Rupert Murdochâs plans for the Â£11.7bn takeover of Sky have been set back after the culture secretary accepted there were serious concerns over handing him and his family âincreased influence over the UK news agenda and the political processâ.
Karen Bradley told the Commons that she accepted a recommendation from Ofcom to call in the Competition and Markets Authority to conduct a further six-month examination of the deal because of the âmaterial influenceâ that the Murdoch family would have as a result.
She said a warning by Ofcom that media plurality would be reduced was âpersuasiveâ. She added: âThe proposed entity would have the third largest total reach of any news provider â lower only than the BBC and ITN â and would, uniquely, span news coverage on television, radio, in newspapers and online.
âOfcomâs report states that the proposed transaction would give the Murdoch Family Trust material influence over news providers with a significant presence across all key platforms.â
Bradley also told MPs that Murdochâs company 21st Century Fox had made a series of formal pledges surrounding Sky News last week in a late attempt to push the deal through before her announcement. This included a commitment to maintain a Sky-branded news service for five years with spending at least similar to present levels, and reinforcing its independence by creating an editorial board that had a majority of independent members to determine the head of Sky News and oversee its editorial guidelines.
However, the secretary of state said she was minded not to accept these undertakings. Bradley will make a final decision on whether to refer the deal to the CMA after further submissions by Sky, 21st Century Fox and other interested parties, leaving open the possibility of further negotiations. The deadline for these submissions is 14 July.
Ofcomâs report said the remedies that had already been proposed would mitigate the media plurality concerns but could be strengthened.
Ofcom was also asked to review whether the Murdochs would be âfit and properâ owners of Skyâs broadcasting licence despite âsignificant corporate failuresâ at Fox News, which has faced a wave of allegations about sexual and racial harassment.
On this matter, Ofcom said there was no clear evidence that senior executives at Fox were aware of sexual misconduct before complaints were made to them and that Fox and Skyâs previous compliance record with the broadcasting code was in line with comparable broadcasters.
That helped shares in Sky rise by more than 3% after the announcement as investors breathed a sigh of relief that the Murdochs had passed the test â thereby clearing one hurdle to the deal â even though Fox may now have to offer concessions to push the transaction through and faces a lengthy competition inquiry.
Tom Watson, the deputy Labour leader and shadow culture secretary, criticised the announcement as part of an âold playbookâ that he predicted would involve the government eventually approving the deal after Fox offered concessions. âNothing about this decision is a surprise. Itâs the old playbook. The secretary of state has known all along what she wants to end up doing, but she has to follow the established dance steps,â she said.
Watson said that undertakings provided by Murdoch on other deals had proven to be ânot worth the newsprint theyâre written onâ. The shadow culture secretary also called on the rules surrounding the âfit and properâ test to be reviewed, saying they did not take into account the phone-hacking scandal that caused a previous attempt by Rupert Murdoch to buy Sky to collapse.
âIf the current rules mean that James Murdoch can pass a âfit and properâ test, given everything we know about his and his companiesâ behaviour over phone hacking, and given everything we know about Foxâs behaviour over the ongoing sexual harassment scandal in the United States, then that says more about the rules than it does about Mr Murdoch,â Watson said.
Ed Miliband, the former Labour leader and longtime Murdoch critic, called on Bradley ânot to do a grubby dealâ, but John Whittingdale, Bradleyâs predecessor as culture secretary, praised her for the âscrupulousâ handling of the takeover.
Whittingdale added: âWhen it comes to plurality, it is increasingly obvious â and the general election bore this out â that the printed press are of a waning influence and the real media giants today are Google and the social media giants.â
Fox said it was disappointed by the decision. The company said in a stock market statement: âWhile we welcome the secretary of stateâs decision on broadcasting standards, we are disappointed that she does not accept Ofcomâs recommendation stated in its report that âthe proposed undertakings offered by Fox to maintain the editorial independence of Sky News mitigate the media plurality concernsâ.â
The regulator had submitted to Bradley the findings of three investigations looking at whether the deal would give Murdoch too much control of UK news; whether the media mogul was a fit and proper owner, and whether Fox, which owns the rightwing Fox News channel, would abide by editorial standards such as accuracy and impartiality once it took full control of broadcasting assets including Sky News. Fox already owns 39% of Sky.
The regulator said that an examination of Fox and Skyâs broadcasting compliance records in the UK found that the enlarged company would not âlack a genuine commitment to the attainment of broadcasting standardsâ and that there were no grounds to justify a referral to competition regulators â as well as saying the âfit and properâ test had been passed.
During Murdochâs previous bid in 2011, Jeremy Hunt, who was culture secretary, initially accepted an offer to spin off Sky News to allay media plurality issues raised by Ofcom. But that deal collapsed when Murdoch was forced to withdraw his bid amid public furore over phone hacking at the News of the World.
The company bidding this time is 21st Century Fox, which owns the 20th Century Fox film studio and the Fox TV network. It was carved out of Murdochâs News Corporation empire as part of the response to the phone-hacking scandal.
Murdochâs remaining newspapers, including the Sun and the Times, are now part of a separate company, News Corp, although both it and 21st Century Fox are still controlled by the media mogul and his family.
Sky said it would âcontinue to engage with the process as the secretary of state reaches her final decisionâ, adding: âIn the meantime, Sky welcomes todayâs announcement of Ofcomâs decision that Sky would continue to be a fit and proper holder of its broadcast licences under full ownership of 21st Century Fox and will continue to operate its business as usual.â