Fox-Sky Faces Six-Month U.K. Competition Review

Public interest standards, corporate governance cited

21st Century Fox's proposed purchase of Sky will get a six-month competition review in the United Kingdom unless a sufficient case can be made against it in the next week-plus.

Karen Bradley, the U.K.'s Secretary of State for Digital, Culture, Media and Sport, has made it official, almost. She said Tuesday that she’d refer the proposed merger of media company Fox and direct-to-home satellite provider Sky for a full, six-month review by the Competition and Markets Authority. In doing so, she cited questions about Fox’s commitment to broadcast (public interest) standards as well as corporate governance.  

Because the public must have a chance to weigh in on that decision, it is framed as a "minded to" referral, rather than an official referral.

Related: 21st Century Fox Strikes $14.8 Billion Deal for Sky

Her move comes despite a recommendation from Ofcom, the U.K.’s version of the Federal Communications Commission, that the deal did not raise “nonfanciful” issues that required that competition review.  

Bradley can refer a merger to the competition authority for a full review if she believes “there is a risk — which is not purely fanciful — that the merger might operate against the specified public interests."

That is the case with Fox-Sky, she said.

Related: Ireland OKs 21st Century Fox's Plan to Acquire Sky Shares

Bradley pointed out that in seeking clarification from Ofcom for its recommendation, it had clarified that it thought there were nonfanciful public-interest concerns, but they didn’t justify the referral for a full competition review.

She said that given the existence of those non-fanciful concerns, as a matter of law the grounds for refereeing the deal on public interest grounds were met, and that she believed they were sufficient to warrant her discretion to refer it. Among those concerns was that 21st Century Fox did not have adequate public-interest compliance procedures in place for the broadcast of Fox News Channel in the U.K. and only took action after Ofcom expressed its concerns.

"The fact that Fox belatedly established such procedures does not ease my concerns, nor does Fox’s compliance history," she said.

She also pointed to third-party concerns about the "Foxification" of Fox-owned outlets internationally. While she said she had not concluded that was a nonfanciful issue, she did say it was important "that entities which adopt controversial or partisan approaches to news and current affairs in other jurisdictions should, at the same time, have a genuine commitment to broadcasting standards here," and signaled the CMA might want to take that into account.

Ofcom had also said there were nonfanciful concerns about corporate governance, but not ones that reached the level of a referral. Bradley agreed with the first part, but again said she thought those concerns bore reviewing by CMA.

Parties and the public have 10 days to respond.

Fox was quick to register its initial reaction. "Ofcom, the expert independent regulator on U.K. broadcasting, undertook a robust and rigorous review of our commitment to the Broadcast Code, concluding 21CF and Sky have records of compliance consistent with other comparable license holders, including the Public Service Broadcasters," the company said. "Furthermore, [on] August 25, 2017, Ofcom reiterated its position having reviewed new representations, stating: 'We consider there are not sufficient concerns that may justify a reference in relation to the broadcast standards consideration.' We are therefore disappointed that the Secretary of State has chosen not to follow the unequivocal advice of the independent regulator, which is the expert body tasked with enforcing the Broadcast Code.

"Subject to any further delays in the decision-making process, we anticipate that the transaction will close by June 30, 2018," Fox said.