Seen it before? Murdoch faces regulator over Sky
It couldn’t happen again, could it? It’s more than six years since Rupert Murdoch abandoned his last bid for Sky in the teeth of the phone hacking scandal, before suffering what he described as the most humble day of his life in Parliament. Much has changed. He has cleaved his empire in two, promoted his sons to lead his businesses alongside him, and got divorced – and remarried.
Yet this week may feel like déjà vu all over again for the 86-year-old mogul. The Government said on Tuesday there were “non-fanciful” concerns about governance and compliance at Fox News, including around its sexual harassment scandal. That means 21st Century Fox, the vehicle for his latest bid for Sky, now faces an investigation of its commitment to broadcasting standards by the Competition and Markets Authority (CMA).
There will be no public humbling for Murdoch senior this time. The closest his political opponents will get is an appearance today at the Royal Television Society Convention in Cambridge by his son James, who is Fox chief executive, chairman and former chief executive of Sky, and spearhead of the family’s European pay-TV ambitions.
Along with almost all of the City and Wall Street, he believed regulatory clearance would be secure by now. Instead, James will face a potentially tricky 45-minute questioning in front of a British television industry establishment, the majority of which views his family as a malign force in media that should not be allowed to take full control of Sky. The cheers that went up in Parliament as Karen Bradley, the Culture Secretary, made her announcement earlier this week were quietly echoed over wine in Cambridge last night.
James Murdoch will at least have company in his discomfit as a result of the Government’s decision. Sharon White, the chief executive of Ofcom, will also speak at Cambridge. She had told the Government that the media regulator believed the concerns around Fox News were not serious enough to warrant a broadcasting standards investigation by the CMA.
Although Ofcom only has an advisory role in scrutinising the takeover, Bradley’s decision to effectively overrule White is unprecedented. When it comes to the public interest provisions of the Enterprise Act around broadcasting standards, the CMA can similarly only give advice and so, in some ways, will be marking Ofcom’s homework.
Broadcasting standards are Ofcom’s turf and an area in which Britain’s competition watchdog has no experience. However, if, after six months or more of investigations, the CMA’s advice differs from that of Ofcom, the media regulator could appear very weak. On Tuesday, Ed Miliband, the former Labour leader, who has campaigned against Fox’s takeover of Sky, said the media regulator faces “very serious questions”. The stakes may have been raised for some involved but not so Bradley. She has broad discretion over whether to trigger public interest investigations of media takeovers. So, there was no reason not to ask the CMA to look at Fox’s broadcasting standards. Had the Culture Secretary refused, she would almost certainly have faced a judicial review from Murdoch’s opponents. That would have put a weak minority Government in the invidious position of defending the interests of Rupert Murdoch in open court. Politically, Bradley needed a reason to keep the concerns around Fox News governance and compliance alive throughout the scrutiny; after spinning her decision out over summer, she found several.
This merely postpones the need to make a decision. The power to approve a media takeover with potential plurality and broadcasting standards issues ultimately rests with the Culture Secretary. She can take expert advice from watchdogs on remedies (such as spinning off Sky News as a legally separate company). But if the Murdoch family are to get a “yes” or a “no”, then it is the Government that must provide the thumbs up or down.
Until then the Murdoch family, Sky, and their investors face a nervy six months while the CMA goes about its investigations.
In the meantime, Sky has to keep the show on the road as things are getting rocky. Its broadband growth has ended and, after a valiant battle, the pressure on its core satellite television business is beginning to tell.
The longer the deal remains under the microscope, the more likely it is that the Murdoch family will be thwarted again. The way the Government has approached the process, taking its time over every stage, has begun to sow suspicion among some investors that ministers hope Fox will be forced to walk away. Such filibustering would allow the Government to avoid making a decision for which there is no reward and huge risk. The deadline is clear: Fox has to pay a £200m break fee if it fails to win approval by Aug 15 2018.
The Premier League auction, Sky’s unstable foundation stone, and civil cases over alleged phone hacking at
could make matters more difficult even before then.
Despite the mounting sense of déjà vu, the complaints about Murdoch’s control of Sky are much narrower this time. The plurality concerns identified by Ofcom, and the broadcasting standards “Foxification” questions that Bradley said were unanswered, all surround Sky News, a marginal, loss-making part of the business. In a less fraught deal, less mired in politics, it could easily be offered up as a spin-off to satisfy regulators.
But the Murdoch family cannot avoid politics and there is a possibility, probably greater than the stock market has priced in, that 21st Century Fox will fail to buy Sky next year. If that happens, the deal’s fate will have been sealed by the general election as much as by the wrongdoing at Fox News.
‘If the Murdochs are to get a “yes” or a “no”, then it is the Government that must give a thumbs up or down’