Sky/21ST Century Fox: Proposed Merger

– in the House of Commons at 4:16 pm on 6th March 2017.

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Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport 4:16 pm, 6th March 2017

Before Christmas, I promised to give the House an update about progress on the process for the bid by 21st Century Fox to acquire the 61% share of Sky that it does not already own. I can confirm that formal notification for the proposed merger of Sky and 21st Century Fox was lodged with the European Commission on Friday 3 March and that I wrote to the parties on Friday to inform them that I am minded to issue a European intervention notice on the basis that I believe there are public interest considerations—as set out in the Enterprise Act 2002—that may be relevant to this proposed merger and that warrant further investigation. To be clear, I have not taken a final decision on intervention at this stage, but I have indicated what I am presently minded to do. In line with the guidance that applies to my quasi-judicial role, I will aim to come to a final decision on whether to intervene in the merger within 10 working days of Friday’s notification. Before I make my final decision, and in line with statutory guidance, I have invited further representations in writing from the parties and have given them until Wednesday 8 March to provide them.

In December, I made it clear that I would make this quasi-judicial decision independently, following a process that is scrupulously fair and impartial, and as quickly as possible with all the relevant information in front of me. To enable this, I instructed my officials to commence work to analyse the relevance of the public interest considerations relating to the merger and to consider the available evidence. Since the 9 December announcement, I have received representations from the parties to the merger, as well as representations made in writing to the Department from a range of people and organisations. This includes more than 8,700 responses made in connection with the Department’s consultation on the Leveson inquiry and its implementation, which referred to the merger. Given my quasi-judicial role, I can only consider evidence that is relevant to my decision.

On the basis of this preparatory work, I have issued a “minded to” letter to the parties on two of the public interest grounds specified in section 58 of the Enterprise Act 2002. The first public interest ground on which I am minded to intervene is media plurality—that is, the specific need for a sufficient plurality of persons with control of the media enterprises serving audiences in the UK. My concern here is that the merger will bring under common or increased control a number of significant news sources, including Sky News and News Corporation’s newspaper titles. As a result, I have told the parties that I am minded to ask for a report from Ofcom on the impact of the merger on media plurality before considering the matter further.

The second public interest ground on which I am minded to intervene is commitment to broadcasting standards. That ground relates to the need for persons carrying on media enterprises, and for those with control of such enterprises, to have a genuine commitment to attaining broadcasting standards objectives. As I have indicated to the parties to the merger, I am concerned about the nature of a number of breaches of broadcasting standards by 21st Century Fox, as well as the behaviour and corporate governance failures of News Corporation in the past. In the light of those matters, I am minded to intervene on this ground and to ask Ofcom to investigate them further.

I want to be clear on what this means for the overall process. My decision on whether or not to intervene is not the end of the matter. Instead, it would recognise that the public interest considerations may be relevant to the merger and will trigger action by Ofcom to assess and report to me on them and for the Competition and Markets Authority to report on jurisdiction. There would then be a further decision-making stage for me to undertake in the light of those reports, but we are not yet at that stage. As I said at the outset, I will aim to take the final decision on whether to issue a European intervention notice within the 10 working days set out in the guidance and will return to this House to notify Parliament of the decision.

I am today, as I said I would, keeping this House appropriately informed of developments on this important matter, and it is right that I continue to do so. However, given that this remains a quasi-judicial process in which I retain a decision-making role for the next 10 days and potentially beyond, it would be inappropriate for me, or any other member of this Government, to comment on the substantive merits of the case. I hope that this update is helpful to right hon. and hon. Members and that this statement gives an opportunity to debate an important issue, but at the same time I hope that right hon. and hon. Members will respect the limits of what I can say given my ongoing decision-making role.

Photo of Tom Watson Tom Watson Party Chair, Labour Party, Deputy Leader of the Labour Party, Shadow Secretary of State for Culture, Media and Sport 4:21 pm, 6th March 2017

I thank the Secretary of State for advance notice of this statement and for writing to me on Friday setting out her intentions. I am also extremely grateful that she has come to the House at the earliest possible opportunity following notification of the bid. I understand that she is in quasi-judicial mode and what that means. I hope, however, that she will listen carefully to the concerns about the merger that are being expressed both inside and outside this Chamber. The company names may have changed since the previous bid for Sky was withdrawn in 2011, but we are still dealing with media plurality, misconduct and the Murdochs.

