Sky/21ST Century Fox: Merger

– in the House of Commons at 11:33 am on 16th March 2017.

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Photo of Karen Bradley Karen Bradley The Secretary of State for Culture, Media and Sport 11:33 am, 16th March 2017

I came to the House on 6 March to give an update on the proposed merger between 21st Century Fox and Sky. At that time, I said that I was minded to issue a European intervention notice on the basis that I believed there to be public interest considerations, as set out in the Enterprise Act 2002, that may be relevant to this proposed merger and warrant further investigation.

The grounds on which I was minded to intervene were, as I explained at that time, media plurality and commitment to broadcasting standards, but I also confirmed that, in line with statutory guidance, I would be inviting further representations in writing from the parties. I gave them until last Wednesday to provide those representations.

Having carefully considered the representations from the parties and the other representations that I have received, I can now tell the House that I have today issued a European intervention notice on the grounds of media plurality and commitment to broadcasting standards. I have written to the parties, Ofcom, and the Competition and Markets Authority to inform them of my decision.

While the representations from 21st Century Fox highlighted areas in which it contested the position taken in my “minded to” letter, none of the representations have led me to dismiss the concerns I have regarding the two public interest grounds I previously specified. I am of the view that it remains both important, given the issues raised, and wholly appropriate for me to seek comprehensive advice from Ofcom on those public interest considerations, and from the CMA on jurisdiction issues. I note that, overall, the parties have welcomed a thorough regulatory review, and that is what will now happen as a result of the intervention notice I have issued.

Since my “minded to” decision, I have also received just over 700 representations from third parties, the vast majority of which supported intervention. A number of those representations called for me to create a new public interest consideration, which would require a fit and proper assessment of the parties to the merger to take place as part of the intervention process. They also argued that it should be made clearer that matters of corporate governance, accountability and conduct could be taken into account in assessing this merger. These issues relate to questions about the application of the fit and proper test by Ofcom, and I will come to those issues shortly.

As I have previously set out, the decision will now trigger action by Ofcom to assess and report to me on the public interest grounds I have specified, and by the CMA to report to me on jurisdiction. They each have 40 working days to prepare and provide these reports. This means that I will expect their reports by Tuesday 16 May. I will then resume my decision-making role in relation to the merger.

To be clear, this intervening period, and indeed any time after that until a final decision on the merger is taken, is subject to the constraints that apply to my quasi-judicial role. Mr Speaker, I am sure you understand that I cannot—nor can any other member of the Government—comment substantively on the case as it proceeds. I will, however, as I have done so far, keep the House updated once I have considered the reports of Ofcom and the CMA.

What I will comment on is that much of the discussion in last week’s proceedings here and in the other place focused on Ofcom’s assessment of whether a licensee is fit and proper, including the ongoing duty that falls to Ofcom under the 1990 and 1996 Broadcasting Acts. I have received representations from Mr Watson and Edward Miliband, as well as from a number of other parties, on adding fit and proper as a new public interest consideration in the Enterprise Act 2002. I want to assure them that I have very carefully considered the arguments they have put forward.

The grounds set out in the Enterprise Act that allow for intervention in media mergers are aimed at ensuring plurality of the media, which is essential to a healthy democracy—something I know that Members of this House and the other place support. It is a view I fully and unequivocally endorse. However, I am also clear that the question of whether someone is fit and proper to hold a broadcasting licence is a different requirement, and one that, quite rightly, sits with Ofcom, the independent regulator.

On Monday, Ofcom announced that it would conduct its fit and proper assessment at the same time it considers any public interest test in response to my decision to intervene in the merger. This means that Ofcom will conduct its assessment within the 40 working days it has to report to me on the public interests I have specified in the intervention notice. I welcome Ofcom’s announcement, which will provide not only clarity for the parties, but reassurance to those who have expressed their own concerns, that this is a matter that Ofcom will now consider before the merger takes place.

I trust, as before, that this update is helpful to right hon. and hon. Members, and that it gives us an opportunity to debate this important issue, while at the same time respecting the limits of what I can say, as I referred to earlier, given my ongoing quasi-judicial role in relation to this merger. I commend the statement to the House.

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 11:38 am, 16th March 2017

I thank the Secretary of State for advance notice of her statement. She says that she will go ahead with what she indicated she was going to do last week. That might not sound like a big deal, but it is more than the Chancellor and the Prime Minister managed yesterday.

Labour Members welcome the fact that the Secretary of State is intervening. She will have noticed that 21st Century Fox is happy, too. In a letter to her last week, it said:

“We welcome a thorough and thoughtful review”.

