News Corp’s acquisition of majority control over BSkyB - Who rightly decides the public interest?

February 2011

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Introduction and summary

The Secretary of State for Culture, Olympics, Media and Sport ( SoS ), Jeremy Hunt, will shortly announce his decision on whether to refer to the Competition Commission ( CC ) News Corp’s proposed acquisition of the 60 per cent of British Sky Broadcasting Group Plc ( Sky ) that it does not already own1. The impending decision follows the issuing of a European intervention notice by the Secretary of State for Business, Innovation and Skills, Vince Cable, who previously had responsibility for these matters, and a recommendation from the media regulator Ofcom that the transaction be sent to the CC for a detailed review of its effects on plurality of media ownership in the UK .

Media plurality is one of the few criteria other than competition for the UK authorities to intervene in a transaction under the merger control process - the others being national security and maintaining the stability of the UK financial system. Moreover, whereas in competition cases the final decisions are left to the independent competition authorities, free of political interference, by contrast for these public interest matters the ultimate decision rests with Government Ministers.

In a statement on 25 January 2011, the SoS said that he intended to refer the merger to the CC but before taking a final decision, wished to consider undertakings proposed by News Corp to address the potential threats to the public interest in media plurality identified by Ofcom. Critics have labelled the SoS’s delay as “dithering” and suggested that he should refer the transaction to the CC because it is best place to resolve questions on plurality.2 However, calls for the SoS to refer the transaction to the CC in the expectation that this will result in greater transparency and an independent review overlook an important point - a 24 week investigation by the CC will only result in a more detailed advisory report and further recommendations for the SoS to consider. He would not be bound by a CC report, and would still be left to exercise his political judgment over whether the deal should be blocked or allowed to proceed. This follows not only from the considerable discretion the SoS has under the statutory regime for assessing media plurality issues in mergers, but also from the fact that questions about how much plurality in the media is necessary are ultimately political ones.

This briefing summarises the background to the case and the Ofcom recommendation to the SoS and explains the respective roles of the SoS and the competition authorities, and the procedure that applies going forward. It also considers the scope for appeals against the SoS’s decision. We conclude by commenting on the significance of the public interest review process and the appropriateness of political decision making in the context of merger control in the UK.

In summary, key points about the process going forward are:

  • The SoS’s decision, on whether to refer the transaction to the CC or accept undertakings offered by News Corp - i.e. a negotiation solution - in lieu of a reference to the CC, is imminent.
  • The SoS has significant discretion to accept undertakings. If he is inclined to do so he must publicly consult on the proposed undertakings before reaching a final decision.  
  • A reference to the CC would result in a public investigation of at least 24 weeks and a report with further recommendations. The SoS would then have 30 days to reach a final decision.
  • Although both the SoS’s decision and the content of the Ofcom report are open to challenge in the Competition Appeal Tribunal (CAT), the scope for challenge is limited to judicial review grounds and the prospects of success limited. An application for review could be made by any person aggrieved by the decision, including media organisations opposed to the transaction.
  • Ofcom has also recommended that the Government consider amending the law to allow concerns that media plurality arise through organic change rather than a merger to be investigated.

Footnotes:

  1. See DCMS page on News Corp/Sky.
  2. See for example, “BSkyB dither shows politicos unfit to police plurality”, Financial Times, 25 January 2011.

Background

On 10 June 2010 News Corp announced it had submitted an offer to the Sky board to acquire the entire share capital of Sky that it does not already own. News Corp has been a major shareholder in Sky for more than 20 years and currently holds a 39.1 per cent stake. This makes News Corp by far the largest shareholder, but its ability to dominate Sky’s strategic direction has arguably been restricted by limited representation on the Sky board and a 2005 Voting Agreement with Sky which limits News Corp’s voting rights to 37.19 per cent.3

Media mergers may potentially be scrutinised by the authorities in two respects:

  • Competition issues: depending on whether it meets certain thresholds, a transaction could be reviewed by the European Commission or the UK competition authorities (the OFT and the CC), which is responsible for applying the relevant competition test and determining whether the transaction can proceed.
  • Public interest issues: a transaction may also be assessed against certain non-competition criteria, including media plurality. The relevant decision maker on these issues is the SoS, advised by Ofcom and the competition authorities.

