Seen it be­fore? Mur­doch faces reg­u­la­tor over Sky

The Daily Telegraph - Business - - Business - CHRISTO­PHER WIL­LIAMS ANAL­Y­SIS The Sun

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’

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