I have no doubt that that welcome is sincere, and that 21st Century Fox is thrilled by her decision. On that basis, I hope that it will seek not to challenge or impede any element of Ofcom’s investigation. If it does, I trust that she will make a new referral to put it beyond doubt that Ofcom can investigate what it needs to.

Can the Secretary of State confirm that the “broadcasting standards” ground of her referral gives Ofcom the power to investigate any corporate governance issues affecting 21st Century Fox, including the phone hacking scandal, any cover-up of illegality at News International, the rehiring of people responsible for governance failures, and ongoing sexual harassment claims in the United States? Is it her view that Ofcom should examine those issues?

The Secretary of State referred to representations made by me, my right hon. Friend Edward Miliband and others about adding “fit and proper” as a new public interest consideration, but she has regrettably chosen to reject them. I welcome Ofcom’s announcement that it will conduct a fit and proper assessment at the same time as considering the public interest test she has specified today, but I have two concerns about this. First, Ofcom has only 40 days to conduct the fit and proper assessment. Is the Secretary of State confident that it can get to the bottom of all these issues in such a short time? Secondly, the 2012 Ofcom report on James Murdoch, which found that his conduct

“repeatedly fell short of the conduct to be expected of him as a chief executive officer and chairman”, contained this important caveat:

“The evidence available to date does not provide a reasonable basis to find that” he

“knew of widespread wrongdoing or criminality at”

News of the World. The reason for that lack of evidence was that Ofcom did not have the power to gather the evidence it needed.

Just a few years ago, News Corporation, 21st Century Fox’s predecessor company, was involved in one of the biggest corporate scandals and one of the biggest corporate governance failures of modern times. Many of the questions about the failure of corporate governance failure within 21st Century Fox’s predecessor company, and much of the evidence of the role of James Murdoch within those failures, can be answered only by going ahead with part 2 of the Leveson inquiry. Ofcom does not have the power to obtain documents and compel witnesses to appear before it. Is not the easiest way of getting to the bottom of the corporate governance questions that we all want answered to hold an inquiry in public, using powers under the Inquiries Act 2005, with terms of reference that have already been announced by a Conservative Prime Minister as a promise to the victims of phone hacking—namely Leveson part 2?

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

I thank the hon. Gentleman for his comments. I will address his final point first—the issue of Leveson—as I did last time I was at the Dispatch Box on this matter. As he will know, the consultation we launched, which closed in January, is subject to judicial review. I am therefore unable to comment on the consultation, or any aspects of it, with regard to the Leveson inquiry. I hope he will understand that I cannot make further comment about that.

I am pleased that the hon. Gentleman welcomes the decision to refer this merger, but it is important that I make a couple of points in relation to his questions. He asked whether the “broadcasting standards” element could include looking at corporate governance. I was clear in my original “minded to” letter and in the statement I made to the House on 6 March that corporate governance was one of the issues on which I was referring the matter to Ofcom, and therefore I would expect it to look at that. Clearly, however, Ofcom is an independent regulator. I have made the decision to refer to Ofcom, but it is for Ofcom to decide what evidence it wants to look at. It is open to look at whatever evidence it feels is appropriate to enable it to make its decision.

The hon. Gentleman talked about the fit and proper test. I very carefully considered the representations that were made, but it is important that it is the independent regulator that looks at fit and proper and the Government who have grounds on which to intervene under the Enterprise Act. Those two things have to be kept separate. The Government should not step into the area where, quite rightly, the regulator should sit.

The hon. Gentleman asked whether Ofcom has the time, resources and ability to gather the evidence that it needs. I have been assured by Ofcom that it has the time to do this and the ability to gather the evidence it needs, and I now look forward to letting it get on with the job.

Photo of John Whittingdale John Whittingdale Conservative, Maldon

Although it is clearly sensible to ask the regulator to examine this bid, does my right hon. Friend recognise that this transaction represents a £11.7 billion investment by an international company in a British broadcaster and is, as such, a fantastic vote of confidence in the UK’s remaining an international centre of broadcasting long after we leave the European Union?

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

As the House knows, my right hon. Friend has significant experience in matters of culture, media and sport. He is right to say that the UK is global Britain, open for business to the whole world, and that it will remain so after we have left the European Union.

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. I am pleased that she will intervene in the proposed merger of Sky and Fox, and that she will ask Ofcom to investigate the deal. Scottish National party Members have consistently voiced our support for media plurality and our commitment to broadcasting standards. There are valid concerns about the merger, which will increase the influence of Rupert Murdoch and his family in the UK’s media. There are concerns regarding a number of breaches of broadcasting standards by Fox, as well as News Corporation’s past behaviour and corporate governance failures.

