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Why Ofcom’s humiliation over Sky is a dark day for all regulators

And there may be worse to come….

lead Culture Secretary Karen Bradley says she is minded to refer Rupert Murdoch's £11.7 billion bid to take full control of Sky to a further inquiry due to concerns over media plurality, June, 2017. Press Association. All rights reserved.Regulators can do damage to themselves. The Financial Conduct Authority’s (FCA) proposed welcome for the controversial Aramco partial flotation, Ofwat’s conflicted relationship with PricewaterhouseCoopers ( PwC), the Competition and Markets Authority’s (CMA) pursuit of economically insignificant breaches of competition law by small and medium enterprises (SMEs) could all be considered examples of regulatory self harm.

However, a climate where experts are despised is not generally favourable to regulators irrespective of what they do to themselves and puts them at the mercy of populist politicians. The Secretary of State’s decision ( in effect ) to overrule Ofcom on the issue of whether Rupert Murdoch’s proposal to acquire the shares of Sky that he does not already own – a decision she was legally entitled to take, it has to be said – is an illustration of this process at work .

The argument that the proposal threatens broadcasting standards ignores the fact that Sky’s record stands comparison with its competitors. The notion that the proposal to acquire total control of Sky News with its small market share menaces “plurality” is far fetched. Bradley’s decision to refer the proposed deal to the CMA looks like a cave in to political pressure.

But there is another test on the horizon which Ofcom must not be deflected from if the entire legislative framework on media concentration is to maintain any credibility. This test arises because the recently reported proposal by David Montgomery’s Mirror to buy the Express, does actually raise a genuine “plurality” issue. The editorial positions of the two publications are well known and diametrically opposed. It is quite likely that in the event of a transaction being completed, the Express’s position would change and become more aligned with that of the Mirror. There would surely be a reduction in “plurality” of views expressed in newspapers that the Enterprise Act newspaper merger provisions are designed to protect – after an independent examination by the CMA.

There has only been one occasion where a media merger has actually been blocked on the grounds of reduction of “ plurality”. This was in 1989,when the Belfast Evening Telegraph (owned then by Thompson) tried to buy what – it argued – was a failing unionist paper called the Newsletter in Northern Ireland. When the matter was referred to the Monopolies and Mergers Commission, after a speedy investigation during which a consortium involving David Montgomery made strong representations against it, the Commission found that the transaction was likely to be contrary to the public interest on the grounds that the merger would result in the disappearance of a distinctive (Orange) “voice” as the merger title’s views moved to the centre ground already occupied by the Belfast Telegraph..

On this occasion, the Minister accepted the recommendation that the transaction should be blocked – something that Bradley would be free( but unwise) to ignore under the legislation, whatever recommendation the CMA were to make on the Sky proposal.

No one has so far raised the issue of whether there is a similarity between the case of the Belfast Telegraph/ Newsletter and that of the Mirror Express. Maybe Northern Ireland is a special case. However, if “plurality” means anything at all in this legislation, at a time when Fox News has just ceased to broadcast in the UK, the potential loss of “plurality” arising from the Express’s proposed merger with the Mirror would seem to be worth at least a look by Ofcom and the CMA.

If Ofcom does not stick what is left of its head above the parapet and the proposal does not receive any examination at all by the CMA, now that Rupert Murdoch’s relatively innocuous proposed acquisition has been sent to the CMA, then the legislation will fall into total disrepute. These issues might as well be decided without recourse to experts at all and be determined on the floor of the House of Commons or by other direct means.

Where Ofcom will go thereafter, other regulators will surely follow so it needs to look carefully at the Mirror proposal to buy the Express at the appropriate time – and not just for its own sake.

About the author

Stephen Hornsby has practised competition law at the EU Commission and in the UK for over thirty years. He has particular experience in the media and broadcasting sectors and has written and lectured extensively on media concentration issues. He is a partner with solicitors Goodman Derrick.


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