The Secretary of State said that she is minded to intervene first on media plurality grounds. The bid would put an even greater amount of UK media power in the hands of the Murdoch family. It would make the Murdoch empire even bigger—we might call it empire 2.0—and Ofcom should look at the whole group of Murdoch-owned and controlled companies in assessing whether the Sky takeover would threaten media plurality.

The second ground on which the Secretary of State says she is minded to intervene is commitment to broadcasting standards. We need to be satisfied that the merged company would comply with the broadcasting code, just as we need to be confident that it would not be used by Rupert Murdoch or his family to promote their political views and interests. However, the most troubling issues raised by the proposed merger are not about the content of James Murdoch’s programming; they are about the content of his character.

The Secretary of State rightly referred to failures of corporate governance during the phone hacking scandal, but it is unclear whether those failings strictly fall under the heading of broadcasting standards, even though they are central to whether the merger should be approved. A commitment to broadcasting standards test is not a fit and proper person test. Will Ofcom’s assessment of 21st Century Fox’s commitment to broadcasting standards include in its scope the following facts? Six senior employees of News International have been convicted of phone hacking and another of perverting the course of justice. Over 30 police and public officials have been convicted of accepting corrupt payments from employees of News International that were approved at a high level. One News International journalist has been convicted of making unlawful payments and another of handling stolen property—namely, a mobile phone belonging to my hon. Friend Siobhain McDonagh, from which private information was taken unlawfully by Sun journalists at the request of several Sun executives. The former editor and the former head of legal affairs at News of the World were held in contempt of Parliament for lying to a Select Committee during its investigation into phone hacking. The Standards and Privileges Committee cast further light on the culture of paying hush money to employees guilty of criminal offences to deter them from co-operating with the police and prosecution authorities. It therefore seems likely that a number of News Corporation employees gave false information under oath to the Leveson inquiry. News Corporation has admitted to another conspiracy to hack phones between 2005 and 2006 and a journalist has been convicted. News International has admitted phone hacking in several hundred claims so far and has made payments to victims and lawyers amounting to $600 million. And that is without mentioning the many outstanding civil claims against newspapers owned by News International, or the fact that allegations have been made in open court that James Murdoch was involved in the email deletion programme at News International that has made it more difficult to get to the truth. If those facts cannot be included in Ofcom’s assessment, the Opposition are ready to work with the Secretary of State to make sure that she can find a solution that deals with the gravity of wrongdoing in companies controlled by the Murdoch family.

Will the Secretary of State ask Ofcom to clarify whether it will conduct a full fit and proper person test before the merger is approved? Ofcom has already made an assessment of James Murdoch, in 2012, and found that, in relation to his time at News Group Newspapers during the period in which phone hacking took place, his conduct

“repeatedly fell short of the conduct to be expected of him as a chief executive officer and chairman.”

But Ofcom also said that

“the evidence available to date does not provide a reasonable basis to conclude that James Murdoch deliberately engaged in any wrongdoing.”

Why did Ofcom not have enough evidence to draw conclusions? Because the Leveson inquiry was not in a position to gather evidence.

If the Secretary of State is concerned about the past behaviour and corporate governance failures of News International, any case for not going ahead with part 2 of the Leveson inquiry collapses because the behaviour that she is so concerned about and that she wants to be investigated is precisely the behaviour that part 2 of Leveson is supposed to look into. We are still awaiting the results of the consultation on whether Leveson part 2 should go ahead, but I hope that the Secretary of State’s words indicate that she will show some courage by standing up to vested interests, doing the right thing and allowing the inquiry to proceed. She must not ask Ofcom to do its job with one hand tied behind its back.

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

I thank the hon. Gentleman for his response and assure him that Ofcom will not be doing any work with one hand tied behind its back.

I will address the Leveson inquiry and the consultation first. It is important to put it on the record that the consultation has closed but is subject to judicial review, which makes it difficult for me to make any further comment at this stage. On the evidence that Ofcom will look at, I make it clear that I am not ruling any evidence in or out. If I do decide to intervene, Ofcom will report to me on any matters it considers relevant. On the commitment to broadcasting standards, there is no exhaustive list of evidence—Ofcom can look at whatever it thinks right.