Many people highlight the fact that part 2 of the Leveson inquiry has yet to be commenced, and they question whether such a significant deal can go ahead before that happens. This is not the first time that there has been an attempt to take over Sky, and we should be mindful of why the previous bid courted such controversy and failed.

At the same time, it should be acknowledged that television is adapting to changes in viewing habits and competition throughout the world. Some will argue that investment in Sky might allow the UK to thrive in the international arena and continue to compete with competitors such as Netflix and Amazon Prime. We welcome the fact that Ofcom will report on the public interest grounds of media plurality and commitment to broadcasting standards, as well as conducting a fit and proper assessment. I trust and believe that that will provide the Secretary of State with the necessary recommendations on how to proceed, and I look forward to Ofcom’s conclusions.

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

I refer to my earlier comments regarding the Leveson inquiry—I hope that the hon. Gentleman will understand. I thank him for his welcome for the decision. I look forward, as he does, to seeing the reports from Ofcom and the Competition and Markets Authority, which will enable me to use my quasi-judicial role to make a fair and transparent decision.

Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

It appears that even the mention of the name Murdoch gets some people twitching and frothing at the mouth. Does the Secretary of State recognise the fact that while James Murdoch was chief executive and later chairman of Sky, the company grew to employ 24,000 people in this country, with investments of £700 million a year in original production and programming? Does she believe, as I do, that Sky is an important part of the creativity of this country, and that the proposal of this merger shows the confidence of the rest of the world in Britain’s productivity and future?

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

I thank my hon. Friend for his comments. I agree that media plurality is important, which is why I have asked Ofcom to look at the proposed merger and to make a decision, on the grounds set out in the Enterprise Act 2002, about whether it will affect media plurality. Like him, I am optimistic that, following Brexit, the UK broadcasting industry will continue to thrive and to be the world-leading industry that it is today.

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

I welcome the Secretary of State’s decision to refer this bid. Many of us believe that in view of the conduct of the Murdochs and the untrammelled power that they already have, it is not in the public interest for them to take over Sky and have full control.

I want to ask about the question of fitness, which I know the Secretary of State has thought about a lot. The 2011 Ofcom review took 15 months to look at the fitness of the Murdochs, but she expects Ofcom to report back to her within 40 days. There is a question about timescale and powers, as my hon. Friend Mr Watson has said. Can she assure us that if during this period Ofcom seeks more time, or indeed more powers, to carry out the fitness review, she will grant its request?

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

Ofcom has assured me that it has the time and the powers that it needs, and I look forward to seeing its report in due course.

Photo of Edward Leigh Edward Leigh Conservative, Gainsborough

Does my right hon. Friend agree that the freedom of the press, and indeed of press ownership, is a bastion of our liberties? It is for Ofcom—objectively, not subjectively—to define, as a narrow term of art, a fit and proper person; it is not for Ministers and politicians to get involved in this.

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

My hon. Friend’s point is exactly what I concluded, having considered the representations. There needs to be a distinction between the work of the independent regulator in determining who is a fit and proper person to hold a broadcasting licence versus the role of the Secretary of State when it comes to determining whether a media merger can go ahead under the terms of the Enterprise Act.

Photo of Alistair Carmichael Alistair Carmichael Liberal Democrat Spokesperson (Home Affairs)

Having encouraged the Secretary of State to take this course of action, may I now welcome the fact that she has done so? She deserves credit for doing the right thing, and I have no doubt that she will have the support of the House as this matter goes forward. Many years ago, I served on the Standing Committee that considered the Enterprise Bill, and I recall that the provisions on this process were supported by all parties at that time. It strikes me, however, that in the light of this experience, it might be appropriate at its conclusion to revisit whether we do in fact have the processes we really need to ensure that we get the ends that we want to achieve.

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

I thank the right hon. Gentleman for welcoming this. If he wants to make representations to me regarding the Enterprise Act and areas in which he feels changes could be made in the light of changing broadcasting and consuming habits, I will of course look at them carefully.

Photo of Nigel Huddleston Nigel Huddleston Conservative, Mid Worcestershire

I agree with the Secretary of State’s view that the decision on whether somebody is a fit and proper person should quite correctly be for an independent regulator, not a politician. Does she believe that that is consistent with our goals of not politicising our broadcasting landscape?

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

I agree with my hon. Friend. That was exactly the conclusion I reached when looking at the representations that I received.

