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Sky/Fox Merger

Volume 628: debated on Tuesday 12 September 2017

I apologise for beginning my statement by correcting you, Mr Speaker, but I am now the Secretary of State for Digital, Culture, Media and Sport. The Department has a new word in its name.

I am here to give an update on the proposed merger between 21st Century Fox and Sky plc and on my decision about whether to refer the transaction for a full six-month investigation by the Competition and Markets Authority. I should first remind the House that in my quasi-judicial role I must, first, come to a decision on the basis of relevant evidence; secondly, act independently in a process that is fair and impartial; and, thirdly, take my decision as promptly as is reasonably practicable. I am committed to transparency and openness in this process and have been clear that my decisions can be influenced only by facts, not by opinions, and that they can be influenced only by the evidence, not by who shouts the loudest.

I turn, first, to media plurality, and I can confirm that none of the representations received has persuaded me to change my position. Accordingly, I can confirm my intention to make a referral on the media plurality ground to the CMA. On the question of commitment to broadcasting standards, over the summer my officials reviewed the almost 43,000 representations received. A significant majority of them were campaign-inspired, arguing against the merger going ahead but generally without providing new or further evidence or commenting on Ofcom’s approach. Overall, only 30 of the 43,000 representations were substantive, raising potentially new evidence or commenting on Ofcom’s approach. Almost all were related to commitment to broadcasting standards.

In the light of those representations, I asked Ofcom to provide further advice. May I put on record my gratitude to Ofcom for its efforts to respond to the questions that were raised? I am, today, publishing the exchanges between my Department and Ofcom. In those exchanges, I sought clarification on, first, the threshold that Ofcom applied to its consideration of the commitment to broadcasting standards ground; secondly, the consideration made of broadcasting compliance; and, thirdly, the consideration made of corporate governance issues. I also asked Ofcom to consider whether any of the new, substantive representations that I received affected its assessment.

I have taken careful account of all relevant representations and Ofcom’s advice, and I have today, as required by the legislation, written to the parties to inform them that I am now minded to refer the merger to the CMA on the grounds of genuine commitment to broadcasting standards. I will now set out the technical reasons for that decision.

Questions were raised about the threshold for referral. The legal threshold for a reference to the CMA is low. I have the power to make a reference if I believe that there is a risk that is not purely fanciful that the merger might operate against the specified public interests. In its original report, Ofcom stated that

“we consider that there are no broadcasting standards concerns that may justify a reference”.

At the time, Ofcom appeared to be unequivocal. Following the additional representations, Ofcom has further clarified that

“while we consider there are non-fanciful concerns, we do not consider that these are such as may justify a reference in relation to the broadcast standards public interest consideration.”

The existence of non-fanciful concerns means that, as a matter of law, the threshold for a reference on the broadcasting standards ground is met. In the light of all the representations and Ofcom’s additional advice, I believe that those concerns are sufficient to warrant the exercise of my discretion to refer.

The first concern, which was raised in Ofcom’s public interest report, was that Fox did not have adequate compliance procedures in place for the broadcast of Fox News in the UK and that it took action to improve its approach to compliance only after Ofcom expressed concerns. Ofcom has confirmed it considers that to raise concerns that are non-fanciful but not sufficiently serious to warrant referral. I consider that those non-fanciful concerns warrant further consideration. The fact that Fox belatedly established such procedures does not ease my concerns, and nor does Fox’s compliance history.

Ofcom was reassured by the existence of the compliance regime, which provides licensees with an incentive to comply. However, it is clear to me that Parliament intended the scrutiny of whether an acquiring party has a “genuine commitment” to attaining broadcasting standards objectives to happen before a merger takes place. Third parties also raised concerns about what they termed the “Foxification” of Fox-owned news outlets internationally. On the evidence before me, I am not able to conclude that that raises non-fanciful concerns. However, I consider it important that entities that 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. Those are matters the CMA may wish to consider in the event of a referral.

