The Murdoch family’s failings on corporate governance and editorial compliance are due to be raked over by competition watchdogs after the Government signalled a major expansion of the investigation into their £11.7bn takeover of Sky.
The controversial deal faced new uncertainty on Tuesday as the Culture Secretary Karen Bradley announced that she had changed her mind over the need for a full examination of 21st Century Fox’s commitment to broadcasting standards, reports The Telegraph.
She told MPs there were “non-fanciful” concerns that full Murdoch control of Britain’s dominant pay-TV operator could damage the public interest in maintaining standards on screen.
The move shocked investors, who sent Sky shares sliding to their lowest level since Fox made its approach in December. The sell-off exposed mounting market fears that the Murdochs could once again fail to acquire the 61pc of the company they do not control.
The family’s previous bid, under the News Corp flag, was abandoned in 2011 as the phone hacking scandal engulfed their British newspapers.
Ms Bradley’s reversal means the CMA will be asked to investigate Fox’s commitment to broadcasting standards alongside a previously planned probe its full ownership of Sky would have on plurality.
The media regulator Ofcom said in June there may be grounds for an investigation of Murdoch family control of the British news landscape. It also said there were not grounds for a broadcasting standards investigation. At the time the Culture Secretary agreed.
In saying she is now minded to trigger a broadcasting standards investigation, Ms Bradley has effectively overruled Ofcom. She said 40 representations out of a total of 43,000 received by her department over summer had introduced substantive new evidence or questioned the regulator’s advice. Ofcom’s responses had convinced her to broaden the CMA’s remit, she said.
Ofcom confirmed there were “non-fanciful” concerns about inadequate compliance procedures at Fox News, the Murdochs’ bombastic US news operation. It made the same assessment about corporate governance failings exposed by a string of sexual harassment allegations at the channel. Yet the regulator said neither set of concerns warranted a broadcasting standards investigation by the CMA.
Sharon White, chief executive of Ofcom, told Ms Bradley in a letter that “while we identified issues giving rise to some concern, in our judgment taking all the evidence in the round there were not sufficient concerns”.
Ms Bradley said she disagreed with Ofcom. Under the Enterprise Act she has discretionary powers to disregard the regulator’s advice.
Ofcom included in its assessment recent allegations that Fox News colluded with a prominent Trump donor to knowingly publish concocted quotes in a false story that claimed a murdered Democratic Party official was behind the leak of Hillary Clinton’s emails. The story has been retracted and Fox news denies the allegations of collusion.
Ofcom said “we generally take retractions to be indicative of a commitment to accuracy and to proper behaviour, rather than the converse”.
A spokesman for the regulator said: “We provided independent and evidence-based advice, and it is then right for Secretary of State to use her statutory discretion to reach a decision.”
The addition of broadcasting standards to the CMA’s investigation means a further delay to scrutiny of a takeover that is already running months behind schedule. Fox and others will have 10 days to respond to Ms Bradley’s announcement before the case is formally referred to watchdogs.
The CMA will then have six months to investigate with the possibility of an extra eight weeks if required. Any remedies demanded by the watchdog to guard against damage to plurality or broadcasting standards are then likely to further run down the clock. Fox said that without more delays it expects to complete its takeover of Sky by the end of June.
It will be liable to pay a £200m break fee if the scrutiny process drags on until next August. The Murdochs could also face new criticism in planned court cases over allegations of phone hacking atThe Sun.
A Sky spokesman said the company was “disappointed by this further delay”. It has previously claimed that the wrangling over the takeover could limit its ability to invest.
Fox said Ofcom’s assessment had been robust and rigorous and that its compliance record was in line with comparable broadcasters. It urged Ms Bradley to formally trigger the CMA investigation straight away.
“We are surprised that after independent regulatory scrutiny and advice, and over four months to examine the case, the Secretary of State is still unable to form an opinion,” it added.
Ms Bradley’s announcement sets up a potentially awkward encounter with James Murdoch, who is chief executive of Fox and chairman of Sky, at the Royal Television Society Convention in Cambridge on Thursday, where they are both scheduled to speak. Sharon White, chief executive of Ofcom, is also on the bill.
Mr Murdoch’s appearance was originally intended to be a victory lap, as Fox initially told investors it expected to complete the acquisition by the end of this year and that regulatory clearance would not cause problems.
At the close of trading Sky shares were 937p, down 1.6 per cent and significantly short of Fox’s £10.75 offer.
The announcement of a broadcasting standards investigation was celebrated by the Murdoch family’s political opponents, who have campaigned against their takeover of Sky. The former Labour leader Ed Miliband said “well done” to Ms Bradley and that there were “very serious questions to answer now for Ofcom about why they provided such flawed advice”.