In the media context, “plurality” is understood to mean the availability of a variety of sources of news and opinions, which allows citizens to participate effectively in democracy in an informed way.4  The public interest consideration concerning plurality of ownership of media outlets is intended to ensure plurality of sources of news and different opinions. Thus measures to protect plurality seek to ensure that mergers do not reduce the number of news outlets to a position where the persons in control of the media are able to restrict access to information and dictate public opinion.

News Corp notified the proposed transaction to the European Commission on 3 November 2010 on the basis that the Commission had jurisdiction under the EU Merger Regulation5 to investigate the competition implications. The following day the Business Secretary issued a “European intervention notice” stating that he believed the transaction raised a public interest consideration concerned with media plurality and that he was considering whether to take appropriate measures to address this concern. The European intervention notice required Ofcom to provide advice and recommendations on the public interest consideration and required the OFT to report on whether the UK authorities had jurisdiction under UK law to take action.

The European Commission cleared the deal on 21 December 2010, concluding that the combination of News Corp’s newspaper and audiovisual content businesses with Sky’s pay TV operations would not lead to anticompetitive effects.6 The full text of the European Commission decision7 revealed that the Commission had initial concerns about the potential for News Corp to withhold advertising from Sky’s pay TV competitors and that Sky offered proposed remedies to address these concerns, but the Commission decided subsequently that those concerns were not substantial.

The European Commission’s press release emphasised that its conclusions on competition grounds were without prejudice to the outcome of the ongoing media plurality review in the UK. Events in the UK took a dramatic turn shortly afterwards when the Business Secretary’s responsibilities for media issues were transferred to the SoS after it emerged that Vince Cable had told undercover reporters that he had "declared war on Mr Murdoch" - this was widely seen as compromising his impartiality.  


Footnotes:

  1. Only 4 of the 14 Sky board directors are affiliated with News Corp. The provisions of the voting agreement cease to apply if there is a change of control of Sky.
  2. Ofcom Report, 1.05; Ofcom Report to the Secretary of State (Culture, Media and Sport) on the Media Ownership Rules, 17 November 2009, 2.7.
  3. Council Regulation (EC) No 139/2004.
  4. As News Corp and Sky’s operations do not overlap, the Commission’s investigation focused on whether the transaction could lead to possible anti-competitive effects arising from vertical links in neighbouring activities in relation to audiovisual content, newspaper publishing and advertising.
  5. Published on 5 February 2011, Case No COMP/M.5932.
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What is a European invention notice?

The Enterprise Act 2002 made a significant change to UK competition law on mergers by removing the SoS from decision making concerning the competition effects of  mergers and instead designating the OFT and the CC - independent competition authorities - as the relevant decision makers. However, the SoS has retained the power to intervene in mergers that raise certain public interest issues, specifically concerning national security, certain media public interest considerations set out in the Act, and maintaining the stability of the UK financial system.8 The specification of a public consideration concerning plurality of media ownership was seen as necessary to counterbalance the removal of many of the restrictions on cross-media ownership.

The power to intervene on public interest grounds applies both to mergers which fall within the jurisdiction of the OFT and to mergers that qualify for notification to the European Commission in Brussels under the EUMR . Article 21(4) of the EUMR provides for an exception to the exclusive jurisdiction of the European Commission to review a transaction that qualifies under the financial thresholds in the EUMR. It allows  national governments and authorities to “take appropriate measures to protect legitimate interests” other than the effects on competition, and states that media plurality shall be regarded a legitimate interest. This means that national authorities may consider a legitimate interest issue (including plurality of the media) and take action to remedy concerns about the merger even though the Commission retains its exclusive jurisdiction to assess the competition implications of the deal.9

