PARLIAMENTARY DEBATE
21st Century Fox/Sky Merger - 29 June 2017 (Commons/Commons Chamber)
Debate Detail
In line with my commitments, I am today publishing both documents, copies of which will also be deposited in the Libraries of both Houses. I will also be publishing later today the letter to both parties with my decision, which I sent them this morning. Separately, Ofcom is today publishing its fit and proper assessment of the merged company. This reflects its ongoing responsibility as the independent regulator under the Broadcasting Acts to monitor who is fit and proper to hold a broadcast licence.
Decisions made by the Secretary of State on media mergers under the Enterprise Act 2002 are made on a quasi-judicial basis. I want to be very clear about what that means. When taking a quasi-judicial decision, I am tightly bound. I must take my decision only on the basis of the evidence that is relevant to the specified public interests. My decision cannot be based on opinion, speculation or conjecture. Any decision I take must be objectively justified by the facts before me. I must set aside wider political considerations going beyond the scope of the legislation. I must act independently and follow a process that is scrupulously fair and impartial. This is what I am doing.
On the question of whether the merger gives rise to public interest concerns in relation to media plurality, Ofcom’s report is unambiguous. It concludes:
“The transaction raises public interest concerns as a result of the risk of increased influence by members of the Murdoch Family Trust over the UK news agenda and the political process, with its unique presence on radio, television, in print and online. We consider that these concerns may justify a reference by the Secretary of State to the Competition and Markets Authority”.
On the basis of Ofcom’s assessment, I confirm that I am minded to refer to a phase 2 investigation on the grounds of media plurality. The reasoning and evidence on which Ofcom’s recommendation is based are persuasive. The proposed entity would have the third largest total reach of any news provider—lower only than the BBC and ITN—and would, uniquely, span news coverage on television, radio, in newspapers and online.
Ofcom’s report states that the proposed transaction would give the Murdoch Family Trust material influence over news providers with a significant presence across all key platforms. This potentially raises public interest concerns because, in Ofcom’s view, the transaction may increase the ability of members of the Murdoch Family Trust to influence the overall news agenda and their ability to influence the political process, and it may also result in the perception of increased influence. These are clear grounds to warrant a referral to a phase 2 investigation, so that is what I am minded to do.
There, is, however, a statutory process that I must follow. I am required by legislation to allow the parties the opportunity to make representations to me on this position before I reach a final decision. I will now do that and have given them until Friday 14 July to respond.
The second question concerns whether, after the merger, the relevant media enterprises would have a genuine commitment to broadcasting standards. Ofcom is unequivocal. It concludes:
“In light of Fox’s and Sky’s broadcast compliance records and taking account of our separate assessment of whether Sky remains fit and proper to hold broadcasting licences following the transaction, we do not consider that the merged entity would lack a genuine commitment to the attainment of broadcasting standards. Therefore, we consider that there are no broadcasting standards concerns that may justify a reference by the Secretary of State to the Competition and Markets Authority”.
Ofcom’s approach sought to measure commitment to broadcasting standards by reference to breaches of regulatory codes. It found that Fox’s compliance with the UK’s Broadcasting Code is in line with comparable broadcasters. Nor did Fox’s compliance record in relation to overseas broadcast jurisdictions—where Ofcom’s analysis focused largely on the EU—give cause for concern.
I also asked Ofcom to consider the effect of any failure of corporate governance on this public interest consideration. Ofcom did this in the context of its separate assessment of whether Fox and Sky would remain fit and proper to hold broadcast licences following the transaction. It concluded that behaviours alleged at Fox News in the US amount to significant corporate failures. However, these did not, in its view, demonstrate that the merged company would lack a genuine commitment to broadcasting standards. In reaching a view, I have to be guided only by the evidence before me. As such—based on the Ofcom report—I am currently minded not to refer to a phase 2 investigation in relation to a genuine commitment to broadcasting standards.
As required by legislation, I am giving the parties an opportunity to make representations in relation to media plurality grounds, where I am minded to refer for a phase 2 investigation by the Competition and Markets Authority. In the interests of transparency and of ensuring that all the evidence has been considered, I will also invite wider representations on the question of commitment to broadcasting standards, where I am currently minded not to refer for a phase 2 investigation.
