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Fox-Sky Merger

Volume 783: debated on Thursday 20 July 2017


My Lords, with leave I will repeat a Statement made in the other place by my right honourable friend Karen Bradley.

“Three weeks ago, I came to this House to set out my initial decisions in relation to the proposed merger between 21st Century Fox and Sky plc. Having referred the bid for a phase 1 investigation by Ofcom and the Competition and Markets Authority in March, the decision before me was whether to refer the merger to a fuller phase 2 investigation by the Competition and Markets Authority.

I told the House then that, following Ofcom’s advice, I was minded to refer the merger to the Competition and Markets Authority on the grounds of media plurality, and minded not to refer on the grounds of commitment to broadcasting standards. At the same time, I confirmed that I had received a set of undertakings in lieu of referral from the parties and was minded not to accept them.

I also set out the steps that I would follow for the next phase of the decision. I said that, as required by legislation, I would allow the parties to the proposed merger the opportunity to make representations on my position on media plurality. In the interests of transparency and ensuring that all the evidence had been considered, I would allow all interested parties, including the public and parliamentarians, to have their say, particularly on the question of commitment to broadcasting standards. I set last Friday as the deadline.

As I know is now very well known by the House, decisions by the Secretary of State on media mergers under the Enterprise Act 2002 are made on a quasi-judicial basis. This means that I must take my decision only on the basis of evidence that is relevant to the specified public interests. I must act independently and follow a process that is scrupulously fair and impartial. I have sought throughout this process to be as transparent and open as possible, and have kept the House informed at every available opportunity. In keeping with that spirit I have come to the House today to give as full an update as I possibly can before it rises.

I can confirm that I have received detailed representations from 21st Century Fox and a letter from Sky, which I will aim to publish, subject to statutory and confidentiality requirements, once I have taken my final decision. I also received a letter from Lachlan and James Murdoch on Friday last week, and a further letter from 21st Century Fox this Monday, which it has since published.

The detailed representations from 21st Century Fox raise a number of points on Ofcom’s public interest test report and the analysis underpinning Ofcom’s recommendations, contesting its view that the transaction raises public interest concerns that justify a referral to a phase 2 investigation by the CMA. Neither of the parties has offered any further or amended undertakings in lieu of referral. I also have received a substantial number of responses in relation to my referral decision.

In coming to my decision in this case, I must take account of all relevant representations made to me. As a result, my final decision on referral can be made only after I have fully considered all relevant evidence on both the plurality and commitment to broadcasting standards grounds. Given that the consultation closed only on Friday, there has not been time to consider all the representations, and I am not in a position today to make my final decision on referral. What I can do, however, is confirm to the House that, having carefully reviewed the parties’ representations, and in the absence of further proposed undertakings, I am currently still minded to refer on the media plurality ground and still minded not to accept the undertakings in lieu of a reference.

To be clear, as I have said, I must fully consider all relevant representations before reaching a final decision, and I will take the time I need to look at the many that I have received, balancing the need for careful consideration of relevant evidence with the merger parties’ legitimate need for a prompt decision. However, I have prioritised considering the parties’ representations and the detailed points that they have made to me. While some of the points they have raised may benefit from closer examination by the CMA at phase 2 in the event that the merger is referred, there was nothing in their representations that has led me at this stage to change my mind about the appropriateness of referral. Unless new evidence from other representations changes my mind in the coming weeks, the bid will therefore be referred to a phase 2 review on at least one ground—media plurality. I thought it would be helpful to set out my current view to the House, given the public interest in this case, as well as to the parties so that they can be as clear as possible about my intentions and the likely next steps for the bid.

Bearing in mind the obligation to act promptly as part of this quasi-judicial process, I expect I will be in a position to come to a final decision on referral, including in respect of the broadcasting standards ground, in the coming weeks, potentially during the Summer Recess. Should that prove to be the case, and as I have done previously when stages of this merger have taken place outside of the House sitting, I will write to the parties informing them of my decision as well as the Leaders and Speakers of both Houses, to the honourable Member for West Bromwich East and to the chair of the CMS Committee, whom I was pleased to see reappointed last week.

As I have said previously, I trust that making this Statement to the House gives another welcome opportunity to discuss this important issue, and further cements my undertaking to openness and transparency. I commend this Statement to the House”.

