A lot of people must be wondering this, given recent allegations and revelations about phone hacking by the News of the World. So can the Culture Secretary Jeremy Hunt now block the planned merger of News Corporation and BSkyB?
He has already said he is minded to allow it, subject to certain undertakings relating in particular to the independence of Sky News, undertakings on which he is consulting the public. We have till this Friday, 8 July, to respond.
The process was initiated by Vince Cable, who issued a European Intervention Notice last November under the Enterprise Act 2002, citing concerns about media plurality and requiring the OFT and Ofcom to report, which they have done. Their view is that the undertakings News Corporation will agree to are practical and viable, and address the concerns about media plurality.
In my view it’s not legally defensible now for Hunt to slam the brakes on this process, let alone put it into reverse. Crucially, the legislation governing the procedure – article 5 of the Enterprise Act 2002 (protection of Legitimate Interests) order 2003 – requires him when deciding now whether to refer the matter to the Competition Commission to take account only of the public interest consideration mentioned in the original European Intervention Notice – the plurality of media ownership. Given his previous indication that he was minded to accept undertakings, and given the Ofcom/OFT advice, in my view a court on judicial review would be bound to conclude that a referral now could only be based on new public interest considerations – and would quash the decision to refer.
So are there any alternatives?
Well, he can’t issue another European Intervention Notice, because of section 67(5) of the Enterprise Act 2002. A pity, that; that principle was no doubt included so as to stop government intervening on a merger or takeover repeatedly, simply to frustrate it. It does, though, ignore the possibility of new public interest concerns coming to light.
Parliament could of course repeal section 67(5), or amend it to permit a second reference where new concerns arise. Interestingly, a new notice could mention public interest concerns not currently laid down in the relevant legislation: section 42(3) makes clear that the concept of a public interest consideration means
a consideration which, at the time of the giving of the intervention notice concerned, is specified in section 58 or is not so specified but, in the opinion of the Secretary of State, ought to be so specified.
The government would then have to seek the approval of the European Commission under article 21.4 of the EU Merger Regulation for “recognition” in principle of its new public interest concern. But that would mean giving the European Commission the final word over whether the government could intervene again; not an attractive approach for any British government. I don’t think ministers will be seriously considering this as a way forward in this case.
What we’re left with is Ofcom’s power to take steps against the holder of a TV broadcasting licence under either of the Broadcasting Acts 1990 and 1996 – as a ditigal terrestrial, satellite and I think cable broadcaster, I imagine BSkyB hold both types of licence (both a TLCS and DTPS licence).
Both section 5(5) of the 1990 Act and the parallel section 5(5) of the 1996 Act permit Ofcom to revoke a licence (or, more strictly, to include provisions in a licence providing for revocation: I assume they’ve done this). Revocation procedures can be initiated where a relevant change has occurred following grant of a licence – and such a change can include a change in the persons having an interest in the licence-holder that would call into question whether it remains a fit and proper person to hold a licence.
There must be some doubt, though, whether a regulator can properly revoke a licence on the basis that the licence holder (in this case, presumably BSkyB Group or one or more of its subsidiaries) is no longer a fit and proper person because it’s now controlled by another company (News Corporation), another of whose subsidiaries (News Group Newspapers) is suspected of presiding over illegality and a cover-up. If Ofcom were challenged on this, I think a judicial review might well succeed on the grounds that there’s no rational connection between the conduct of a newspaper firm and the likely conduct of a broadcaster. It might depend whether senior managers of News Corporation itself can be linked to the phone hacking scandal or cover-up. But I’d be surprised – unless even more explosive evidence emerges linking phone hacking to the very centre of the Murdoch empire – if an independent regulator were bold enough to take action.
What all this shows is that the legislation in its current state does not satisfactorily address legitimate public interest concerns about the toxic mix of media concentration and impropriety.
Parliament should now consider amending section 67 of the Enterprise Act to permit a second European Intervention Notice where new public interest concerns emerge following an initial intervention, or allowing an existing notice to be amended; and the government should seek recognition from the European Commission of a new ground of public interest consideration, where a merger involves a company which is (or one of whose subsidiaries or related companies’ staff is) linked to suspicions of serious or systematic illegality. It can then make an order under section 58(3) of the Enterprise Act to give statutory force to that new consideration. Parliament should also consider amending the Broadcasting Acts to permit the Secretary of State to “call in” a decision on whether a licence-holder remains a fit and proper person to hold a licence – or at least to direct Ofcom to make a formal investigation and decision on fitness – where related companies of those taking controlling interests in licence-holders are linked to serious or systematic illegality. In that way, political will can be brought to bear directly on the regulatory process in cases like this.