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British Competition Watchdog Says Fox Takeover of Sky Not in Public Interest

In a blow to 21st Century Fox, Britain’s competition watchdog has provisionally concluded that the company’s proposed takeover of satcaster Sky would have a negative impact on media plurality, increasing the likelihood that the British government will reject the $15 billion bid.

The Competition and Markets Authority said Tuesday morning that it “has provisionally found that Fox taking full control of Sky is not in the public interest due to media plurality concerns, but not because of a lack of a genuine commitment to meeting broadcasting standards in the U.K.”

It noted that Murdoch-owned news outlets are already watched or read by a third of the British population and a deal “would lead to the Murdoch Family Trust (MFT), which controls Fox and News Corporation (News Corp), increasing its control over Sky, so that it would have too much control over news providers in the U.K. across all media platforms (TV, Radio, Online and Newspapers), and therefore too much influence over public opinion and the political agenda.”

Fox wants to buy up the 61% of Sky it doesn’t already own. Gaining full ownership would mean that Sky News, the Times of London newspaper, and the Sun tabloid would all fall under the Murdochs’ control. According to media regulator Ofcom’s earlier findings, Murdoch properties would collectively rank No. 3 in terms of share of news consumption, behind pubcaster the BBC and news provider ITN.

In its provisional findings Tuesday, the Competition and Markets Authority, or CMA, suggested that Fox might be able to mitigate the concerns on media plurality by spinning off Sky News or by finding ways “to insulate” the news channel from the Murdochs’ influence.

The CMA now has until May 1 to issue a final report. Tuesday’s findings are followed by three weeks of further consultation. In a statement, Fox said that it was disappointed by the preliminary conclusion on media plurality but that it would continue working with the watchdog in advance of the final report.

“We welcome the CMA’s provisional finding that the company has a genuine commitment to broadcasting standards and the transaction would not be against the public interest in this respect,” Fox said. “Regarding plurality, we are disappointed by the CMA’s provisional findings. We will continue to engage with the CMA ahead of the publication of the final report in May.”

Sky’s share price went up about 2% upon news of the CMA’s preliminary findings and held steady at that level through Tuesday morning.

After the watchdog issues its final report, the British government will have 30 working days to deliver its own verdict. Matthew Hancock, the government’s culture and media secretary, told Parliament that he would adhere to “due process” in making a decision by June 14. Hancock will not be bound by the CMA’s findings, but if the CMA reaffirms its warning against the deal, it would be politically difficult for Hancock and the ruling Conservative Party to go against that warning without being accused of cozying up to the Murdochs.

Fox itself is in the process of trying to sell off some of its assets to Disney. That mammoth transaction is likely to be concluded after the British competition authority completes its scrutiny of the bid for Sky, but the watchdog said it would consider the implications of the Fox-Disney merger in any remedies it suggests.

Murdoch has long coveted Sky, and nearly succeeded in adding it to his empire in 2011 before Britain’s phone-hacking scandal – which implicated Murdoch-owned newspapers – torpedoed his efforts. For several years, Murdoch was considered too politically toxic for the bid to be revived, but enough time had passed for Fox to make a new play for Sky in December 2016. Lachlan Murdoch, Fox’s executive chairman, called the takeover his company’s “No. 1 priority.”

Social activists have continued to oppose Sky being absorbed into the Fox fold, arguing that the latter’s checkered corporate history, especially the racism and sexism scandals that have beset Fox News, made the Murdochs unfit to be the owners of such an important media property.

British regulators have rejected that argument in a series of reports. But last September, the government decided to ask the Competition and Markets Authority to examine the bid more closely on plurality grounds.

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