My Lords, I thank the Minister for repeating the Statement made in the other place. I am grateful to the Government for returning to the Houses of Parliament, both here and the other place, just before Recess to update us on progress.

We have been following the twists and turns of this saga closely. It is obvious, and absolutely right, that the Secretary of State is taking her quasi-judicial responsibilities very seriously. While we regret that she is minded not to refer the bid on grounds of broadcast standards, we support her decision, as I take it to be, to refer the bid to the CMA on the grounds of media plurality.

I have three main points that I hope the Minister will be able to respond to. The first is on the timing. Could I press the Minister on the possibility that the Secretary of State might announce her decision during the Summer Recess? Surely Parliament must have the opportunity to scrutinise any decision that she makes. It is not her job to operate to 21st Century Fox’s corporate timetable; in my view, the company would be better to abide by the rules as they currently are and respect the role of Parliament in this, and it should signal that very clearly. In my view, the Secretary of State should demonstrate to those at Fox that it is she, as an elected representative of the people, who is in charge, not them. I ask that the usual channels in this House also be kept abreast and that we be informed if there is to be a Statement so that we can respond to it.

Secondly, I want to press the Minister on the broadcasting standards investigation. I suggest it needs a bit more work before a decision is finally reached. Recently, compelling arguments for this have been made in the other place by my right honourable friend the Member for Doncaster North and the right honourable Members for Twickenham and for Rushcliffe—noble Lords will be aware that that is a pretty distinguished cross-party alliance. The truth is that the Murdochs have a history of regulatory non-compliance and of corporate governance failure that calls their commitment to broadcasting standards into serious question. Ofcom says that there are,

“significant concerns about Fox’s approach to ensuring Fox News content complies with the Broadcasting Code”.

We saw in the phone hacking scandal that senior employees and executives at News International failed to comply with criminal law or with acceptable standards of journalistic conduct—and, frankly, acted with a flagrant disregard of basic human decency. We see from the ongoing sexual and racial harassment scandal at Fox News in the United States that there is ample evidence of what Ofcom calls “significant corporate failure”.

Does the noble and learned Lord agree that it is time to look again at the fit and proper person test applied in the case of broadcasting standards? I heard it said by a distinguished former member of Ofcom that that test could be satisfied only if the person concerned was caught in the act of murder, had been prosecuted and that the body was exhibited before any such decision could be taken. That is probably a test too far. The noble and learned Lord will recall that, in the Digital Economy Act, several noble Lords from around the House joined together to table an amendment that suggested that there were other models for the fit and proper person test that might be more appropriate—particularly those applying under the Financial Conduct Authority. At that stage, we were persuaded by Ministers that it would be inappropriate to press the amendment to a vote, which I now regret, because they promised an early opportunity in the legislative timetable to bring forward recommendations on it. Can the noble and learned Lord confirm that that is still the plan and share with us which legislative vehicle will be used for it?

Of course, the best way to get at a lot of these corporate failure issues would be to proceed with the inquiry that has already been promised, which is specifically to look into part 2 of the Leveson inquiry. Will the noble and learned Lord confirm that that could still be implemented, because that could be very germane to what we are discussing today?

There is a third issue that we need to look at. On one hand, a lot of the problems that have been caused here are to do with the way in which the corporate veil hides individual actions in a way that would be inappropriate in the broadcasting area. This issue is really about control of media organisations. This is not a battle for the control of a particular broadcasting entity called Sky News; it is really a battle between old media and new media. At the heart of that lies control of personal data, in which there is considerable interest and investment being made. It is about data power—the power to know who is watching what and what their interests are will be more important as competition increases. We are talking about battles between the organisations concerned in this merger and organisations such as Google and Facebook. Does the noble and learned Lord believe that the CMA has the powers to investigate this aspect of media plurality? Without knowing where the data sources and how they are being used, it will be difficult for it properly to assess the impact on media power going forward? I look forward to hearing from him.

My Lords, like the noble Lord, I welcome the Statement and the courtesy and openness with which the Secretary of State has approached her responsibilities. That is why I find it extraordinary that, having emphasised and carried out her duties to Parliament so assiduously, it could even be suggested that she should make a decision during an eight-week gap between Parliament rising now and returning on an issue that has been before her, regulators and Parliament for years. That would be an absurd assault on parliamentary dignity and responsibility, and I strongly urge her not to follow that road.