I turn to the question of corporate governance failures. Ofcom states in its latest correspondence that such failures raise non-fanciful concerns in relation to the broadcasting standards ground. However, it again concludes that those concerns do not warrant a reference. I agree that corporate governance issues at Fox raise non-fanciful concerns, but in my view it would be appropriate for those concerns to be considered further by the CMA. I agree with the view that, in this context, my proper concern is whether Fox will have a genuine commitment to attaining broadcasting standards objectives. However, I am not confident that weaknesses in Fox’s corporate governance arrangements are incapable of affecting compliance in the broadcasting standards context. I have outstanding non-fanciful concerns about these matters, and I am of the view that they should be considered further by the CMA.

Before I come to a final decision, I am required, under the Enterprise Act 2002, to allow the parties to make representations on my proposed decision, and that is the reason why my decision remains, at this stage, a “minded to” one. I have given the parties 10 working days to respond. Following receipt of any representations from the parties, I will aim to come to my final decision in relation to both grounds as promptly as I can.

I remind the House that should I decide to refer on one or both grounds, the merger will be subject to a full and detailed investigation by the CMA over a six-month period. Such a referral does not signal the outcome of that investigation. Given the quasi-judicial nature of this matter, my decision cannot be guided by the parliamentary timetable. If I come to my decision during recess, I will write, as I have done previously, and return to this House at the earliest possible opportunity to provide an update. I commend this statement to the House.

I thank the Secretary of State for advance sight of her statement.

The Secretary of State has taken her responsibilities seriously, and I give her credit for that. I give her credit, too, for listening to the evidence before her, including new evidence submitted after she had announced her initial decision, and for changing her mind. I also want to praise my right hon. Friend the Member for Doncaster North (Edward Miliband), who has run a very effective campaign in this area. Dare I say it, but I think he leads the race for Back Bencher of the year for his campaign?

I welcome the Secretary of State’s decision—or, I should say, the fact that she says she is minded to make such a decision—to refer the bid on broadcasting standards grounds, as well as on media plurality grounds. This is the first time that a Minister in the current Government has ever stood in the way of what the Murdochs want—and, frankly, not before time. So well done, and as they say in the Black country, “She’s a good ’un.”

The Secretary of State has done everything we asked her to do—or almost everything. Her statement does in my view, however, reflect a failure on the part of Ofcom. In its first report, as she said, Ofcom said that there were

“no broadcasting standards concerns that may justify a reference”.

It has now admitted that there are, as she said, “non-fanciful concerns”. On that basis, she had to refer the bid, and she has done so. It should have been obvious to Ofcom, as it certainly was to all Labour Members, that concerns about the Murdochs were more than fanciful.

After all, the Murdochs have a long history of regulatory non-compliance and of corporate governance failure. Just last week, Fox recognised its own failure to comply with broadcasting standards when it pulled Fox News, which has breached Ofcom’s rules again and again, from the UK. Ofcom could have gone further, too, on the “fit and proper” test. It decided that a post-merger Sky would pass, despite clear evidence of impropriety and failure of corporate governance both at 21st Century Fox and at News Corporation.

Such failures include the phone hacking scandal, which still has loose ends that are yet to be tied up. Just last week, News Group settled 17 cases related to allegations of criminality at The Sun newspaper, ensuring that James Murdoch will not have to appear in court later this year. Those 17 cases are just the first tranche of 91 new claims of phone hacking and illegality in obtaining information against The Sun and News of the World. This story is far from over, even if we will read little about it in the pages of the Murdochs’ newspapers, and all these cases are claims against a company that claimed for over a decade that there was no problem and that tried to move heaven and earth to prevent abuses from being uncovered. This is alongside the ongoing sexual and racial harassment scandal at Fox News, which is part of 21st Century Fox’s empire.