The European intervention notice states that the relevant public interest consideration in this case is “the need, in relation to every different audience in the United Kingdom or in a particular area or locality of the United Kingdom, for there to be a sufficient plurality of persons with control of the media enterprises serving that audience”.10

Having issued an intervention notice, the SoS is required to determine whether, taking account only of the relevant public interest consideration, the merger may be expected to operate against the public interest. To assist him, the OFT and Ofcom must provide advisory reports, in particular on whether the threshold is met to make a reference to the CC for in-depth investigation.  If a reference is made, the CC must then report to the SoS to assist his final decision.11

This is only the second time that the SoS has used his powers to intervene in a merger on media plurality grounds. The first was in 2007 in relation to Sky’s acquisition of a 17.9 per cent minority stake in ITV, which the OFT investigated in respect of its effects on competition. The SoS referred the transaction to the CC and ultimately followed its recommendation that the acquisition did not have an adverse effect on plurality of ownership (although the deal was blocked on competition grounds, and Sky was required to reduce its holding to 7.5 per cent).12 The SoS concluded that the Sky/ITV deal did not raise plurality concerns because the limited degree of control Sky could exercise over ITV (as material influence rather than total control) did not significantly affect plurality.  In that case, Ofcom and the CC assumed that News Corp controlled Sky and took News Corp’s UK newspaper businesses into account for the purpose of their analysis of the possible plurality effects that arose from the Sky shareholding in ITV.

The previous Government published guidance on the operation of the media public interest merger provisions, as required by the Act.13 This explains when the SoS might intervene in a merger situation on the basis of a media public interest consideration and the procedure he will follow. 

The guidance states that the media ownership public interest consideration:

is concerned primarily with ensuring that control of media enterprises is not overly concentrated in the hands of a limited number of persons. It would be a concern for any one person to control too much of the media because of their ability to influence opinions and control the agenda. This broadcasting and cross media public interest consideration, therefore, is intended to prevent unacceptable levels of media and cross-media dominance and ensure a minimum level of plurality.” [emphasis added]

The guidance stated that, save in exceptional circumstances, the SoS will not intervene in a merger concerning businesses that are, or were previously, subject to media ownership restrictions, including “mergers involving satellite and cable television and radio services”. This would appear to cover News Corp’s acquisition of Sky. The intervention in Sky/ITV was consistent with this policy, as ITV was previously subject to ownership restrictions. The SoS has not made it clear, but the Government may consider the News Corp transaction gives rise to exceptional circumstances due to Sky’s dominant position in the pay TV market and the already significant influence the News Corp group has over other media in the UK. Alternatively, the new coalition Government may consider that the guidance - now more than six years old - does not sufficiently reflect its policy in the area.


Footnotes:

  1. This consideration was recently added in the context of the previous Government’s response to the Lloyds/HBOS merger.
  2. This assumes that the Commission does accede to a request to refer the transaction to the OFT under the relevant provisions of the EUMR that allow repatriation of the competition review.
  3. Enterprise Act 2002, section 58(2C).  The other media grounds on which the SoS can intervene are: to protect accurate presentation of news and free expression of opinion in newspapers; to protect the range and quality of broadcasting; and to ensure a genuine commitment to broadcasting standards.
  4. The procedure is set out in the Enterprise Act 2002 (Protection of Legitimate Interests) Order 2003 (SI 2003/1592).
  5. The SoS has issued four other invention notices, all in relation to national security concerns.
  6. DTI Guidance Document Enterprise Act 2002: Public interest intervention in media mergers - Guidance on the operation of the public interest merger provisions relating to newspaper and other media mergers, May 2004.
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What was Ofcom’s advice?

Ofcom and the OFT submitted their reports to the SoS on 31 December 2010.14 The SoS published the advice on 25 January 2011. The OFT advised that the SoS had jurisdiction to make a reference to the CC to address any media plurality concerns. On the media plurality concern identified in the Intervention Notice, Ofcom concluded there is a risk that the transaction threatens plurality. Ofcom advised it “considers it reasonable to believe that the proposed transaction may be expected to operate against the public interest since there may not be a sufficient plurality of persons with control of media enterprises providing news and current affairs to UK-wide cross-media audiences.”