Parties responding to the consultation should not simply duplicate any representations previously made to Ofcom. Instead, responses should be limited to setting out any new and substantial evidence and any comment on Ofcom’s overall approach. While there are strong feelings among both supporters and opponents of this merger, in this quasi-judicial process my decisions can be influenced only by facts, not opinions, and by the quality of evidence, not who shouts the loudest. The invitation to make representations will open today and close on Friday 14 July, and it can be found on the DCMS website.
Under the process set out in the Enterprise Act 2016, it is open to the parties to propose undertakings in lieu of a reference to the CMA for a more detailed investigation—in other words, the parties may seek to avoid a phase 2 reference by proposing remedies to address the public interest concerns that have provisionally been identified. The decision as to whether or not to accept undertakings in lieu is for the Secretary of State alone.
However, somewhat unusually, the parties proposed a set of undertakings to Ofcom, and Ofcom commented on them in its report. The proposed undertakings centred around Fox maintaining the editorial independence of Sky News by establishing a separate editorial board, with a majority of independent members, to oversee the appointment of the head of Sky News and any changes to Sky News editorial guidelines. They also include a commitment to maintain Sky branded news for five years with spending at least at similar levels to now. Ofcom’s view was that these remedies would mitigate the serious media plurality public interest concerns. It also suggested that the remedies could be further strengthened.
Last week, the parties—without prejudice to my decision today, which they learned about only this morning—formally submitted undertakings in largely the same terms to me. In accordance with the legislation, if I still intend to refer the merger after having considered representations from the parties, I am required to consider whether or not these remedies are appropriate. Given that the parties have offered these undertakings and that Ofcom have commented on them, I have taken an initial view. I can confirm that I have, today, written to the parties indicating that I am minded not to accept the undertakings that have been offered. While Ofcom suggests that they may mitigate its concerns, it is for the Secretary of State to decide whether they sufficiently mitigate—or, ideally, fully remedy—what are serious public interest considerations.
I note that Ofcom’s report says:
“we recognise that behavioural undertakings can be difficult to monitor and enforce and that there are areas in which the proposed undertakings could be strengthened.”
It cites questions regarding
“the ongoing arrangements for the appointment of the independent members of the Sky News Editorial Board and the period of Fox’s commitment to maintaining its investment in Sky News”.
I also note the guidance of the Competition and Markets Authority, which, in the context of competition cases, says that undertakings in lieu are appropriate where the remedies are
“clear cut...effective and capable of ready implementation”,
and that, in ordinary cases, it is
“highly unlikely to accept behavioural remedies at phase 1”.
I have given the parties 10 working days—until Friday 14 July—to make representations on the minded-to decisions that I have reached. If I receive further offers of undertakings as part of those representations, I will keep the House informed about how I intend to structure the statutory process that I must follow when considering them.
As I have set out, I will now take representations on my minded-to positions. The call will remain open for 10 working days and I will then consider the evidence received before coming to a final decision on both grounds. To be clear, the minded-to decisions that I have outlined today are not my final decisions.
Before I close, I want to say a word about Ofcom’s “fit and proper” assessment. This is a matter for Ofcom, as the independent regulator, and my understanding is that it will publish its report today. I have seen the report and know that many Members in the House will want to comment on it. However, given my current quasi-judicial role in the merger, I will not be commenting on the findings. It is rightly not for Government to determine who should, and should not, hold TV broadcasting licences. Ofcom has an ongoing duty to ensure that all UK broadcasters are fit and proper to hold TV broadcasting licences. I am clear that if any evidence comes to light, it is for Ofcom to take account of that evidence.
I trust, as before, that this update is helpful to right hon. and hon. Members and that this statement gives an opportunity to debate this important issue while respecting the limits of what I can say, given my ongoing quasi-judicial role in relation to this merger. I commend this statement to the House.
This decision was delayed as a result of the unexpected general election campaign. I hope that the Conservative party found those weeks as productive as we on the Opposition Benches did, but nothing about this decision is a surprise. It is the old playbook. The Secretary of State has known all along what she wants to end up doing, but she has to follow the established dance steps, so let me make a prediction now. The parties have proposed some pretty minor undertakings in lieu. They always knew that they were not going to be enough to satisfy Ofcom, so the Secretary of State will demand extra conditions, as a result of which she will get written up as a tough operator. The parties will offer something new, which they always had in their back pocket, the Secretary of State will accept them, as she always planned, and this merger will go ahead.