Part of the problem is the siloed nature of the decision, when what is needed, as the noble Lord said, is a holistic judgment about the fitness of this takeover. But that is how it has been played. The problem is also the siloed nature of modern business structures. Various parts of the structures can clear part of the siloed questions when we all know, as I have said, what the web is and that the spider is at the centre of that web.

I also press the Minister on whether this could lead to the second stage of Leveson and on the point made right at the end. I remember a few years ago somebody buying a canal and everybody thought what an absurd price he had paid for a canal—the age of canals was over. Then it suddenly dawned on everybody that he had not bought a canal; he had bought miles and miles of land on either side of the canal and made a fortune as a property developer. The same is true now, as the noble Lord has said. I have often pondered what on earth niggles Murdoch that he has tried, year after year, to get 100% control of Sky. What act of vanity is this? He may be vain but he also knows where a quick buck is to be made. It occurs to me that there is ample evidence that what Sky has is a database of some 13 million people, which could become increasingly valuable in the data battles ahead. I wonder whether the Secretary of State has asked the Information Commissioner’s advice on this aspect of the takeover and on how it fits into other legislation that we are considering. This is a foreign bid for a British database, which should give concern about how it is being handled. I go back to the friendliest of warnings: the Secretary of State would be very wrong to consider making this decision while Parliament is in recess.

I am obliged to the noble Lords, Lord Stevenson and Lord McNally, for their observations on this matter and I appreciate their acknowledgement that the Secretary of State is endeavouring to treat this matter in as open a way as possible. Given the quasi-judicial nature of the task that has been laid on her by statute—one that she cannot alter by her own whim, as it were—and bearing in mind the quasi-judicial process that we are in, it is implicit that the Secretary of State must act promptly, for the benefit of both the public and the parties interested in the proposed merger. It is in those circumstances that she has to consider the matter of timing. I appreciate the point made by the noble Lord, Lord McNally, about the dignity of this House, the other House and Parliament in general, but the Secretary of State is in a position where, because of the timing issues, the announcement is liable to be made during recess. As she has said, however, she is intent on assuring the House by way of intimation to the Speakers of both Houses when the decision is made and the nature of that decision.

The noble Lord, Lord Stevenson, referred to her decision. I reiterate that the Secretary of State has made no final decision on any matter. She has reached a preliminary view on the basis of the information before her at present.

So far as standards are concerned, further work will be done before a final decision is made. In particular, the Secretary of State will look at all the representations that have been submitted to her until Friday, which cover both media plurality and broadcasting standards. She will look at both issues before coming to a final decision. It is possible to reach an informed decision and verdict without a body. The circumstantial evidence may be compelling in itself, and all the circumstantial evidence will be taken into account.

As for the reference to the CMA, it would not be for the Secretary of State to constrain the scope of the CMA’s phase 2 investigation, and I would not suggest that any constraint should be placed on that investigation by the Secretary of State.

I hear what is said about data protection but we have to remember that personal data held by Sky, or indeed by Fox, are protected by the Data Protection Act. That applies not only to personal data but to more extensive caches of data held by Sky, so there is already a degree of protection in place.

Part 2 of Leveson was raised. No final decision has yet been made on that. Indeed, no final decision can be made until the chair of that inquiry has been consulted on the point. A statutory provision under the Inquiries Act dictates that the chair of an inquiry will be consulted before any final decision is made about the second phase of an inquiry programme, so that remains outstanding.

In these circumstances, I again commend the Secretary of State’s Statement to this House and reinforce the point that she has arrived at no final determination but will do so only after she has considered all the representations submitted to her.

My Lords, I am grateful to the noble and learned Lord for repeating the Secretary of State’s Statement in this House. I am also grateful to the Secretary of State for keeping Parliament informed as to what her process is. I am glad that she is minded to refer on plurality and horrified that she is minded not to refer on broadcasting standards. I understand and accept what the noble and learned Lord says: no decision has been made about either matter at the moment. My concern is that Sky, a trusted broadcaster, could go the way of Fox News in the US, and we could lose an impartial broadcaster that complies with our standards. I am extremely worried that Sky will fall 100% into the hands of a family who have been guilty of allowing regulatory standards to be ignored in relation to the newspaper industry in the UK and have allowed Fox News to be guilty of a whole series of illegalities and breaches of the law, particularly in relation to sexual harassment.

