With the help of Diana Osipova, Davide Morisi brings together key documents, information and news sources on News Corporation’s bid for BSkyB and the media plurality debate in the UK. These documents and sources were last updated on July 18th, 2011. The materials are organized as follows:
- Brief summary of the case
- Key documents
- Phone hacking scandal and withdrawal of the bid
- The deal that was almost made
- The role of Government
- EU Commission and the Office of Fair Trading
- The Debate: highlighting key plurality arguments
1. Brief summary of and key questions regarding the case
1.1. When it all began:
Rupert Murdoch’s News Corporation sought to take full control of satellite broadcaster BSkyB, by acquiring the 60.9% of the shares it does not already own.
BBC News – Memo for Vincent Cable – June 2010
1.2. When it all ended:
Rupert Murdoch’s News Corporation announced on 13 July 2011 that it is dropping its planned bid to take full ownership of satellite broadcaster BSkyB. “It has become clear that it is too difficult to progress in this climate,” said News Corp deputy chairman and president Chase Carey.
BBC – 13 July 2011 – http://www.bbc.co.uk/news/business-14142307
1.2. Why did the sale matter so much?
News Corporation is the UK’s largest newspaper publisher, printing more than one in three copies sold. Sky is the largest broadcaster, with turnover of £5.9bn against the BBC’s £4.8bn. The Murdoch family say a merger makes good financial sense, but critics say it would create a media group of unprecedented power, in which newspapers could be bundled with a Sky subscription, or Sky sports content could be shown exclusively on Times and Sun websites.
1.3. Doesn’t Murdoch already control Sky?
No, he owns 40% of the voting shares in News Corp. It in turn owns 39.1% of BSkyB, with others holding the rest. Although Rupert’s son James is BSkyB’s chairman, the two companies are separate entities.
1.4. What is the vital criterion?
Cross-media power. Cross-media ownership rarely triggers competition law concerns, because TV and papers are considered distinct markets. Ofcom, though, judged the deal by “public interest” considerations: whether the number of independent voices in media will be reduced as a result of a super-Murdoch company. This is known as the media plurality test. After the hacking scandal broke Ofcom also suggested that whether or not News Corp is “fit and proper” to hold a broadcasting license should be considered. The bid was withdrawn before this condition, stemming from the Broadcasting Act of 1990, was applied.
2. Key documents
2.1 Legal framework
2.1.1. Enterprise Act 2002
“Section 67 allows the Secretary of State to intervene in order to protect legitimate interests, including that there is a sufficient plurality of persons with control of media enterprises.” http://www.legislation.gov.uk/ukpga/2002/40/contents
2.1.2. Communications Act 2003
Section 375, which amended Section 58 of the 233 Enterprise Act 2002, introduced the Public Interest Test for media mergers. Before this legislation, media mergers were still subject to separate ownership restrictions.
2.1.3. EU Commission Merger Regulation – 1 April 2010
The European Commission’s legislation related to mergers and competition all in one place.
2.2 Ofcom’s involvement and assessment criteria
2.2.1. Statement on fit and proper – 6 July 2011
“In the light of the current public debate about phone hacking and other allegations, Ofcom confirms that it has a duty to be satisfied on an ongoing basis that the holder of a broadcasting licence is ‘fit and proper’”
2.2.2. Letter to the Secretary of State – Further advice on the undertakings in lieu – 22 June 2011
“We consider that the revised proposed undertakings offered by News Corporation would address the plurality concerns identified in our report of 31 December 2010.”
2.2.3. Ofcom’s December 2010 Report on the Public Interest Test – published 25 January 2011
“Ofcom‟s advice, based on the evidence and reasons set out in this report, is that it reasonably believes that the proposed acquisition may be expected to operate against the public interest since there may not be a sufficient plurality of persons with control of media enterprises providing news and current affairs to UK-wide cross-media audiences.” http://stakeholders.ofcom.org.uk/binaries/consultations/public-interest-test-nov2010/statement/public-interest-test-report.pdf
2.2.4. Sky Response to Ofcom’s Invitation to Comment – 5 November 2010
“Sky has invested for many years, and continues to invest, in the operation of Sky News as a distinct, impartial and independent news service. The availability of Sky News to audiences, therefore, is the result of a strong commercial incentive, not of any obligation to provide television news. This incentive would remain irrespective of a change in ownership of Sky.” http://corporate.sky.com/documents/pdf/press_releases/4ad9b907f137492d998022a042ac035b/Response_to_Ofcoms_Invitation_to_Comment
2.2.5. Ofcom Guidance note for public interest test on the anticipated acquisition of British Sky Broadcasting plc by News Corporation – 4 November 2010
Full Document: http://www.ofcom.org.uk/files/2010/11/PIT_Guidance_note.pdf
2.2.6. Ofcom Media ownership rules review – 31 July 2009
“Ownership is considered a proxy for viewpoints. However Ownership plurality does not always ensure a plurality of news sources.” http://stakeholders.ofcom.org.uk/binaries/consultations/morr/summary/morrcondoc.pdf
2.2.7. Ofcom General guidance for the public interest test for media mergers
3. Phone hacking scandal and withdrawal of the bid
3.1. News Corp withdraws bid for BSkyB
Rupert Murdoch’s News Corporation dropped its planned bid to take full ownership of satellite broadcaster BSkyB. This came just before MPs were set to debate a motion supported by all major parties calling on Mr Murdoch to withdraw the bid.