Ofcom’s advice was based on three sets of media plurality concerns identified in the report:

  • Reduction in external plurality: Because News Corp would take full control of Sky, the number of larger news and current affairs “across-media” providers (below the BBC , whose scale is unrivalled) would reduce from three separate providers (NewsCorp, Sky and ITN) to two. The characterisation of larger providers was based on analysis of the ability of different media enterprises to influence and inform public opinion, including audience shares and reach. News Corp (with its newspapers and related websites) and Sky (with its TV news and websites) are among the major cross-media producers. 
  • Insufficient evidence on internal plurality: A number of submissions suggested that News Corp’s full ownership of Sky would remove the editorial independence of Sky News from News Corp and its other outlets. In the time available, Ofcom was not able to conclude that Sky News’ independent voice would not be compromised by the transaction or whether the measures News Corp had suggested would ensure sufficient internal plurality.
  • Multi-sourcing and online news do not ensure sufficient plurality: News Corp presented evidence that most consumers use a number of news sources, and that on-line news sites will remain significant alternative sources. Ofcom rejected these arguments as indicators of sufficient plurality post-transaction, concluding that the number and range of news providers used by all consumers and their relative significance is more important and that online news is, at present, complementary to traditional media rather than providing alternative voices.

Based on its analysis of these concerns, Ofcom recommended that the SoS make a reference to the CC for an in-depth investigation. However, in recommending a reference Ofcom emphasised that the legal test it was required to apply - to advise on whether the SoS can choose to refer the transaction to the CC - involves a low threshold. It only requires that the evidence be sufficient “to hold a reasonable belief, on the basis of the evidence available, that the proposed acquisition may operate or be expected to operate against the public interest”.15 Ofcom stressed that its advice to make a reference reflected this low threshold, and that its recommendation did not necessarily mean that these concerns were conclusive or that the transaction should be blocked.

The Ofcom recommendation also raised a wider concern about the ability of the SoS’s intervention powers to ensure sufficient plurality of media ownership. These powers only arise in the context of a transaction. Ofcom suggested a new mechanism might be required to allow the Government to intervene in the sector if market developments over time threaten media plurality. For example, Ofcom noted concerns that new technologies, organic changes in market shares, changes in news wholesaling and the growth of news aggregators could reduce plurality. To address this risk, Ofcom recommended that the Government conduct a wider review to consider whether the power to order market investigations by the CC under the Enterprise Act should be extended to public interest issues.  

In his 25 January 2011 statement the SoS said that he had carefully considered the Ofcom report and consulted with News Corp and Sky on the advice. Unsurprisingly, both parties have submitted that the SoS should not adopt the Ofcom report. They argue Ofcom has applied the wrong legal test and that its assessment of the evidence is unsound.  


Footnotes:

  1. Ofcom Report on public interest test on the proposed acquisition of British Sky Broadcasting Group plc by News Corporation, 31 December 2010; OFT A report to the Secretary of State for Culture, Olympics, Media and Sport in response to the European intervention notice issued on 4 November 2010 in relation to the anticipated acquisition by News Corporation of British Sky Broadcasting Group plc, 30 December 2010 - both accessible on the DCMS page on News Corp/Sky.
  2. Office of Fair Trading v IBA Health Ltd [2004] EWCA Civ 142.
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Is the Secretary of State required to follow Ofcom’s recommendation?

The SoS has three options for action:

  1. Reference: make a reference to the CC for an in-depth review, as recommended by the CC;
  2. Undertakings: accept undertakings from News Corp in lieu of a reference to mitigate or prevent the potential effects adverse to the public interest; or
  3. Clearance: decide not to make a reference to the CC and to permit the proposed transaction to go ahead without modification, although the SoS only has the power to consider undertakings in lieu of a reference where he would otherwise make a reference.16   

In deciding whether to make a reference, the SoS is obliged to accept the decision in the OFT’s report concerning jurisdiction but the legislation does not require him to accept Ofcom’s advice and recommendations as to the public interest consideration.