As I have said, the Secretary of State has done almost everything we asked her to do. The one thing we still want, and we have said this time and again, is that we need to get properly to the bottom of the scandals at the Murdoch empire—part 2 of the Leveson inquiry. She has now shot her fox with the Murdochs. She has burned her boats, and they already do not like her—I know what that is like—but that liberates her. Go on, Secretary of State, do the right thing: go ahead with Leveson 2.

I am a little unsure about whether I have been damned with faint praise. I do not know that I will ever again hear such good words from the hon. Gentleman across the Dispatch Box.

I want to repeat the point I made in my statement: I have made this decision on the basis of the evidence. I take my quasi-judicial role very seriously. I have looked at the evidence before me and considered Ofcom’s response to the further evidence that we put to it, and that is why I have made this announcement. I remind the hon. Gentleman that the “fit and proper” duty that he mentioned is a duty on the independent regulator. It is a responsibility of Ofcom as an ongoing duty. It will not end at any point but will be there for Ofcom to continue to consider for any holder of a broadcasting licence.

On the matter of Leveson, I will shortly come to the House with the responses to the consultation about it that we have carried out. The hon. Gentleman will perhaps understand that this summer has been fairly busy, with the need to review significant amounts of evidence.

I ask the hon. Gentleman to join me in condemning the campaign that has been run by some very left-wing activists. Some people spent the summer walking around my constituency wearing masks with my face and carrying big electronic A-boards. They not only pursued me around town, but actually went and found my family, who live outside my constituency, and protested there. I am taking this decision on the basis of evidence, not of any campaign of intimidation and harassment, and I hope he will join me in condemning those activities.

We do not normally take points of order in the middle of statements, but I am in a generous mood, and I will hear the hon. Gentleman if he is characteristically brief.

I will be brief, Sir. I am very sorry to hear the allegations that the Secretary of State has made, and I promise her that I will go away and look at the evidence. If Labour party members are involved in this, we will deal with them. Let me say to her that I have been as sickened as she has been by the way in which our colleagues in this House have been targeted for doing their jobs. A heavier load is carried by our female colleagues, so let me make it clear: you can either be a misogynist or you can be a member of the Labour party, but you cannot be both. If she gives me the evidence, we will deal with this.

I just want to respond by thanking the hon. Gentleman. I think we are at one on that point, and we would like to work in a cross-party way on these matters.

I thank the Secretary of State for her statement, and for agreeing to appear in front of the Select Committee during the first week back after the conference recess, when we will have the chance to question her further on this matter. I hope that she will agree that this process is working: it is right that such questions about broadcasting standards and whether licence holders are fit and proper persons are taken by the appropriate independent regulatory body. It should not be for politicians to exercise discretion about who they think should or should not hold licences, but to provide official guidance for the regulator.

As I have not had the chance to do so in the House, I congratulate my hon. Friend on his return as Chair of the Select Committee. I look forward to being interrogated by him, I am sure at length, in a few weeks’ time. He is right: the process is set down in the Enterprise Act. Parliament voted for this process, and it has asked me as Secretary of State to follow the process. I have taken that role very seriously, and I will continue to make sure that I act scrupulously fairly in this matter.

I thank the Secretary of State for prior sight of her statement. She rightly acknowledges that there is growing public concern about the concentration of media ownership in fewer and fewer hands. SNP Members absolutely share those concerns. It is essential that there is a plurality of voices within the media across the UK for the maintenance of diversity and standards.

Before the recess, SNP MPs absolutely welcomed the fact that the Secretary of State was minded to refer this matter to the CMA, and we are delighted that she has now confirmed that it is her position so to do. We also welcome the fact that she is now minded to refer the takeover on the grounds of broadcasting standards as well. In doing so, I believe that she has bolstered the confidence of the public that broadcasting standards and diversity within the media will have been carefully considered, even should this takeover be given the green light at some point in the future.

