The UK said it planned to expand its probe into 21st Century Fox’s bid for pay-TV broadcaster Sky, exposing Rupert Murdoch and his family to further scrutiny over governance at their media empire and adding to the uncertainty about the £11.7bn ($15.5bn) deal’s fate.
Culture Secretary Karen Bradley is inclined to ask the Competition and Markets Authority to investigate Fox’s commitment to broadcasting standards, as well as whether the deal would give the Murdochs too much influence over UK media, she said yesterday in Parliament.
The scope of the planned CMA referral surprised investors, given an earlier regulatory review had cleared Fox on its commitment to broadcast standards. Shares of Sky, which is 39% owned by Fox, fell as much as 5.1% to 903.5 pence, their biggest drop since the 2016 vote to leave the European union.
Fox chief executive officer James Murdoch and fellow managers now face the prospect of months of interrogation over recent events at scandal-hit Fox News and past corporate governance failings in the Murdoch media empire. Wrongdoing at News Corp’s UK newspapers scuppered a 2010 attempt to buy the rest of Sky, while this time, publicity over sexual - and racial - harassment allegations at Fox News has given opponents ammunition to slow a deal that initially appeared on track to sail through.
James Murdoch and Fox co-chairman Lachlan Murdoch had previously warned that any delay to approving the merger would signal to other companies that the UK isn’t “open for business” as the country leaves the European Union. Britain is under pressure to reassure investors of the nation’s future path amid stalling Brexit talks with the EU.
Bradley will make the final decision on whether to clear the merger after considering the CMA’s feedback, which could come as late as March 2018. At issue for the CMA will be the scope of the Murdoch family’s media influence in the UK and Fox’s broadcasting record. On media influence, Rupert Murdoch is both co-chairman of Fox and executive chairman of News Corp, which owns the Times of London, the Sunday Times and the Sun newspapers. Adding Sky News to the mix would give the Murdoch family influence over a third of the news sources used in the UK, according to a June report by communications watchdog Ofcom.
On broadcasting standards, the CMA would have to weigh the relevance of recent revelations of alleged misconduct at Fox News, including claims of fabricated quotes for a story and alleged instances of racial and sexual harassment. Ofcom’s initial review of the takeover found no broadcasting standards concerns given Fox’s favourable record of compliance with the UK’s Broadcasting Code.
The CMA has the infrastructure to do a much more thorough study than that initially conducted by Ofcom. It would likely entail hearings with Fox and Sky executives, as well as harvesting huge amounts of data from the companies, their rivals and industry bodies. The CMA is set to appoint a panel of experienced competition lawyers and industry grandees who would give their recommendation to Bradley.
The deal’s progress has already been set back by the upheaval of the UK general election, the furor over racial and sexual harassment allegations at Fox News and obstruction by the deal’s opponents.
Political advocacy group Avaaz has already challenged a review by Ofcom that found Sky would continue to be a “fit and proper” media outlet under Fox ownership. The group has further threatened Bradley with a legal challenge if she were to choose not to call for a deeper probe of Fox’s commitment to broadcasting standards.
The CMA referral makes it almost certain that Sky will now have to pay a special dividend of about £170mn to its shareholders as the takeover won’t complete by December 31. Fox has said it expects the deal to complete by mid-2018, after previously saying it would be done by the end of 2017.
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