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British Regulator Faces Court Review Over Fox-Sky Decision

British media regulator Ofcom will have to defend its conclusion that 21st Century Fox would be a “fit and proper” owner of pan-European satcaster Sky in court. A British high court judge has approved a legal challenge, brought against Ofcom last September by activist group Avaaz, that questioned the soundness of the regulator’s decision.

The case concerns Ofcom’s report, submitted to the British government last June, which concluded that it could see no reason to reject Fox’s proposed $15-billion takeover of Sky on the grounds that the Murdochs would not be a “fit and proper” owner. Avaaz accused Ofcom of not carrying out a thorough investigation of Fox News content or corporate governance failures across the Murdoch empire and clearing the way for the merger too easily.

Avaaz declared its intent to seek legal intervention in an Aug. 21 letter to Ofcom last year which requested the regulator withdraw its June report, saying it should “reconsider the question of Sky’s fitness post-merger” and claiming factual errors had been made in Ofcom’s assessment of sexual and racial harassment scandals at Fox. Avaaz argued that Ofcom’s test of what constitutes “fit and proper” was too narrow.

The group then filed legal documents at the British High Court of Justice on Sept. 29. Avaaz campaign director Alex Wilks said in a statement at the time: “Repeated, large-scale scandals in the Murdoch empire indicate that something is very rotten at the core of their businesses. Ofcom didn’t dig deep enough before declaring the Murdochs fit to own even more of our media.”

A judge has now ruled that Avaaz’s case against Ofcom “raises important points of principle and should be heard rapidly,” rejecting the regulator’s contention that the suit was without merit.

A spokesperson for Ofcom said of the judge’s decision: “We will defend our ‘fit and proper’ assessment, which was independent, expert and based on the evidence.”

The question of whether Fox could be considered a suitable owner of Sky was a hurdle that appeared to be behind the company but that this decision could re-raise. Fox, which already owns 39.1% of Sky, is seeking to acquire the remaining 60.9%. Should Avaaz win its case, Ofcom would be forced to revisit its previous decision, which could result in further delays to a final decision on the bid. The judge ruled that the case should be heard in court before the end of June.

“If the Murdoch empire is fit and proper to hold broadcasting licenses after massive hacking, harassment and hush money, then virtually anyone is,” said Avaaz CEO Ricken Patel in response to the ruling. “Ofcom has put licensing standards in the gutter with this decision. They got down there by steadily shifting the goalposts to ensure the Murdochs passed the test. The Murdochs may believe they are above the law, but the court has made it clear Ofcom is not.”

The news comes after 21st Century Fox sought to ease passage for the proposed takeover by offering to strengthen the editorial independence of Sky News.

Preliminary findings of Britain’s Competition and Markets Authority (CMA), published Jan. 22, warned that the takeover would not be in the public interest because it would give too much media power to Rupert Murdoch and his family, who already own newspapers The Times of London and The Sun. The CMA said its findings suggested the takeover would not be 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.,” which could support Ofcom’s case.

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