The SoS’s 25 January statement revealed that, when the SoS forwarded the Ofcom report to the parties, he initially told the parties that he was minded to refer the transaction to the CC but was open to representations to challenge his thinking. The parties’ initial efforts appear to have been unsuccessful - in the 25 January statement the SoS said that, after considering the responses from News Corp and Sky, he still intends to refer the merger to the CC. However, the SoS said that, despite his intention, he is currently considering proposals that News Corp has offered as undertakings in lieu of making a reference. There appears to be no possibility of the SoS simply clearing the transaction at this stage.

The SoS may accept undertakings in lieu of a reference “for the purpose of remedying, mitigating or preventing any of the effects adverse to the public interest” and may accept undertakings “to take such action as he considers appropriate”.17   

The details of News Corp’s proposed undertakings are not clear - they have been blanked out from the published documentation - but, based on concerns set out in the Ofcom report, they are most likely to involve measures to preserve the editorial independence of Sky News. This could involve the creation of an independent editorial board that would sit outside the oversight of the main Sky board. Undertakings along these lines may not be too painful for News Corp, in particular if the Sky board is itself concerned about retaining editorial independence. Some sources have reported that News Corp may have offered to sell Sky News but this seems less likely to be a viable remedy if Sky News is as unprofitable as has been reported.18

Negotiations on undertakings are not subject to a statutory timetable. The negotiations could be complete in the next few days, or they could take a number of weeks. However, if the SoS reaches a view that News Corp’s proposals sufficiently address the public interest concerns identified in the Ofcom report he must publish the proposed undertakings and allow a period of no less than 15 calendar days for other interested parties to express their views, before making a final decision.19  Alternatively, the SoS will announce that he has decided to make a reference to the CC. 

In the event of a reference:

  • The CC would have 24 weeks (with a possible extension of 8 weeks) to conduct a detailed investigation and report back to the SoS with its view on whether the proposed acquisition may be expected to operate against the public interest on the ground that it threatens the plurality of control over the media in the UK. If so, the CC would also provide recommendations on remedial action, i.e. whether the transaction should be blocked or subject to remedies.20    
  • The SoS would then have 30 days in which to come to a decision - whether to clear the transaction or whether to block the transaction, either outright or subject to remedies. As with Ofcom’s advice, the SoS would not be under an obligation to accept the CC’s recommendations.  

Footnotes:

  1. Order, Schedule 2, paragraph 3(1).
  2. Order, Schedule 2, paragraph 1(2).
  3. See, for example, Financial Times “Media groups warn on Sky News sale plan”, 20 January 2011.
  4. Enterprise Act 2002, Schedule 10, paragraph 2(2)(f) as amended by the Order, Schedule 3, paragraph 2(3).
  5. Order, article 6(4).
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Could the Secretary of State’s decision be challenged?

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:

  1. Illegality:  That the SoS (or Ofcom) has misinterpreted the relevant law, for example by apply the wrong legal test.
  2. 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.  
  3. 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.


Footnotes:

  1. Enterprise Act 2002, section 120(4).
  2. BSkyB v Competition Commission & The Secretary of State [2010] EWCA Civ 2. 
  3. Enterprise Act 2002, section 120(6).
  4. Enterprise Act 2002 section 120(1), as amended by the Order, Schedule 3, paragraph 21.
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Comment

Media transactions that raise nebulous “public interest considerations” are one of the last outposts for political intervention in merger control in the UK. Given that it so rarely occurs, and is inevitably contentious, it is not surprising that intervention raises questions about whether it remains appropriate for a Minister to decide whether a transaction should proceed, rather than leaving the matter to the (independent) competition authorities. In this case, the comments by the Business Secretary that he had declared war on Mr Murdoch were not helpful. However, this debate should focus on the core of the issue. This is not whether the process undertaken by the SoS is as transparent as the procedure employed by the competition authorities, or whether the SoS should seek the view of the CC just because Ofcom and the OFT say he should? - these questions overlook the considerable discretion that the SoS has under the intervention process, and the fact that he would still be required to make up his own mind at the end of a CC investigation. The more important questions concern the subject matter of plurality - when is plurality of media control “sufficient”, and who is best placed to determine questions of plurality?

