Rupert Murdochâs Â£11.7bn takeover bid for Sky is to be investigated by the media regulator to see if it gives him too much control of news output in the UK and whether the Murdoch family are âfit and properâ owners following the phone-hacking scandal.
The culture secretary, Karen Bradley, has referred 21st Century Foxâs bid to buy the 61% of Sky it does not already own to Ofcom to investigate potential public interest issues on two grounds.
Ofcom, which will now have up to 40 working days, to 16 May, to report back to Bradley on the public interest concerns, will kick off its own concurrent review of whether Fox is âfit and properâ to take control of Skyâs broadcasting licence.
Bradley, who had previously said she was âmindedâ to refer the deal to Ofcom, told MPs she had issued a European intervention notice on the grounds of âmedia plurality and commitment to broadcasting standardsâ linked to the bid from Murdochâs company.
Bradley, who confirmed the decision in a statement to MPs in the Commons on Thursday, said she had received more than 700 representations about the deal from third parties, âthe vast majority of which supported interventionâ.
Ofcom will look at whether Foxâs takeover will raise issues of UK media plurality and concentration in Murdochâs control. The deal will give him full control of Sky News, as well as the Times, Sunday Times and Sun newspapers and the radio group TalkSport, through a separate company News Corp.
The second issue is whether Fox is committed to the required editorial standards, such as accuracy and impartial news coverage.
In parliament, Tom Watson, shadow culture secretary, questioned whether Bradleyâs referral on broadcasting standards grounds would give Ofcom the power to investigate issues including phone hacking and corporate governance failures
Bradley said: âNone of the representations [made by Fox] have led me to dismiss the concerns I have regarding the two public interest grounds I previously specified.â
She added: âI was clear in my original âminded toâ letter and statement made to the House [of Commons] on 6 March that corporate governance was one of the issues I was referring the matter to Ofcom [about]. I would expect them to look at that. Ofcom is an independent regulator. It is for Ofcom to decide what evidence they want to look at. They are open to look at whatever evidence they feel is appropriate to enable them to make their decision.â
Both Watson and fellow Labour MP Ed Miliband raised concerns that Ofcomâs 40-day time limit is not long enough to conduct a âfit and properâ review.
Miliband, the former Labour leader, said Ofcomâs âfit and properâ review conducted during Murdochâs last aborted bid for full control of Sky in 2010 took many months. âCan [Bradley] assure us that if during this period Ofcom seek more time or powers she will grant that request?â Miliband asked in parliament on Thursday.
Watson said: âA comprehensive âfit and properâ test will take time, so that all of the Murdochsâ failures of corporate governance during the phone-hacking scandal and elsewhere can be properly investigated.â
Bradley responded: âOfcom have assured me they have the time and powers they need.â
She also rejected calls for the fit and proper test to be made a standard part of the public interest criteria in the Enterprise Act, and not sit with Ofcom. âI did very carefully consider the representations made,â she said. âIt is important an independent regulator looks at âfit and properâ and the government has grounds to intervene under the Enterprise Act. Those two have to be kept separate and we should not see government stepping into where the regulator should quite rightly sit.â
However, if the regulator cites problems she must decide whether to accept an undertaking from Fox to address them.
Opponents of the bid have raised concerns that Murdoch, who also owns the rightwing Fox News, will use his influence to drive the news agenda, thereby risking the âFoxificationâ of Sky News.
Murdoch critics have called for the bid to be blocked. Rival broadcasters are expected to lodge complaints and make representations in the UK and Europe â the European commission is also examining the deal â after expressing concerns that a Fox/Sky combination will dominate bidding for top-flight sport, TV shows and movies.
Fox News, which is also broadcast in the UK, has fallen foul of the regulator a number of times through editorial lapses. Last year, Ofcom criticised a Fox News programme for breaching the UK code when a guest said Birmingham was a city âwhere non-Muslims just simply donât goâ.
Ofcom has already said that Fox taking over Skyâs licence would warrant a âfit and proper reviewâ. During its investigation following Murdochâs previous attempt to takeover Sky in 2010, it found that Sky remained a âfit and properâ owner of a broadcast licence, despite the phone-hacking affair that embroiled the now-defunct News Corporation, then parent of Fox and Murdochâs UK newspapers.
However, it published a scathing assessment of James Murdoch â then chief executive of his fatherâs UK newspaper group and chairman of Sky: â it found that his conduct repeatedly fell short of the standards expected.
The political fallout ultimately resulted in Rupert Murdoch withdrawing his bidand James standing down as chairman of Sky and quitting the UK newspaper business to run Fox, the film and TV operation, from the US.
Rupert Murdoch subsequently spun off the publishing and newspaper assets into a separate company, News Corp, and film and TV into 21st Century Fox, with independent boards, in part a corporate governance measure to facilitate another tilt at Sky.
James Murdoch, chief executive of Fox, was reappointed last year as chairman of Sky. In October, he had to rely on the support of Fox, Skyâs largest shareholder, to win approval for his return after more than 50% of independent shareholders voted against his reappointment.
At the time of the last bid, the Murdochs agreed a deal to spin off Sky News to allay media plurality concerns. This time James Murdoch has said he does not believe any âmeaningful concessionsâ will need to be made to get the deal through.
In a letter to Bradley during the 10-day period she has had to review whether to refer the bid to Ofcom, Fox argued that in the six years since the aborted bid, the media landscape had changed beyond recognition. Fox said media plurality was flourishing with the rise of digital rivals such as Google and Facebook and news distributors and new outlets such as Vice, Buzzfeed and Huffington Post, while newspaper sales declined.
Fox also argues that splitting the publishing and TV and film operations into two companies solves corporate governance, competition and plurality issues.
Opponents argue, however, that the Murdoch family will still be the ultimate owner of both newspaper and TV assets in the UK and that that will give them too much control over UK news media.
Fox has also pledged to keep Fox News at armâs length and âcontinue to broadcast news under the Sky brand maintaining its excellent record of compliance with the Ofcom broadcasting codeâ.
âWe are confident that a thorough review of our track record over 30 years will underscore our commitment to upholding high broadcast standards, and will demonstrate that the transaction will not result in there being insufficient plurality in the UK,â said a spokeswoman for Fox.
âThe media market has changed dramatically in recent years, as has our business. We believe our proposed Â£11.7bn investment will benefit the UKâs creative industries. We look forward to continuing to work with all stakeholders and are confident that the transaction will be approved.â
Ofcom has set a deadline of 30 March for submissions relating to the Fox/Sky takeover.
Nick Pollard, an Ofcom board member and former Sky News chief, has excused himself from the Fox investigation process.
Pollard, who led the inquiry into the failure of BBC2âs Newsnight to broadcast an investigation into allegations of sexual abuse against Jimmy Savile, worked at Sky from 1996 to 2006. âNick Pollard is recused from any involvement in the public interest test or fit and proper assessment to avoid any perceived conflicts of interest,â said an Ofcom spokesman.
The remaining eight members of Ofcomâs board will make the final decision on the public interest test and fit and proper assessment.