Let me tell the Secretary of State the problem with Murdoch’s undertakings in lieu—not just these undertakings in lieu, but any undertakings in lieu that have ever been offered by the Murdochs. They are not worth the newsprint they are written in. Ask Harold Evans or James Harding about the guarantees of editorial independence at The Times and The Sunday Times. Can the Secretary of State name any undertakings in lieu that the Murdochs have ever made that have been respected?
If the current rules mean that James Murdoch can pass a fit and proper person test, given everything we know about his and his companies’ behaviour over phone hacking, and given everything we know about Fox’s behaviour over the ongoing sexual harassment scandal in the United States, that says more about the rules than it does about Mr Murdoch. It is clear that the rules need to be reviewed, and if the current Conservative government will not do that, the next Labour Government will.
This company has been found guilty of significant corporate failure, yet this bid process can still go ahead. In fact, over the next 12 months, the Labour party will be reviewing media ownership rules in the UK, and let me put the media barons on notice: the days when citizens of other countries can dominate our media markets while paying their taxes overseas have to end.
The truth is, the world is changing and it is time the Conservative party realised it. We have seen what looks like an implicit bargain between the Conservative party and the Murdoch empire over recent years. The Conservatives would give Murdoch what he wanted—the Sky deal, stopping section 40, blocking Leveson part 2 —and Murdoch would deliver Theresa May the landslide victory she craved. Well, it has not quite worked out that way, has it? Rupert Murdoch has not delivered his side of the bargain, has he? His papers may have done their best to urge a Tory landslide, but he just could not follow through. He is not what he was. It was not The Sun wot won it. The country saw through him. The Sun told Britain: “Don’t chuck Britain in the Cor-bin”. Britain chucked the Tory manifesto in the bin instead.
Please let me give the Secretary of State some friendly advice: Murdoch was not any use to them. They do not need to be any use to him anymore. If I was speaking to the Minister outside the Chamber, I would say to her: “At long last, you’re free. You can do the right thing.” One way of signalling that freedom would be to go ahead and order part 2 of the Leveson inquiry. Notwithstanding Ofcom’s fit and proper assessment, the only way to get to the bottom of the corporate governance issues that are at the heart of the decision is for the Secretary of State to hold part 2 of the Leveson inquiry. She should get on and order it now. She does not have a mandate to drop Leveson 2.
Meanwhile, let me ask the Secretary of State this. Given that this autumn James Murdoch is facing a civil trial in the High Court over new allegations of hacking and blagging at The Sun, and destruction of evidence, does she think that she could come out of this process with egg all over her face? How can the process possibly proceed with these cases hanging over them? Before she makes her final decision, will she guarantee to let the House know what the Prime Minister discussed with Rupert Murdoch at their private meeting in New York last year?
The hon. Gentleman should judge me on my record. Throughout this process I have been scrupulously fair and I have looked at the evidence and analysis available to me. He should not prejudge any decisions that I will take; I will take them on the basis of the evidence and analysis that is given to me and that I see, and I will make an appropriate judgment based on that evidence. I hope that he will give me credit for the fact that so far I have done that, and I will continue to do that.
In her statement, the Secretary of State said that the guarantees received from Fox about editorial independence do not go far enough. Will she outline what she is looking for from Fox to guarantee that independence of editorial standards? Although she said that it is not for the Government to decide who holds a broadcast licence, is she satisfied that the current arrangement, whereby it is left solely to Ofcom to decide who holds a broadcast licence and who does not, is sufficiently robust to ensure public confidence in the process?
The hon. Gentleman asks what undertakings I am looking for and, again, it is not for me to prejudge that. I have set out today that I am giving all parties 10 working days to come forward—that is, interested bodies that wish to make further representations on the matter of commitment to broadcasting standards and media plurality, as well as the parties themselves—on the matter of further undertakings they wish to make or other matters concerning my minded-to decisions. At that point, I will make a further decision.
May I also ask about fitness, propriety and broadcasting standards? I do wonder what it takes to be declared unfit and improper to hold a broadcasting licence. Ofcom has apparently found a second significant corporate failure on the part of the Murdochs. Given the Secretary of State’s responsibilities for broadcasting standards, is she not worried that this entity has been found responsible for a second huge corporate failure at Fox News, after News International?
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