What is “sufficient plurality”?

The statutory test requires the SoS to determine whether, if the transaction proceeded, there will be a sufficient plurality of persons with control of the media enterprises. What constitutes “sufficient plurality” is not defined in the Enterprise Act. The Guidance states that the SoS will consider the number of media sources in the market and whether the merger is likely to significantly reduce plurality in relation to relevant audiences. However, the statutory scheme does not say that “sufficient plurality” equates to a minimum number of media outlets. It will be obvious that a single, dominant source of news would not be enough. The more difficult consideration is how many media outlets are required to ensure sufficient plurality, and how their relative strength and appeal should be factored into the equation.  

Parliament has deliberately left the interpretation of sufficiency to the SoS as the decision maker and he has a wide discretion, as does Ofcom and the CC in advising him. This was recognised by the Court of Appeal in Sky/ITV, where the Court noted that the assessment of sufficient plurality means more than a number and requires a qualitative assessment that also considers the range and variety of media sources in the market.25 What is sufficient can only be assessed on a case-by-case basis, it cannot therefore be pre-defined as a matter of policy that “two” or “three” alternative news sources will protect the public interest.

Who is best placed to determine questions of plurality?

The wide discretion the SoS has in determining these questions presumably reflects the fact that a decision about the sufficiency of plurality is inherently a political one. It is arguably proper that a Minister be charged with protecting the public interest concerning such an important issue rather than the competition authorities, which are skilled in applying economic principles but not themselves directly accountable to Parliament and the electorate. However, the SoS’s discretion is not without bounds - his decision is subject to judicial review, which protects against the risk that his conclusions might be irrational or motivated by bias.  

Ofcom’s recommendation that the Government consider the possibility of market investigations into concerns about media concentration arising from organic growth is an interesting one. The prospect of wide-ranging, lengthy reviews by the CC followed by the possibility of a break-up order is unlikely to be welcomed by larger media organisations. This would be a significant move away from the current statutory regime, which only allows intervention in the context of significant mergers and acquisitions - something the parties involved in a transaction can factor into their decision making.

Where to from here?

A decision is imminent as this briefing goes to print.  Many are expecting a negotiated solution, with News Corp agreeing to restrictions that will safeguard Sky News’s editorial independence. The proposed undertakings would then be put out for consultation, and parties opposed to the transaction would then have 15 days to reverse the SoS’s thinking. This will be difficult given the apparent intensity of the discussions between the SoS and his advisers and News Corp. If the SoS reaches the view that the concessions offered by News Corp do not go far enough, he will instead send the transaction to the CC for an in-depth investigation. This will subject News Corp to five months of softening up before the SoS has to contemplate a final decision.  

Given what is at stake, a legal challenge against a decision either way - by News Corp against a decision to refer, or by a party opposed to the transaction if the SoS decides to accept undertakings in lieu of a reference - cannot be discounted.  However, the scope for challenging his decision in the CAT is limited - the SoS’s decision will be safe as long as his conclusions are adequately supported by the evidence and he has given all affected parties a sufficient opportunity to put forward their views. But this does not mean it will not be contentious.  Whatever the SoS decides he will be criticised in the media - if he clears the transaction on New Corp’s word, the Government risks being accused of being “Murdoch’s poodle”;  if he refers it to the CC that could well be seen as “Murdoch bashing” or interference to prevent a foreign takeover.  This reflects the highly political nature of decisions on “public interest” criteria. It is perhaps only right that a politician should take responsibility for what he determines is in the public interest.  


Footnote:

  1. Above note 22, 87 and 90.
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