Photo of David Winnick David Winnick Labour, Walsall North

I recognise and respect what the Secretary of State has told the House, and we all appreciate her keeping the House up to date. I again say that this is not a question of any kind of vendetta against Mr Murdoch, but it would be simply unacceptable for the amount of media ownership he already controls to be increased. That is the position, and it is why I hope that the right decision will be taken at the end of the day.

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

Ofcom will look at these matters and I look forward to seeing its report.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

I welcome my right hon. Friend’s statement, but will she assure me that the question of plurality is not just examined occasionally—when a big merger such as this comes up—but kept constantly under review by Ofcom and, indeed, her Department?

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

Ofcom has a responsibility to consider on a regular basis the fit and proper person test for holding a broadcasting licence. Clearly, however, when looking at the whole media landscape—there were questions about the status of Channel 4 during oral questions—the issue of media plurality is at the forefront of my mind. That is the case when looking at the right decision to take regarding the future of Channel 4 and all media matters.

Photo of Tasmina Ahmed-Sheikh Tasmina Ahmed-Sheikh Shadow SNP Westminster Group Leader (Trade and Investment)

I am grateful to the Secretary of State for her statement. I have received a huge number of emails on this issue from many constituents, and I welcome the intervention that she detailed in her statement. A free, open and diverse press is of course important to democracy, and I want to put on record that my constituents have asked that she understands the depth and strength of feeling on this issue. I look forward to hearing from her further in due course.

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

The hon. Lady will probably not be surprised to hear that I have, I suspect, received more emails than even she has on this matter. I have taken note of them.

Photo of Bob Blackman Bob Blackman Conservative, Harrow East

I think my right hon. Friend’s decision will be warmly welcomed by all parties to the proposed merger, as well as across the country. However, one of the considerations is the short time in which Ofcom must carry out the review. Will she therefore ask Ofcom for an interim report part of the way through this period? If there is any obstruction or a need to extend the time, she would then be able to look at the situation sympathetically to ensure that Ofcom can do the proper job we all want it to do.

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

My hon. Friend makes an interesting suggestion, but Ofcom has reassured me that it has the time and resources required to produce a report in 40 working days. It is important to remember that we want to make sure that there is sufficient time and scrutiny, and that we provide certainty within a reasonable timeframe, so that all parties can get on with business as usual, whatever that might be.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

I warmly congratulate the Secretary of State on her decision. She should bear in mind, however, that historically successive Governments —and Prime Ministers, in particular since Mrs Thatcher—have decided that Rupert and now James Murdoch are fit and proper persons because they own newspapers that support them in general elections. The concentration of ownership is the problem. Sky now has nearly four times as much money to spend every year as the BBC. I hope that we end up in a position in which we maintain diversity in the British ecology, with a strong BBC not being bullied by Murdoch and Sky.

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

I am getting slightly worried, because this is the second time this morning the hon. Gentleman has worked consensually with the Government, but I take note of his comments.

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

I welcome today’s statement, as will many of my constituents who have been in contact with me regarding this matter. I am sure that they will all be happy that the bid is being referred to the regulators. Given that Britain has one of the most concentrated media environments in the world, with three companies controlling 71% of national newspaper circulation and five companies in command of 81% of local newspapers titles, does the Secretary of State agree that now is the ideal time to properly review the media landscape in Britain?

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

I am very proud of the incredibly diverse free press that we have in this country, and I want to preserve it and ensure that we can enable it to thrive. There was a question in oral questions about local newspapers, and I certainly want local newspapers, and others, to thrive. Through this process, it is important that we ensure that we have a plurality of media and broadcasting. That is why I have asked Ofcom to look at this particular issue.

Photo of Clive Efford Clive Efford Labour, Eltham

I welcome the Secretary of State’s decision. I would merely point out that someone has to be a fit and proper person to be a licensed London hackney carriage driver. With that in mind, this is not just a question of the amount of influence that the Murdochs already have; it is their association with so much corruption and illegality, which is still being uncovered even now. I am incredulous that they are being considered for a 100% controlling share of Sky. That must not be allowed to happen.

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

I am sure that Ofcom will have heard the hon. Gentleman’s comments. I hope that his comments about fit and proper persons for taxi driving is not a reflection on any experiences he may have had in the past.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

I congratulate the Secretary of State on how she is handling this matter which, if I may say so, is better than any Secretary of State since 2010. She says that she cannot respond to any substantive questions on Leveson 2 because it is under judicial review. When will the judicial review be resolved so that we might come back to Leveson 2?

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

The judicial review is a matter for the courts. I am in their hands.