If the CMA says that this deal does not pass the public standards test, will the Secretary of State follow its advice, or, in her quasi-judicial role, will she allow Fox to make further representations and give assurances before she reaches a final decision? As the process is ongoing, will she commit to consulting MPs such as my hon. Friend the Member for Livingston (Hannah Bardell) to ensure that employees’ views are also taken into account before she reaches a decision? We welcome her commitment to openness and transparency, but will she do everything she can, within given constraints, to ensure that the announcement of a decision, when it is reached, is made to this House rather than through a written ministerial statement?

To deal with the last point first, I have given every statement to the House first. The only occasions on which I have not been able to come to the House in person have been when Parliament has been in recess. At those times, I have always written to Mr Speaker, the Lord Speaker, the Chairs of Select Committees and my shadow on the Opposition Front Bench. I will continue to ensure that Parliament hears first about any decisions that I take.

The hon. Gentleman referred to the hon. Member for Livingston (Hannah Bardell), who I know has raised concerns in this Chamber about Sky employees. The terms on which I can intervene on the merger are set out very clearly in the Enterprise Act 2002. They relate to public interest tests, and I am minded that the CMA should look further at those on plurality and commitment to broadcasting standards. The rules governing this process are quite prescriptive, but I am aware of the hon. Lady’s concerns.

It is worth putting it on record that although nothing has changed in my “minded to” decision on plurality, I can make a referral to the CMA only once. I must make that referral on the basis of all the grounds for referral; I cannot do it piecemeal. That is why I have not yet referred to the CMA on the issue of plurality. Now that I have set out my “minded to” decision, the parties have 10 working days to come back to me. I will then make a final decision on the basis of that.

The hon. Gentleman is right that this is an important part of the process of gaining public confidence in media mergers. It is something that Parliament has prescribed, and I am determined to ensure that I abide by the rules.

I understand and support my right hon. Friend’s decision, or at least the decision she is minded to take. However, she will be aware that by the time the CMA reports, it will be well over a year since the matter was first proposed, which has created considerable uncertainty for the companies and for investors. Does she therefore agree that whatever verdict the CMA may reach, that ought to resolve the matter?

My hon. Friend is right that this process has taken a significant period of time. It was always known that this would be a lengthy process. I remind the House that the proposed merger was set out in December last year, but no official notification of the merger was made to the authorities until February. We have been determined to deal with it as promptly as possible. The small matter of purdah also got in the way earlier in the year, I am afraid to say. I am mindful that I have to act as promptly as is reasonably practicable. I am aware that there are those who are keen to see this matter progress. I want to get the CMA working on it as soon as possible, and that will be the final part of the official process set out in the Enterprise Act, although there are always opportunities for discussion at that point.

I welcome the Secretary of State’s decision on plurality and her “minded to” decision on broadcasting standards. I join my hon. Friend the Member for West Bromwich East (Tom Watson) in praising the Secretary of State. She has made a brave decision—or is minded to make a brave decision—but it is the right decision and one that the Murdochs will not like. I have my own experience of the Murdochs, and she is absolutely to be commended for that.

The Secretary of State is ignoring what is, in my view, the unreliable and flawed advice of Ofcom. She knows that I and a number of colleagues believe that its view on “fit and proper” is also flawed and unreliable. If its advice on broadcasting standards is flawed, I think we can draw some conclusions about its position on “fit and proper”, although I know she will not comment on that.

I have one specific thing that I want to ask the Secretary of State. Can she reassure us that if the CMA holds the inquiry she is minded to have, it will be a comprehensive look—the first time this has happened, I think—at the Murdochs’ disgraceful record in news and, indeed, broadcasting—from the News of the World to Fox News to Sky News Australia? Crucially, will she confirm that it will look at the issue of corporate governance, which was something that she flagged up in her letter to Ofcom, although I do not think it looked at that properly? That needs to be looked at, as it relates to broadcasting standards.

I end by saying that the Secretary of State has done her job today; it is now for the CMA to do theirs.

