Murdoch says MMC referral is `political'

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THE RELATIONSHIP between Rupert Murdoch and the Government came under renewed strain yesterday after the media mogul claimed the decision to refer the bid by British Sky Broadcasting for Manchester United Football Club to the Monopolies and Mergers Commission was purely political.

Mr Murdoch, whose News Corporation owns a 40 per cent stake in BSkyB, suggested the Government had referred the bid to the MMC in order to fend off criticism that it was too close to him.

"It goes with the territory but it is very hard for small shareholders of Sky that we should be punished for the fact that we supported the government at the last election," Mr Murdoch said. "Obviously it's political."

On Thursday Peter Mandelson, the Secretary of State for Trade and Industry, asked the MMC to investigate the pounds 623m takeover after the Office of Fair Trading concluded that it raised competition and public interest issues.

As a result of the decision, BSkyB's bid for Manchester United lapsed, although the satellite television group has indicated it will renew its offer if the deal is cleared when the MMC delivers its report in March.

"It is excessive caution," Mr Murdoch said after attending BSkyB's annual general meeting in Westminster yesterday. "To be influenced by a few paranoid hacks in Fleet Street is ridiculous."

Curiously, however, he added that he was not blaming Mr Mandelson "in the least".

The Trade and Industry secretary has come under fire because of his personal friendship with Mr Murdoch's daughter Elisabeth, managing director of BSkyB's networks division. The television company is also a major sponsor of the Millennium Dome.

Mr Mandelson has not commented on the takeover. But Chris Smith, the Secretary of State for Culture, Media and Sport and Tony Banks, the sports minister, have both called for an MMC investigation.

Meanwhile a group of backbench members of parliament recently called for the bid to be blocked while Karel van Miert, the European competition commissioner, said it raised problems.

Reports have suggested that the OFT originally saw no competition grounds for referring BSkyB's bid to the MMC, but changed its recommendation under pressure from officials at the Department of Trade and Industry and the Department for Media, Culture and Sport.

The view is supported by the fact that John Bridgman, the OFT's director- general, pointed to the public interest issues raised by the bid as a reason for recommending an MMC reference.

The OFT normally makes its decisions purely on competition grounds, leaving it to the government to decide on public interest matters.

Mr Murdoch has had close links with the Labour government since before the last election, when the Sun newspaper unexpectedly advised its readers to vote Labour.

The switch followed a trip by Tony Blair, the Prime Minister, to address a conference of senior News Corporation executives. Gordon Brown, the Chancellor, also spoke to a gathering of Murdoch executives in the United States.

The extent of the relationship became clear earlier this year when it emerged that Mr Blair lobbied on BSkyB's behalf during a phone conversation with the Italian Prime Minister, Romano Prodi.

However, the link has been showing signs of strain. The Sun recently ran a front page story asking whether Mr Blair was the most dangerous man in Britain.

BSkyB creates 1,700 jobs, Business, page 20