As I have said, Ofcom has sufficient powers and can investigate anything it thinks appropriate. I thank the hon. Gentleman for raising his points, which I am sure will be considered by Ofcom. Ofcom has a fit and proper person test for broadcasting licences. That test is different from the one that will be considered for the merger, but the same evidence may be relevant to both.

Finally, my letter sets out a number of matters that I consider relevant and as warranting further investigation, which includes facts that led to the Leveson inquiry, such as on corporate governance at News of the World. It will be open to Ofcom to look at all relevant areas, and I will not rule out any areas if I decide to intervene.

Photo of Damian Collins Damian Collins Chair, Culture, Media and Sport Committee

I thank the Secretary of State for her letter to the Culture, Media and Sport Committee on Friday setting out the case she made to the House today. Can she confirm that the fit and proper person test is rightly a matter for Ofcom and that Ofcom can initiate a fit and proper person test at any time and consider any evidence it thinks relevant to making that determination?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

My hon. Friend is right; the fit and proper person test that Ofcom has is different from the grounds on which I can intervene under the terms of the Enterprise Act 2002. However, as I said in response to Mr Watson, the evidence may well be the same.

Photo of John Nicolson John Nicolson Shadow SNP Spokesperson (Culture, Media and Sport)

I thank the Secretary of State for advance sight of her statement and am encouraged to hear that she is minded to intervene in the proposed merger of Sky and Fox. Asking Ofcom to investigate the deal and file a report on media plurality and on commitment to broadcasting standards would be a welcome step in ensuring that this proposed merger is robustly scrutinised. The merger is likely to increase the influence of Rupert Murdoch and his family in the media in the UK, and Fox already has a controlling stake in Sky, as we all know. Another Murdoch company, News Corp, runs newspapers, through News UK, and radio stations, through the Wireless Group. At a time when smaller titles are struggling with poor circulation numbers and established newspapers are having to rethink their business models to survive, giving yet more power to the already dominant media giant seems counter-intuitive, to say the least.

Yet, it should also be acknowledged that television is adapting to changes in viewing habits and competition around the world. Many will argue that the investment in Sky might allow the UK to thrive in the international arena and to continue to compete with competitors such as Netflix. On this issue, it is important that the Secretary of State clarifies whether she will prioritise domestic or international plurality and competition when she makes a final decision on this merger. Furthermore, she rightly highlights a number of breaches of broadcasting standards by Fox and the behaviour and corporate governance failures of News Corporation in the past. The National Union of Journalists and victims of the phone hacking scandal have expressed concerns on how this deal can take place when part 2 of the Leveson inquiry has yet to be commenced. Does she agree that we should remain acutely aware of the reasons why past attempts to buy Sky were so fiercely resisted last time?

Finally, it was proposed that Sky News could be spun off to preserve its independence. Would the Secretary of State welcome such a move? After all, I presume that she, like the rest of us, is far from convinced that Fox is committed to the required editorial standards, such as on accuracy and impartial news coverage, that we expect in this country?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

The hon. Gentleman has asked a number of detailed questions on the merits of the bid, but I am not able to comment on those at this stage. What I can say is that I am minded, based on the evidence I have seen so far, to refer the matter to Ofcom. The referral would be on the basis of the rules set out in the Enterprise Act 2002, and I look forward to representations from all parties in determining whether or not to take a final decision to intervene. I can assure him that I will return to this House, as and when I make that decision, to tell it first.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

May I begin by declaring my inherited interest in this subject, but perhaps also jog the mind of Mr Watson on the half a million pounds he received from Mr Mosley, which may have some bearing on these matters? What I want to ask my right hon. Friend is whether she will be certain not to involve herself in this socialist witch hunt against Mr Murdoch and News Corporation/Fox News, which has done so much, both through newspaper publishing efficiency after Wapping and through the launch of Sky News, to increase plurality in the media in this country. This wonderfully successful company should not be persecuted because the left does not like it.

Photo of John Bercow John Bercow Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority

Order. Just before the Secretary of State responds, may I just say to Mr Rees-Mogg that I am sure he is not suggesting—and I hope he will take the opportunity to make this clear—that pecuniary gain has influenced a Member in his thinking or statements in the Chamber?