I thank the right hon. Gentleman for his question. Together with the right hon. Member for Twickenham (Sir Vince Cable) and my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), he contributed one of the 30 substantive representations that I received. He referred to the “fit and proper” test. One question that he raised in his representation was the level of the threshold. What has become clear from the conversations we have had and our work is that the threshold for referral to the CMA is a different threshold from the “fit and proper” test. The “fit and proper” test is, quite rightly, something for Ofcom.

If the right hon. Gentleman looks at my statement, he will see the reasons I have set out for referral to the CMA. As and when the “minded to” decision becomes a final decision, I will set out those reasons in full.

I am grateful to my right hon. Friend for coming to the House today. No right hon. or hon. Member could deny that she has come to the House frequently and kept us informed. As she has said, this process has lasted for over a year, so I ask her two questions. First, does this announcement today mean that there will be a further delay? Secondly, does she fear that there will be calls for a judicial review, which would delay the decision still further?

My hon. Friend makes an important point. Clearly, there is always scope for anybody to call for a judicial review about the process if they feel that that is appropriate. That is why I have been scrupulous in my work during this process to ensure that I comply fully with the terms of the Enterprise Act.

My hon. Friend also asked about delay. The referral to the CMA on plurality alone would be for six months, and the referral to the CMA on both grounds is also for six months, so that does not change the timeframe to ask the CMA to look at commitment to broadcasting standards in addition to plurality.

I add my welcome and appreciation to the Secretary of State for her referrals. I suggest that if she were to revisit Leveson 2—a judge-led inquiry—that would add to the evidence base for Ofcom’s investigation, if it happened quickly.

I presume that the right hon. Gentleman means the CMA and not Ofcom when he talks about the inquiry. As I said in response to the hon. Member for West Bromwich East (Tom Watson), I will respond to the responses to the Leveson consultation that we carried out. I thank the right hon. Gentleman for his representations, which he made with the right hon. Member for Doncaster North (Edward Miliband).

I thank the Secretary of State for her statement. Given the lobbying that has gone on, much of which right hon. and hon. Members have received, will she lay out in detail what can be taken into account legally under the quasi-judicial test?

I know that right hon. and hon. Members on both sides the House have been subjected to significant lobbying on this matter. I have been clear throughout that I can look only at substantive evidence. When I came to the House in June, I said that I could look only at new evidence, not evidence that was already in the public domain. Lobbying with no new evidence or shouting the loudest is not the answer; the answer is having the evidence, and that is what I have looked at. I hope that right hon. and hon. Members feel able respond to their constituents, who I know will have written in good faith, to reassure them, and to let them know that the activities they took part in were not conducive to this quasi-judicial process.

My right hon. Friend has been subjected to abuse and intimidation, as has her family. We have all been bombarded by emails from organisations such as 38 Degrees. Will she explain to the House exactly how much weight she puts on the bombardment of emails to all of us?

My hon. Friend makes an important point, as did my hon. Friend the Member for Torbay (Kevin Foster). Those emails have filled up inboxes and distracted colleagues from important constituency casework. I have made this decision in spite of the lobbying, not because of it.

Good corporate governance in a construction company means that the directors of the company make sure that its building sites, for instance, are safe to work on. Good corporate governance in a supermarket company means that the directors make sure, for instance, that their staff do not sell alcohol to underage kids. One would think that good corporate governance in a broadcasting organisation would mean that the directors of the company would make sure that their organisation abides by good broadcasting standards, which is why I wholeheartedly support what the Secretary is State is doing today. Rupert Murdoch’s defence over phone hacking was, in the end, that his company was far too big for him to possibly know what was going on across the whole of it. That was not good corporate governance, and it could not possibly lead to good broadcasting standards.

I refer the hon. Gentleman to the comments on corporate governance that I made in my statement: “I have outstanding non-fanciful concerns about these matters, and I am of the view that they should be considered further by the CMA.”

I congratulate the Secretary of State on her steady handling of this sensitive issue. She clearly shares with me and other hon. Members concerns about pressure on Members from third-party organisations outside this place representing what is, in essence, a quasi-judicial process as something that it clearly is not. Will she make it very clear that we have to avoid histrionics and instead get to the heart of the matter?