News Corp Statement 13 July 2011 http://www.newscorp.com/news/news_494.html
3.2. News Corp’s BSkyB bid referred to Competition Commission
Jeremy Hunt makes a statement to parliament moments after News Corp withdraws plan to spin off Sky News “I am now going to refer this to the Competition Commission with immediate effect and will be writing to them this afternoon”
DCMS – 11 July 2011
The Guardian – 11 July 2011
3.4. News of the World closes amid hacking scandal
“This Sunday’s edition of the News of the World will be its last, News International chairman James Murdoch has said, after days of increasingly damaging allegations against the paper.”
BBC – 7 July 2011
The full statement from James Murdoch, Chairman of News International http://www.dailymail.co.uk/news/article-2012318/News-World-close-James-Murdochs-statement-full.html
3.5. BSkyB verdict delayed until September
“Jeremy Hunt is expected to delay until September his verdict on whether to News Corp to proceed in its bid to take full control of BSkyB, after a deluge of last-minute submissions on the deal. The controversy over phone hacking at the News of the World saw submissions rise from an estimated” 60,000 to more than 135,000”.
Financial Times – 7 July 2011
3.6. Missing Milly Dowler’s voicemail was hacked by News of the World
The Guardian reveals that the News of the World hacked into voicemail left for murdered schoolgirl Milly Dowler, and by deleting messages when the mailbox became full led her family to believe she was still alive. The Guardian – 4 July 2011
3.7 James Murdoch gives evidence at Leveson Inquiry
James Murdoch gave evidence and testified to the role Jeremy Hunt, Secretary of State for Culture, Media and Sport, played in the News Corp bid for BSkyB. As the hearing progressed, questions emerged about the relationship between James Murdoch and Hunt throughout the process as a series of email exchanges between Hunt’s office and James Murdoch was published as evidence. The allegations referred to Hunt’s ‘quasi-judicial‘ role in the process.
4. The Deal that was Almost made
4.1. Analysis: What would the BSkyB sale mean?
If News Corp’s takeover of BSkyB goes ahead, it will be a big deal financially – but how big a deal is it for viewers and those concerned about choice and competition in news media?
BBC – 3 March 2011 http://www.bbc.co.uk/news/business-12642589
4.2. Jeremy Hunt gives News Corp green light to launch £8bn bid for BSkyB
Opponents brand Britain’s biggest media merger a ‘complete whitewash’ that will give Rupert Murdoch too much control
The Guardian – 3 March 2011
4.3 Culture Secretary Jeremy Hunt makes a statement on proposed merger – 3 March 2011
Today, the Secretary of State for Culture, Olympics, Media and Sport announced that, following advice from Ofcom and the Office of Fair Trading (OFT), he intends to accept undertakings from News Corporation on their proposed merger with BSkyB in lieu of a referral to the Competition Commission.
4.4 Rupert Murdoch to dispose of Sky News for bid approval
Rupert Murdoch’s News Corporation offered to dispose of most of the Sky News channel to allay concerns about the planned take-over of all of BSkyB.
BBC – 3 March 2011
“News Corp will spin-off the news operations of British Sky Broadcasting, under an agreement reached with regulators to address concerns over Rupert Murdoch’s bid for full control of the satellite broadcaster.”
Financial Times – 2 March 2011
4.5. News Corporation faces stark choice over BSkyB bid.
Rupert Murdoch’s News Corp must either agree terms with the OFT or have its bid referred to the Competition Commission
The Guardian – 21 February 2011
5. The role of Government
5. 1. Jeremy Hunt launches a second consultation
Jeremy Hunt initiates further consultations intended to achieve “a revised, more robust set of undertakings”, ending on 8 July
DCMS – 30 June 2011
5.2. Hunt accepts undertakings offer
Jeremy Hunt announces that, following advice from Ofcom and OFT, he intends to accept undertakings from News Corp in lieu of a referral to the Competition Commission. He launches a consultation seeking views on the undertakings, which would involve Sky News being ‘spun off’ as an independent public limited company.