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

Most certainly not. I was merely declaring my own interest and it occurred to me that it was only fair to remind the hon. Member for West Bromwich East that he had not referred to his interest in the half a million pounds he received—I am absolutely certainly it was an inadvertent oversight.

Photo of John Bercow John Bercow Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority

I am grateful to the hon. Gentleman for what he said, but I would just say—I do so on advice—that he has, uncharacteristically, over-interpreted his responsibility. It is his responsibility to declare his own interest, but he does not have to declare and should not declare, whether out of a spirit of altruism or otherwise, another Member’s interest. It is that Member’s responsibility so to declare as he or she thinks fit. We will leave it there.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

I am now better informed. Thank you, Mr Speaker.

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

Perhaps I can reassure my hon. Friend Mr Rees-Mogg. I am, in a quasi-judicial capacity, looking at the rules as set out in the Enterprise Act 2002. I am very much aware of those rules and I am sticking to the letter of those rules. I want to make sure that the process is scrupulously fair and that all parties have the opportunity to make representations before I make a decision.

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

I welcome the Secretary of State’s coming to the House and her apparently robust intentions. Nevertheless, like my Front-Bench colleague, my hon. Friend Mr Watson, I am worried about the issue of the fit and proper test, and I wish briefly to explain why. The key thing about the test is that it is wider than the test on broadcasting standards. Many of us believe that the Murdochs are in no way fit and proper to have full control of Sky, given their corporate record. Can the Secretary of State clarify something I have not been able to establish on the basis of my correspondence with Ofcom? First, will the fit and proper test that Ofcom is going to conduct take place before the bid can be completed? Secondly, if there is no clarity on that, why does the Secretary of State not do what she can do under the Enterprise Act, which is to specify fit and proper as a third ground for referral to Ofcom, to make sure that such an assessment takes place?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

The Enterprise Act is clear about the grounds on which the quasi-judicial decision can be taken. I can intervene on the grounds of media plurality, range and quality, and genuine commitment to broadcasting standards. The right hon. Gentleman will know that fit and proper is an ongoing test for Ofcom to apply to the holders of broadcasting licences. Although many of the issues that Ofcom would consider in reaching a judgment are also relevant to me in considering genuine commitment to broadcasting standards, the tests are different and apply at different points in time.

Photo of Mark Pawsey Mark Pawsey Conservative, Rugby

I thank the Secretary of State for coming to the House with the statement. On the basis that the merger would put the ownership of a large proportion of the UK media into one organisation, my constituents would want to know what she is able to do make sure that such an organisation is run by people who are appropriate and suitable.

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

I note my hon. Friend’s comments and will bear them in mind when making my decisions.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

The thing is, we already know that under James and Rupert Murdoch’s leadership, the companies they controlled bribed and bullied their way around British politics. They poisoned the well of British political engagement, used anti-competitive practices at every possible turn to try to destroy competitors, and made it impossible for media diversity to flourish in this country. Why on earth would anybody think that they were fit and proper people to take over now? Their only excuse, when they lied their way through their evidence to Parliament, was that their company was far too big for them possibly to know what was going on in some small outpost in the United Kingdom. That does not suggest that they would be any good at running things now, does it?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

The hon. Gentleman has put his views on these matters on the record on several occasions. I am sure his points will have been heard.

Photo of David Winnick David Winnick Labour, Walsall North

Even if the notorious phone hacking had never taken place—if we were totally unaware of such events—is the Secretary of State aware that such a concentration of media ownership as is being proposed would be simply unacceptable? Also, is it not interesting that although reference has been made to some kind of witch hunt by Labour Members, there do not seem to be many Tories, except one, willing to defend Murdoch?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

I have come to the House to be as open and transparent as possible about my position in this decision. I have set out the terms and look forward to receiving representation so that I can make a final decision on the matter.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

Does the Secretary of State not agree that the fit and proper person test referred to by my right hon. Friend Edward Miliband a moment ago is, as she put it, an “ongoing” process? Surely that must mean that past behaviour is also taken into account. Without compromising her quasi-judicial position, will she say whether the previous behaviour of the Murdoch family in running their companies is also taken into account?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

The hon. Gentleman is right. The fit and proper person test is an ongoing Ofcom test, but I am here today to consider under what grounds in the Enterprise Act 2002 I can intervene on a media merger. I have set out my current thinking to the House, and I now await representations.

