News that the British broadcaster Sky has agreed an £11.2bn takeover by Rupert Murdoch’s US media group 21st Century Fox reignites one of the most contentious corporate deals of the decade. Five years ago, Murdoch’s News Corp pulled out of a bid for the pay-TV broadcaster in the wake of the phone-hacking scandal. This time, however, the regulatory and political backdrop is less difficult for the 85-year-old media tycoon, whose offer values all of Sky at £18.5bn.
Will the UK regulators get involved?
Once notified of the deal, the culture secretary, Karen Bradley, will have 10 working days to decide whether to issue a public interest intervention notice, or PIIN. She must specify what concerns, if any, are raised by the transaction. These can include concentration of media power and whether there needs to be a “fit and proper” test to determine whether Fox is committed to standards, such as accuracy and impartial news coverage.
If Bradley publishes a PIIN, Ofcom will conduct an initial investigation, reporting back in 40 working days. If there are no concerns, Bradley must clear the bid.
If Ofcom raises concerns, however, Bradley must decide whether to accept an undertaking from Fox to address them. For instance, the doomed Murdoch bid for Sky in 2011 resulted in a deal to spin off Sky News. If Bradley rejects any Murdoch-brokered compromise, she can refer it to the Competition Markets Authority for full scrutiny.
Should that happen, the competition body has six months to complete its inquiry. After that, Bradley will have 30 days to decide whether to block the deal, waive it through unchecked or rubber stamp it, subject to certain conditions.
The big question is whether she will look to issue the PIIN in the first place. Most analysts feel she will have to. Given the level of opposition to the first bid, which resulted in the then culture secretary, Jeremy Hunt, intervening, it could look like she is being partial towards the Fox bid if she doesn’t act.
So is the deal likely to be blocked?
Last time around, a compromise emerged. In 2010, when News Corp – then 21st Century Fox’s parent – announced its bid to take full control of Sky, Ofcom launched an investigation. The regulator was concerned about whether the proposed deal would give Murdoch too much control of media in the UK. As well as a 39% stake in the pay-TV broadcaster, News Corp also owned the Times, Sunday Times and Sun newspapers.
In a bid to push through the takeover, News Corp agreed a deal with the government to spin off the loss-making Sky News subsidiary into a new, publicly listed company which would be independently funded for 10 years.
Since then, News Corp has split into two different companies comprised of its newspaper assets in one, and its TV and film assets in the other. 21st Century Fox, owner of the Fox TV network and a Hollywood studio, has made the bid for Sky so the company will believe there are no concerns this time about media power being concentrated in too few hands.
However, given that the Murdoch family will be the ultimate owner of both newspaper and TV assets in the UK, questions might still be asked. A similar offer to spin off Sky News may still need to be made to appease media plurality issues.
Could European regulators block the deal?
The original bid to buy the outstanding stake in Sky did not fall foul of competition regulations, because the European commission – the EU’s executive arm – gave it the green light. The original European commission investigation looked at the potential combination of Sky UK with its German and Italian operations. It found that such a group was “unlikely” to flex its muscle in an anti-competitive way in areas such as sports and film rights.
That scenario has now come to pass anyway. In 2014, Sky struck a near-£7bn deal to buy out its sister operations in Germany and Italy, creating a pan-European operation. European regulators cleared this too, which will buoy Fox’s optimism that a takeover of a newly enlarged Sky will receive EU approval.
Could the phone-hacking scandal again derail the deal?
In 2011, News Corp was forced to abandon its £8bn-plus bid to take control of Sky after the fallout from the phone-hacking scandal made the transaction politically impossible.
An Ofcom investigation found in 2012 that Sky remained a “fit and proper” owner of a broadcast licence, despite the phone-hacking affair that embroiled its parent company, but published a scathing assessment of James Murdoch – then chairman of Sky – finding that his conduct repeatedly fell short of the standards expected.
The historical issue of phone hacking is unlikely to play a role in the renewed bid. The tainted newspaper operation has been spun off into a separate company from 21st Century Fox.
Will Sky News become more like Fox News?
The short answer is no. While Murdoch has in the (distant) past made comments that he would like Sky News to be more “Foxified”, he meant it more in the sense that the operation would become as influential and important as his US network.
Due to the lack of impartiality laws in the US, Fox News became successful as a rightwing counterpoint to the leftwing/liberal leanings of many rivals. In the UK, however, Ofcom has stringent impartiality rules relating to news and current affairs that all TV companies must adhere to as part of their broadcasting licence.
• This article was amended on 12 December 2016. An earlier version said that if a public interest intervention notice was published Ofcom would conduct an initial investigation and report back in 20 working days; that has been corrected to 40 working days.
