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FOX/SKY; how feeble Ofcom report increases Murdoch's chance of success

View profile for Stephen Hornsby
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Whatever one thinks of Rupert Murdoch, his ambitions to acquire the shares of Sky that he does not already own can only ultimately be constrained by robust theories and facts that persuade an independent regulator that it is more likely than not that the public interest will be harmed (the legal test for control of  mergers). Thereafter, of course in public interest cases, the ultimate decision is for the Secretary of State; so to that extent the matter is political .But assuming that the merits have anything to do with the outcome, Ofcom’s report ought to actually increase the chance of the merger proceeding even without any undertakings because Ofcom’s theories of harm are highly theoretical and the facts on which it relies (with due diffidence it has to be said) have been undermined by the election outcome.

On the question of plurality, the theory of harm advanced by the many opponents of the proposed transaction is that once in full control of Sky, the Murdoch family would breach the Broadcasting Code systematically and irremediably and turn this highly regarded news service into an equivalent of the agenda setting Fox in the U.S. Is this more likely than not? At most this looks like a remote possibility since Sky’s compliance with the Broadcasting Code to date is quite good – moreover the incentives for non–compliance with the Broadcasting Code seem very low from a commercial perspective since Fox is not watched much in the UK.

The other theory of harm is that the Murdoch family already influences the political process and public opinion and that as a result of the acquisition this influence would increase. The main facts on which this theory is based is academic research showing how the outcome of the 2015 election was influenced by the Murdoch press. For a report drafted close to an election, Ofcom rightly points out that this theory needs to be tested in the light of the recent election outcome. Unfortunately for Murdoch’s opponents, the outcome of the election does not support the theory – indeed it is even arguable that it disposes of it entirely .

In front of an independent regulator (the CMA), Fox would doubtless make these points and many more besides. A clean bill of health is reasonably foreseeable thus giving the Secretary of State – whoever that might be – the unenviable task of rejecting the CMA’s advice if he/she  was so minded. The financial markets  greeted the announcement and  Ian Watson’s prediction in Parliament of some minor tweaks to the proposed undertakings followed by approval looks justified. If so, Murdoch’s opponents will have to look to other tools to attack him. The “public interest” provisions of U.K. merger control as currently drafted are not really fit for this purpose.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.