Does Rupert Murdoch's Sky takeover bid pass the public interest test?

Rupert Murdoch with his son James.

Rupert Murdoch’s 21st Century Fox has until 6 January to notify the UK takeover panel of its intention to go ahead with its £11.2bn purchase of Sky. Assuming this happens, Karen Bradley, the culture secretary, must decide whether or not to launch a public interest test.

What will shape Bradley’s decision?

If Fox bids formally then Bradley will have 10 working days to weigh up whether the deal triggers public interest concerns, as laid out in section 58 of the Enterprise Act 2002. There are three kinds of public interest concern, only one of which applies here: the issue of media plurality. According to the act there is a need “in relation to every different audience in the United Kingdom or in a particular area or locality of the United Kingdom, for there to be a sufficient plurality of persons with control of the media enterprises serving that audience”.

What is a public interest test?

If the public interest test is triggered Bradley can ask the media regulator, Ofcom, to evaluate whether the public will lose too much from a reduction in plurality. Basically, to ask whether it is in the public interest to let Murdoch take 100% control of Sky, as well as running the Times, Sunday Times and the Sun through a separate company.

What is media plurality?

Ofcom believes a plurality of media sources is important for a well-functioning democratic society through “informed citizens and preventing too much influence over the political process”. The regulator is charged with ensuring a diversity of viewpoints across the media – TV, radio, print and online – and preventing any one owner “or voice” having too much influence over public opinion and the political agenda.

How will 21st Century Fox’s takeover of Sky affect …

1 Sky News

Murdoch could look to make Sky News __more like his rightwing Fox News channel in the US. Any “Foxification” of Sky News would still have to adhere to Ofcom’s rules governing due impartiality and accuracy. Fox News, which is also broadcast in the UK, has fallen foul of the regulator many times through editorial lapses. Last year, Ofcom criticised a Fox News programme for breaching the UK code when a guest said Birmingham was a city “where non-Muslims just simply don’t go”. However, Sky News has built up a strong reputation since 1989 as a trusted news outlet, winning numerous awards for its journalism so changing its editorial strategy could damage the brand.

As part of the failed bid in 2011, Murdoch agreed to spin off Sky News to appease media plurality concerns, a deal accepted by Ofcom and the government. Fox may give the same undertaking to avoid a full-scale “phase 2” investigation by competition regulators this time.

2 Sky’s role in the UK TV production market

Sky spends __more than £5bn on TV content each year, with its biggest investment in sports rights, such as Premier League football matches. It also commissions shows including Fortitude and The Tunnel from UK producers. It owns 70% of Love Productions, the company responsible for The Great British Bake Off. Fox, which owns part of a joint venture that includes the makers of MasterChef, American Idol and The Biggest Loser, as well as a Hollywood film and TV studio, could allow Sky to build a large-scale TV production arm across Europe.

Can News Corp – the Murdoch company split off to house publishing assets including the Times, the Sun and the Wall Street Journal – really be a separate entity from 21st Century Fox in the UK?

On paper, yes. In reality, probably not. News Corp and Fox are separately listed public companies, with Murdoch as executive chairman and executive co-chairman respectively. If regulators look at media plurality, the two companies will be viewed essentially as one. “From a legal perspective you always look at the whole group of companies so it is irrelevant that [Murdoch’s assets] have been split into two,” said Alan Davies, a competition lawyer at Jones Day. “If they are under common control then the law looks at them as if they are one entity.”

How does the bid affect the second phase of the Leveson inquiry into the press and phone hacking?

The second stage of Sir Brian Leveson’s inquiry, established in the wake of the News of the World phone-hacking scandal, was to have looked at issues including the extent of unlawful or improper conduct within organisations including the paper’s publisher, News International (now renamed News UK and part of News Corp). That second stage has yet to be launched.

In 2011, Murdoch was forced to abandon his £8bn-plus bid for full control of Sky as the fallout from the phone-hacking scandal made the deal politically impossible. The Leveson report following the first stage of his inquiry proved scathing about the conduct of Murdoch’s son James as chairman of News International. He ultimately stepped down as chairman, and from the same role at Sky, and moved to the US. Last year he was promoted to Fox chief executive and returned as Sky chairman in April.

Hacked Off, which campaigns on behalf of victims of phone hacking, argues it is now imperative that the second stage of the inquiry is launched, especially in light of the Sky takeover approach.

Could James Murdoch’s historical ties with News International derail the Sky bid again?

In 2012, after the phone-hacking scandal, Ofcom found that Sky remained a “fit and proper” owner of a UK broadcasting licence.

Remaining “fit and proper” is an ongoing requirement of all licensees, meaning Ofcom has the right at any stage to launch a new investigation, which includes looking at directors and shareholders. However, Ofcom had a chance to air any concerns about James Murdoch and investigate his role when news broke in January that he would be returning as Sky chairman.

If a range of media organisations call for the Sky takeover to be investigated – as happened in 2011 – is Bradley obliged to trigger the public interest intervention notice?

No. She is supposed to decide whether to call in Ofcom of her own accord. Media organisations can lodge their views with Ofcom if it is asked to conduct a public interest test. Many observers believe that because of the level of opposition to the first bid, and because her predecessor, Jeremy Hunt, felt it necessary in 2011, Bradley will have to refer the deal to Ofcom for scrutiny or face accusations of partiality.