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British Government Wants Full Investigation Into Fox-Sky Takeover Deal

The British government has dealt 21st Century Fox a blow by deciding to ask for a full review of whether the Murdoch family are “fit and proper” owners of a combined Fox-Sky group, and whether the new media giant created by the proposed $15 billion takeover would comply with local rules on broadcasting standards.

Culture minister Karen Bradley had previously said she was inclined to ask the U.K. Competition and Markets Authority to look only into the issue of media plurality, of whether a combined Fox-Sky would wield too much power on the British media landscape. But Bradley told Parliament on Tuesday that she had changed her mind after fresh evidence came to light, believed to relate to Fox News’ conduct in the U.S. She said she had sought new advice from regulator Ofcom on the evidence.

Bradley said Ofcom had shifted from seeing no problems over Fox’s commitment to British broadcasting standards to suggesting that there were now “non-fanciful” concerns. Ofcom still did not recommend that the competition authority step in, but Bradley concluded that a further investigation was warranted, noting that Fox took measures to improve its compliance procedures only after concerns had been expressed. “The fact that Fox belatedly established such procedures does not ease my concerns, nor does Fox’s compliance history,” Bradley told lawmakers.

She also addressed concerns about the alleged “Foxification” of Fox-owned news outlets. “I consider it 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,” she said.

Bradley’s decision is a major setback for Fox and the Murdochs, who were keen to avoid a more extensive investigation, and a delight to the deal’s opponents, including some politicians and social activist groups. The company has lobbied heavily to get the deal approved by the British government and regulators, and said that how it is dealt with is a key test for Britain’s business sector ahead of the country’s withdrawal from the European Union.

Bradley said she would allow Fox to make new submissions to her office over the next several days. But unless anything game-changing emerges, it is unlikely that she will go back on her decision.

Fox is already facing a likely compensation payment to Sky shareholders, of which it is the largest, for failing to get the deal done in calendar 2017, and the decision to mount a wider investigation raises questions over whether it will get the deal done at all. If not, it will be on the hook for another compensation payment. An earlier move for Sky foundered in 2011 in the wake of the phone-hacking scandal engulfing Murdoch’s British newspapers.

Fox wants to buy the 61% of Sky it does not already own, to have full control of Europe’s largest pay-TV operator. Sky has satellite pay-TV operations in the U.K., where it is listed, and in Ireland, Germany, Austria, and Italy. This week it ventured into Spain with a low-cost streaming service, a model it is expected to replicate elsewhere in Europe. EU authorities have already given their green-light to the merger.

The Murdoch family and 21st Century Fox have faced considerable opposition to the Sky deal in the U.K. and beyond. Prominent lawmakers including Tom Watson, Vince Cable, and Ed Miliband have been vocal opponents of the deal, as have pressure groups Avaaz and Media Matters. They contend that the behavior of Fox News, which has been hit by allegations of sexual harassment and racial discrimination, warrants a fuller investigation into whether the Murdochs are fit to own a combined company, and whether the new Fox-Sky media giant would comply with British broadcasting standards.

Regulatory agency Ofcom advised Bradley that the “fit and proper” requirement and the broadcasting standards elements of the deal did not merit further probes, but that the issue of media plurality did warrant further scrutiny by the Competition and Markets Authority. Bradley then asked Ofcom for more clarifications, further delaying her decision. Avaaz, which alleges that Ofcom mishandled its investigation into Fox-Sky, is considering legal action against the government for its handling of the deal.

The details of Ofcom’s latest report to Bradley, likely referring to Fox News, will now be published.

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