, that all material factual considerations have been taken into account and that immaterial considerations have not influenced his decision making.
The News Corp submission (published by the SoS) suggests that News Corp believes it may have grounds to challenge a reference decision on the basis of illegality and procedural impropriety. The illegality ground would be on the basis that, in News Corp’s view, Ofcom has applied an incorrect test in assessing the effects on plurality. This would also apply to a reference decision by the SoS based on Ofcom’s advice. In particular, News Corp points to Ofcom’s failure to offer a view on a “minimum” level of plurality of ownership. In terms of procedural impropriety, News Corp has made much of the apparent bias in the statements attributed to the Business Secretary and suggested that this has tainted the entire administrative process. This suggestion may have limited prospects of success given the shift of responsibility to the SoS and the consultation with News Corp since this time.
A challenge on irrationality grounds will be more difficult. The exercise by the SoS of his powers is subject to a wide discretion. In particular, he is not bound by Ofcom’s advice. He is free to reach his own conclusions about the threat to plurality and whether action is required, including whether undertakings will address any concerns. To demonstrate that he has acted reasonably, he will only need to show he has considered the advice and all relevant considerations, including the evidence presented by parties opposed to the transaction.
Consequences of a successful challenge
The effectiveness of using the CAT process to divert the SoS from his stated course of action or to challenge Ofcom’s conclusions is likely to be limited. Even if the CAT finds in an applicant’s favour, the decision would not be reversed. Instead it would merely be remitted to the relevant decision maker - i.e. the SoS in relation to his decision to refer or not to refer, or back to Ofcom if the appeal is against the recommendations in the report. The CAT would make a direction to reconsider the decision in accordance with its ruling, but this would not prevent the SoS or Ofcom from reaching the same conclusion, provided corrections have been made for the faults identified by the CAT.
The same considerations would apply to any appeal against a final decision by the SoS following a reference to the CC or against the recommendations in the CC’s report.
- Enterprise Act 2002, section 120(4).
- BSkyB v Competition Commission & The Secretary of State  EWCA Civ 2.
- Enterprise Act 2002, section 120(6).
- Enterprise Act 2002 section 120(1), as amended by the Order, Schedule 3, paragraph 21.