Photo of Jo Stevens Jo Stevens Labour, Cardiff Central

Does the Secretary of State agree that the principles of competition and media plurality are vital in a modern democracy? Will she confirm that, when Britain leaves the European Union, we will continue to apply those principles and regulations to avoid the unfair concentration of media ownership in the UK?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

The Enterprise Act is a piece of UK legislation and I am not aware of any intention to change it as a result of leaving the European Union. UK legislation will remain in place as will those grounds in the Enterprise Act.

Photo of Julie Elliott Julie Elliott Labour, Sunderland Central

I welcome the fact that the Secretary of State said that she was “minded to report” in her oral statement, but does she not agree that part of the process should be waiting for Leveson 2 to complete so that we can look at the issues of corporate governance to which she referred in her statement, as they are very worrying and concerning to the public at large?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

I must look at the evidence that is presented to me on the basis of today’s information using the rules set out in the Enterprise Act 2002. I will repeat the comments that I made to Mr Watson that the consultation on the Leveson inquiry is subject to judicial review and that therefore I can make no further comments.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Equality)

I thank the Secretary of State for her statement. This merger appears to operate against the public interest. She has outlined the steps that she has taken in her departmental intervention. I have had lots of correspondence from constituents on this very issue. Does she agree that, as there has been no dramatic changes to the issue that led this House to reject the bid five years ago, there are no grounds whatever to indicate that a merger should now be acceptable?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

I am not in a position to make that judgment. I have come to the House to let Members know that I am minded to intervene, but that I await further representations before I make a final decision.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

The Secretary of State is handling this matter in a very careful and considered manner. On Leveson 2, is she saying that she is now legally constrained there as well and that she cannot simply decide to go ahead, which is what many people think she should be doing?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

Let me repeat that the public consultation, which was closed in January, is now subject to judicial review and therefore I cannot comment further on that matter.

Photo of Margaret Ferrier Margaret Ferrier Shadow SNP Spokesperson (Scotland Office)

As I mentioned during the urgent question on 20 January, a “substantial number” of my constituents have contacted me to voice their concerns over this proposed merger, particularly with regard to media plurality. Does the Secretary of State agree with them, and indeed with the previous Prime Minister, that we should not let any one media group get too powerful?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

Based on the evidence that I have seen so far, I am minded to refer this matter to Ofcom on the basis of media plurality, but I await further representations before making a final decision.

Photo of Ruth Cadbury Ruth Cadbury Shadow Minister (Housing)

More than 8,000 people work at Sky’s head office and broadcast facilities in my constituency. When the original bid was abandoned in 2011, David Cameron said that it was the “right decision” for the country. Will the Minister ensure that this deal receives the fullest possible scrutiny?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

I have come to the House today to say that I am minded to refer the matter to Ofcom. I await further recommendations, which I will look at carefully, and I will return to this House when I have made a final decision on whether to intervene.

Photo of Diana R. Johnson Diana R. Johnson Labour, Kingston upon Hull North

Many constituents have contacted me, too. I understand that the Secretary of State cannot talk about the substantive issues, but can she give an estimate for when a final decision will be made? Also, if the merger is refused, will it be open to the Murdochs to keep coming back again and again on the issue?

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

I do not wish to detain the House, so perhaps it would be helpful if I wrote to the hon. Lady to set out the precise details of the law, as set out in the Enterprise Act, and the various stages that apply to media mergers.

Photo of Alan Brown Alan Brown Scottish National Party, Kilmarnock and Loudoun

I welcome the Secretary of State’s statement. With regard to media plurality, she might be aware that 18 academics from across the UK have written to The Guardian today to express their concern about what the merger would mean. We know that Fox News has given rise to fake news and feeds the ramblings of a madman across the Atlantic, so we certainly do not want to go down that road. I welcome her comments about News International’s governance and James Murdoch’s past behaviour. I look forward to her coming back in 10 days’ time to say that she will intervene and refer the merger to Ofcom. Hopefully she will remain robust when it comes to any representations she might receive.

Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport

I note the hon. Gentleman’s comments. I, too, look forward to coming back to the House with the final decision.