DCMS – 3 March 2011
5.3. Hunt delays referral of News-BSkyB bid
Financial Times – 25 January 2011
5.4. Jeremy Hunt’s statement on proposed merger, 25 January 2011
5.5. Cable refers to Ofcom
Vince Cable refers News Corp’s BSkyB bid to regulator: Business secretary Vince Cable has referred News Corporation’s controversial £12bn bid for full ownership of BSkyB to Ofcom
The Guardian – 4 November 2010
5.6. Secretary of State – European intervention notice given pursuant to section 67 enterprise act 2002, BIS – 4 November 2010:
“The Secretary of State … requires the Office of Fair Trading to investigate and report in accordance with article 4 of the Enterprise Act 2002 (Protection of Legitimate Interests) Order 2003 and Ofcom to investigate and report in accordance with article 4A of that Order, both within the period ending on 31 December 2010.”
6. EU Commission and the Office of Fair Trading
6.1. OFT, report to the Secretary of State
“The OFT believes that the Secretary of State has jurisdiction to make a reference to the CC under Article 5(3) of the Order to address any media plurality concerns”
OFT – 30 December 2010
6.1. Mergers: Commission clears News Corp’s proposed acquisition of BSkyB under EU merger rules
“The European Commission has approved under the EU Merger Regulation the proposed acquisition of British and Irish pay TV operator BSkyB by News Corporation… The Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it. The Commission’s findings concern solely the competition aspects of the proposed transaction. They are without prejudice to the on-going investigation by the competent UK authorities of whether the proposed transaction is compatible with the UK interest in media plurality, which is different from the Commission’s competition assessment. The UK remains free to decide whether or not to take appropriate measures to protect its legitimate interest in media plurality” (as permitted under Article 21 of the EU Merger Regulation).
21 December 2010 – http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/1767
6.5. The UK Office of Fair Trading declined to seek jurisdiction over the case: News Corp’s proposed acquisition of British Sky Broadcasting Group Plc will be reviewed by European Union antitrust regulators after the UK Office of Fair Trading declined to seek jurisdiction over the case.
Bloomberg – 29 November 2010
6.6. OFT May Pass on Review of News Corp’s BSkyB Bid, Lawyers Say: UK antitrust regulators won’t seek their own review of News Corp’s proposed acquisition of British Sky Broadcasting Group Plc while Business Secretary Vince Cable conducts a separate probe, lawyers and analysts said.
Bloomberg – 25 November 2010
7. The Debate – Highlights key issues of Media Plurality
7.1 News Corp in the Market
7.1.1. Murdoch media to control over a fifth of UK news consumption: Enders Analysis concludes that News Corp and Sky will produce 22% of all the news that Britons consume daily.
The Guardian – 30 December 2010
7.1.2. No wonder they’re scared – How Sky has consolidated its grip over British viewers
“Sky is already an immensely powerful competitor. It is so deep-pocketed, in fact, that even if the purchase were to be blocked by shareholders or regulators, the west London firm would continue to petrify commercial rivals.” The Economist – 14 October 2010
7.1.3. Enders Analysis – Memo for Vincent Cable – June 2010
“We think that there is a strong case that the transaction does raise substantial issues of ‘plurality’ as defined in the Court of Appeal judgment on the purchase of ITV shares by BSkyB in 2006.”
Full document: http://www.beehivecity.com/wp-content/uploads/2010/09/For-Vincent-Cable.pdf
7.1.4. Oliver and Ohlbaum Associates: See page 4 regarding BSkyB (“Pay TV continued to triumph in the face of adversity growing revenues and subscribers through the recession, developing new services and investing more in original content.”)
Global TV Economics in 2010 – 25 February 2010
7.2. Arguments against News Corp’s bid
7.2.1. BSkyB takeover will undermine UK media plurality (letter from Lord Fowler and others)
“Mr Murdoch himself has said that the reason Sky News is not yet more like Fox News is because ‘nobody at Sky listens to me’… The new merged company would also be able to “bundle” together television and newspaper services via BSkyB’s huge subscription base in a way that would place severe financial pressures on the rest of the media market.”
Financial Times – 10 January 2011
7.2.2 We’re such a feeble nation that Murdoch was bound to triumph
“Our cross-ownership rules in the media are the lamest of any in an industrialised country. Anybody who objects to this is jumped on as ‘anti-enterprise’”.
The Observer – 27 February 2011
7.2.3 Pluralism and the public interest
“It’s all about pluralism. What does it mean? Can it be measured? Is a profitable, strong, dominant media player a genuine threat to the public interest?”
Evening Standard – 23 February 2011
7.3. Arguments supporting the merger
7.3.1. Critics of News Corp’s BSkyB takeover are missing the point: Rupert Murdoch’s opponents are wrong in their analysis – and risk the loss of both Sky News and billions in tax for the UK.
“No doubt News Corp will argue that, under the specific definition of media control in section 357 of the 2003 Communications Act, it has always controlled BSkyB. It follows that any increase in News Corp ownership of BSkyB cannot materially increase its control of the business, and that therefore the transaction can have no significant effect on media plurality.”
The Guardian – 5 January 2011
7.3.2. Clouding over the Sky: The Murdochs should be allowed to acquire Britain’s satellite broadcaster
The Economist – 14 October 2010