I congratulate my hon. Friend on his appointment to the Select Committee—I look forward to being interrogated further. He is absolutely right. This process is set down in statute. It cannot be influenced by loud voices, sustained campaigning or a lack of evidence; it can be influenced only by the evidence.

We are all beneficiaries of decisions taken nearly 100 years ago in this Chamber to impose on broadcasters a statutory duty of political balance. Is that not now threatened by what has been described as the “Foxidation” of news, which is taking news away from journalists of integrity and transferring it to alternative bodies that produce news that is corrupted and prostituted for certain political ends? Is it not the Secretary of State’s prime duty to ensure that we do not Foxidise our news services?

That was one of the points made in the representations I received between my statement in June and my statement today, and it is one of the matters I would like the CMA to consider. Broadcasters in the United Kingdom are subject to the United Kingdom broadcasting code. I want to be clear, through the work of the CMA, about the impact that partisan reporting, which may occur in other jurisdictions, might have on the impartiality we expect of our broadcasters here in the UK.

I, too, welcome the Secretary of State’s statement. Five years on, it seems as if little has changed. The newspapers have been cast off, but Rebekah Brooks is back having been reappointed by the Murdochs, and Fox wants to take over Sky. There are a lot of loose ends to be tied up on corporate behaviour and governance, including evidence given to the Select Committee. One is the second part of the Leveson inquiry, which might well reveal more. May I press the Secretary of State on this matter, not least because the Conservative manifesto pre-empted the conclusions of her consultation? When will we learn whether an amended Leveson 2 will go ahead, as the Select Committee unanimously recommended?

If I may repeat myself, Mr Speaker, I will come to the House with the responses to the consultation, and our views on that consultation, in due course.

I, too, welcome the Secretary of State’s statement. May I press her again on that point? She said earlier that the consultation outcome will be published “shortly”. When is shortly going to be?

One recent precedent—it is from less than a decade ago—was when the competition regulator, on competition grounds, forced Sky to sell 17.5% of ITV. Is it not inconceivable that, in six months’ time, the CMA will wave through a merger that gives one family control of not just two large newspapers but Sky News, a national radio channel, and radio news supplied to every commercial radio station in our country?

I have set out that I am minded to refer the decision to the CMA for a six-month inquiry as part of the terms of the Enterprise Act. These will be matters for the CMA, should I make a final decision to make that referral.

I congratulate the Secretary of State on her statement that she is minded to refer the matter on the grounds of governance, but does she not recognise that a commitment to Leveson 2 would go some way towards reassuring the public that the individuals who own the media in this country will be subject to full scrutiny?

Just to be clear, I am minded to make a referral on the basis of commitment to broadcasting standards, not corporate governance. It also worth saying that the CMA has to look at the merger on the basis of the evidence available at the time. Whatever comes out in the future may impact on the “fit and proper” test, as decided by Ofcom, the independent regulator, but the merger has to be governed by information in the public domain and the private domain, with the evidence provided to the CMA as part of the process.

I commend the Secretary of State for her decision, but is it not incumbent on her to secure the evidence to make the correct decision? She must now take forward Leveson 2, which the House clearly wants and the victims were promised so long ago.

As I said, I will come back with the Government’s view about the consultation on the Leveson inquiry, which we conducted earlier this year. However, I again make the point that the merger has to be looked at in the context of today and not what might come out in the future. That is a matter for the fit and proper test, which is covered by an ongoing duty of Ofcom.

I thank the Secretary of State for her statement. It has taken a bit of time, but we are very pleased to hear it and about the steps she is taking to refer the Sky-Fox merger. I have been in correspondence with her Department on behalf of literally hundreds of constituents, some of whom are seeking private legal action. They consistently tell me that they would like to see Leveson 2. Can she give my constituents some reassurance?

I am sorry to have to repeat myself, but I will come to the House in due course with my response to the consultation we carried out.