From a legal point of view I am extremely concerned that the Secretary of State will rely too heavily on what appears to me a flawed finding by Ofcom that Sky would remain fit and proper if it became 100% owned by 21st Century Fox. I appreciate what the noble and learned Lord says about the Secretary of State’s role being quasi-judicial. What advice is the Secretary of State receiving on the legal position in relation to the extent to which she is bound by Ofcom’s fit and proper finding? To what extent is she aware that a totally different threshold has to be passed to refer the broadcasting standards issue to the CMA from the standard applied by Ofcom in relation to the fit and proper test?

I have a final observation. I would not mind if the Secretary of State referred the matter to the CMA on grounds of both broadcasting standards and plurality. However, I would be horrified if she thought that she could rule out any consideration of whether that was right during a recess. That would be wholly inappropriate.

I say to the noble and learned Lord that Ofcom is there to discharge its statutory functions. The Secretary of State is here to discharge her statutory functions in a quasi-judicial manner, and she will do so having regard to all the evidence. She will have to evaluate that evidence, and she will do so in arriving at her final decision. As the noble and learned Lord will be aware, it is not usual to disclose either the making of legal advice or its content. That is reflected in the Law Officers’ Convention and, indeed, in the Ministerial Code, so I make no further comment on that point.

As regards the noble and learned Lord’s observations about the behaviour of Fox and the position of Sky going forward, clearly all these considerations will be in mind when the Secretary of State arrives at her final decision—one she has not yet made in respect of either plurality or broadcasting standards. In due course, those matters referred to a phase 2 inquiry will be the subject of the most intense investigation by the CMA. So, at the end of the day, the points of concern raised by the noble and learned Lord are bound to be addressed in the context of this decision. As regards the timing of the decision, it is regretted that it may fall during a period of recess; indeed, I acknowledge that. That is one reason why this Statement is being made to the House today—to try to ameliorate the consequences of that.

My Lords, I share the concerns expressed about the delay in this matter, although I do not have quite the same emotional approach to the issues. My noble and learned friend outlined the constraints. Assuming that there is a reference to the CMA, which seems likely, what can be done to ensure that there is proper analysis of the situation that broadcasting faces, with its being heavily regulated in a world where the internet is driving everything and Sky and its competitors are becoming more and more dependent on the digital world, as the noble Lord opposite explained? Is there a way in which that can be looked at in the context of this deal, to shine some light on this important matter? If not, is there another way that it can be addressed?

I acknowledge the importance of the point made by my noble friend. Clearly, in the context of broadcasting, one is looking not only at terrestrial broadcasting but at the wider sphere of news and broadcasting across the internet, in the modern age. Those are matters that the Competition and Markets Authority will have in mind when it comes to make its decision following its in-depth review under phase 2, if a decision is made that there should be a phase 2 referral.

My Lords, my noble and learned friend in repeating the Statement of the Secretary of State appears to have omitted that the letter being circulated would come to the Communications Committee of your Lordships’ House. Could he confirm that I heard it right? Secondly, if I did—and I declare an interest as an ex-chairman of that committee—I suggest that the chairman ought to be added to that list. Finally, as an aside, in respect of what my noble friend Lady Neville-Rolfe said, when I was chairman of the Communications Committee we did a report on precisely how you might deal with the very issue she raised.

With respect to the query raised by my noble friend Lord Inglewood, I referred to the chair of the committee as being included among those to whom the decision will be intimated, together with the Leaders and Speakers of both Houses.

My Lords, I seek reassurance from the noble and learned Lord in respect of the issue of data. When the original Statement was repeated in this House, I raised the issue of data protection, and the noble and learned Lord referred to the Data Protection Act—but that is not what the issue is really about. It is about how data are mined, used and abused in terms of media plurality. Can I have a reassurance, if the Minister refers this to the CMA, that the CMA will have the ability to look at this key issue? It is about how things can be manipulated—it is not simply about data protection.

My Lords, regulators do not have a role in scrutinising what data are held by companies involved in mergers, but if representations are made about the issue of data, such as data-scraping or data accumulation, those are matters that the Competition and Markets Authority will take into account in arriving at any decision that it makes in the context of a phase 2 inquiry.

Has the Information Commissioner been consulted? I did ask that question, and the noble and learned Lord did not answer.

I am not in a position to answer that question at this time, but I shall endeavour to make inquiries and write to the noble Lord to advise him on the positon on that point. I shall place a copy of any letter in the Library.