Fox Fires Back at British Government on Sky Deal Regulatory Issues

James Murdoch
Simon Wilkinson/SWPix.com/REX Shutterstock

Twenty-First Century Fox has hit back at some of the points made in a letter from the British government last week regarding Fox’s proposed merger with European pay-TV network Sky. The move comes in advance of next week’s decision on whether to refer the deal to the regulators.

Friday’s letter from the Department for Culture, Media and Sport stated that the Secretary of State, Karen Bradley, was “minded” to refer the deal to media regulator Ofcom and the Competition and Markets Authority “on the basis that she believes that it is or may be the case that the public interest in plurality ground and the public interest in the commitment to broadcasting standards ground is relevant to a consideration of the merger.”

With regards to the issue of plurality, the DCMS had pointed to an alleged high level of influence the Murdoch Family Trust exerts over Fox, which would control Sky News channel after the deal, and News Corp., which owns leading U.K. newspapers the Sun, the Times, and the Sunday Times. “It is therefore possible that the merger could reduce the diversity of viewpoints across news providers and/or increase the MFT’s ability to influence public opinion and the political agenda,” it stated.

Fox challenged this in its response on Wednesday, and the rationale behind the DCMS viewpoint. In particular it questioned the evidence provided by the Media Reform Coalition, whose report appears to have swayed the DCMS, but which Fox alleged was “flawed.” For example, the report described News Corp. as the U.K.’s “largest newspaper provider,” when Fox said this is in fact DMGT, which publishes the Daily Mail. It also claimed the report had ignored “the implications of the split” between Fox and News Corp. in 2013.

Fox challenged the DCMS’ assertion that the Murdoch Family Trust has a 15% shareholding in Sky, and that this will rise to 39% after the merger. Fox stated: “The MFT and other interests associated with the Murdoch family hold only an indirect interest in Sky, not a shareholding.”

Fox said it “remains confident that the facts will show that the U.K. media is robustly plural and that plurality has increased in recent years.” Fox urged the Secretary of State to “engage fully with the transformation of news provision and consumption brought about by the internet and social media.”

With reference to the question of broadcasting standards, the DCMS had referred to “huge failings of corporate governance” during the phone-hacking scandal at the News of the World newspaper, run by News Corp.’s subsidiary News Intl. James Murdoch was executive chairman of News Intl. between 2007 and 2012, and is now chairman of Sky and CEO of Fox.

DCMS referred in its letter to the fact that Ofcom had previously reviewed James Murdoch’s role in the events relating to the hacking scandal, and concluded “his conduct … repeatedly fell short of the exercise of responsibility to be expected of him as CEO and chairman.”

Fox fired back, stating it “takes compliance matters extremely seriously and is proud of the transformation of its corporate governance and of the arrangements it has put in place since that time.” It also underscored the point that independent directors formed the majority of its board, adding that it “has adopted strong governance measures and controls to ensure it meets the highest standards of corporate conduct.”

Fox concluded that it “believe this transaction is in the interest of the U.K., its creative economy and its consumers. For the past 30 years, [Fox] and Sky have been broadcasters of good standing in the U.K., a responsibility we take seriously.”

It added: “The U.K. has a thriving creative and media sector that is becoming increasingly more plural and we are confident that this transaction would not result in there being insufficient plurality in the U.K. We will continue to work with all relevant regulatory authorities in assisting their reviews.”

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