The Sky News saga reveals fault lines in UK regulation media ownership

Published 11 October 2018 by Goodman Derrick LLP

The Secretary of State’s decision to require Sky News to be sold as a condition of Fox’s bid being allowed to proceed, leaves the field open for a bidding war to take place involving Disney and Comcast. The decision not to intervene in respect of the Comcast bid does leave the long term future prospects of Sky News and its employees in some doubt – at least in the scenario in which Comcast wins the bidding war. So suppose Comcast wins the war and decides it wants to off load the loss making, small player that Sky has always been, what can the competition authorities do? The answer is nothing – unless the purchaser is a media company whose ownership raises a competition or public interest plurality issue.

So if Comcast did not want to keep subsidising Sky News it could well close  it for very good commercial reasons if it could not find a buyer. What could the competition authorities do in such a scenario? Again, the answer is nothing. But this of course would be a rather disastrous outcome for the public interest for it is accepted even by opponents of Murdoch, such as Tom Watson, that Sky News is an excellent outfit and that it makes a substantial contribution to media diversity in the United Kingdom.

To address this concern, and pave the way for the non – intervention by the Secretary of State, Comcast formally offered “voluntary binding undertakings” (sic) to the Stock Exchange on May 8 to keep Sky News operating for a number of  years, to invest in it and to guarantee its independence etc from which it can be released in exceptional circumstances. But no one knows for certain how enforceable these undertakings might prove to be. Rather a lot may ride on them being fully enforceable. Should they not prove to be enforceable, an eventual loss of plurality as a result of closure of Sky News would be a cause for questions to be raised about the utility of this legislation.

On the other hand if Disney wins the bidding war, then the future of Sky News looks more promising and its staff can sleep more easily. In an highly unusual if not unprecedented intervention, the Secretary of State has allowed Sky News to be part of Disney once it acquires Fox provided that Disney undertakes to finance it properly for 15 years and only sells it a purchaser that the Secretary of State approves of who accepts these obligations to the extent they are still outstanding (and yes, the Murdoch family need not apply to be a purchaser).

As competition law remedies go, forcing a purchase to keep a loss making company going for such a long time is about as dirigiste as it gets. In due course, when the dust settles on this saga, the question that will be asked is whether this outcome was really worth it. To address this question, it is worth reminding ourselves that the CMA Panel were not experts in this industry and the “theory of harm” that led to its negative conclusion about Fox’s ownership was firmly based on the Murdoch family’s perceived ability to use its ownership of Sky to perpetrate wholesale breaches of the Broadcasting Act’s requirements of impartiality without regulatory constraint from Ofcom. This bizarre conclusion was conclusively dismantled by the former Chairman of Ofcom’s Content Board Richard Hopper under whose stewardship a number of television companies were fined substantially for breaches of the Code – a Code which Ofcom is currently employing to put RT through the regulatory wringer – for its alleged lack of impartiality.

Whilst this is all going on, Ofcom has just given the green light to the proposed takeover of the Express by the Mirror. On the face of it, this merger looked to give rise to serious plurality issues in the press because of the very different editorial positions of these companies. But Ofcom took the view that ring fencing of editorial from potential commercial interference by its new owners sufficed to deal with any plurality concerns – just the sort of ring fencing that the CMA deemed inadequate to deal with the potential harm arising from Murdoch owning Sky News.

Clearly the UK regulatory authorities and politicians, having welcomed Murdoch for so long, were prepared to go to very considerable lengths to accommodate the views of his opponents. This has been done at a cost to the integrity and consistency of the entire regulatory system which may not yet be fully apparent. Murdoch might be amused at the contortions he has caused.

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.