Will BSkyB get the red card?

News Analysis: MMC report on Murdoch's bid for Man United is delivered this week
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The Independent Online
THIS WEEK, the Monopolies and Mergers Commission will deliver its verdict on the proposed purchase of Manchester United by British Sky Broadcasting, Rupert Murdoch's satellite broadcaster.

In financial terms the pounds 628m takeover, the report on which is due to be passed to Stephen Byers, the Trade and Industry Secretary, on Friday, is relatively insignificant.

Nevertheless, the completion of the report marks the conclusion of one of the most high-profile investigations the MMC has ever been asked to carry out. The report will not only determine whether Britain's dominant pay-TV operator will be allowed to buy its most successful football club; it will also help to shape the future of both professional football and sport on television.

In the past four and a half months, the MMC has heard a wide range of arguments - from the highly technical to the highly emotional - about why the deal should not be allowed to go ahead. In the background, the members of the panel can hardly have missed the looming presence of Rupert Murdoch and the political power he wields.

The MMC's conclusions are a closely-guarded secret, and are likely to remain so for another month or so until Mr Byers delivers his own verdict on the takeover.

What is clear, however, is that the MMC's investigation has been much more thorough than expected. When Peter Mandelson referred the deal to the MMC last October, many believed his main motivation was to avoid accusations of being too close to Rupert Murdoch - a view shared by the media mogul.

But BSkyB and Manchester United have not had an easy ride. People close to the inquiry say they were surprised by the hostile line taken by the panel members during the hearings.

This hostility is likely to be a reflection of the huge number of arguments against the deal that were presented to the MMC. A strange alliance of opponents - many with conflicting aims - queued up to argue that the takeover should be blocked.

Rival media groups such as Lord Hollick's United News & Media have sought to undermine BSkyB's position by arguing that the deal is anti-competitive, but have stopped short of opposing the principle of media groups owning football clubs. Both United News and Carlton have held talks with the current league champions Arsenal, while NTL, the cable operator, has an option to buy Newcastle United.

Football club chairmen have also been divided. Some, such as Tottenham Hotspur's Alan Sugar, are thought to have argued in favour of the deal because it is likely to trigger a wave of copycat takeovers, driving up the clubs' market value. But smaller clubs have opposed the deal because they fear that BSkyB's deep pockets will ensure that Manchester United become unbeatable.

Meanwhile, supporters' organisations have voiced the opposite concern that BSkyB would starve Manchester United of resources and squeeze the fans by forcing up ticket prices. Some have even suggested that BSkyB might order Manchester United to lose matches in order to encourage a closer league contest.

Then there have been curious interventions from the likes of Peter Rogers, the chief executive of the Independent Television Commission, who reportedly told the MMC the deal should be blocked outright even though the television watchdog's official position was more balanced. Nevertheless, competition lawyers say the MMC is likely to have accorded the greatest weight to the evidence submitted by BSkyB's competitors.

One of the most common complaints about the deal is that it will give BSkyB an advantage in negotiating television rights with the Premier League.

Opponents suggested that Manchester United would be able to use its influence in the league to make sure the rights were awarded to BSkyB, or could tip off its owner about the value of bids from rival media groups.

A similar argument was made by the BBC, which is concerned that it might lose access to the recorded highlights of Premier League matches that form the basis of its Match of the Day programme. Most clubs want to keep highlights on free-to-air television in order to encourage interest in football. But BSkyB might be able to use Manchester United to end the highlights in order to stimulate sales of dishes.

The problem with both these arguments - as BSkyB and Manchester United both pointed out - is that the club has only one vote out of 20 in Premier League meetings, making it hard to influence the outcome of any decision.

Manchester United could threaten to leave the league if it did not get its own way, although it would then face the problem of finding clubs and competitions to play.

Nevertheless, the MMC may attach a specific condition to the takeover, requiring a commitment that Manchester United does not abandon the Premier League for a rival competition.

BSkyB may also have to accept other restrictions on its control of television rights. Cable & Wireless Communications, the cable operator, is thought to have proposed that BSkyB agree not to buy the rights to matches it does not intend to show - a suggestion the MMC is considering attaching as a condition to the takeover. This means that BSkyB would either have to show more than its current quota of 60 matches a year, or give up its exclusive grip on Premier League rights.

Even if the MMC does not go this far, it will probably require BSkyB to make its channels available to rival pay-TV platforms such as cable and ONdigital at commercial rates - something industry regulators have already been considering.

In drafting its report, however, the MMC faces a serious headache. Its conclusions depend crucially on the outcome of the Office of Fair Trading's case against Premier League, which is currently being heard before the Restrictive Practices Court.

The OFT argues that the Premier League is acting as a cartel by negotiating television rights on behalf of all its member clubs. If the OFT wins its case, all the clubs will automatically be free to sign their own broadcasting deals.

As a result, it is possible that the MMC may take the unprecedented step of delivering two rulings with two different sets of conditions - one for each possible outcome.

At the moment the odds still favour the MMC recommending that the deal be cleared subject to BSkyB and Manchester United agreeing to certain conditions. But the result will be in doubt until Mr Byers blows the final whistle.