Leading Article: The soccer business has returned to a level playing field

IT SEEMED to be expecting too much of this Government to stand up to Rupert Murdoch, the "billionaire tyrant" as he described himself on The Simpsons, part of his own Fox TV empire. Even this newspaper fell prey to cynicism when, in the Budget last month, the Chancellor announced that decisions on competition policy would in future be contracted out to an independent commission. It seemed that this was a device - a welcome one, but a device none the less - to take sensitive decisions on takeovers out of the hands of politicians. Just as an independent Bank of England absolves Gordon Brown of responsibility for unpopular interest-rate decisions, so an independent Competition Commission will in future excuse Stephen Byers from having to upset New Labour's business friends.

In the meantime, so the uncharitable thought ran, Mr Byers would let the Murdoch bid for Manchester United through in return for a series of worthless promises not to use a bridgehead in the Premier League to gain an unfair advantage for BSkyB.

We are delighted and relieved to admit that we were wrong. The Labour Government's posture of defensive cringe towards Mr Murdoch's cheap press interests has, at a stroke, been replaced by the confident stance of squaring up to a bully. This is no mere side-issue of the Government's self-respect: the policy of cringe was not even in Labour's own interest, and it was certainly not in the country's interest.

The Monopolies and Mergers Commission verdict that the BSkyB takeover would have been against the public interest was right. It was not a straightforward judgement - the idea of fair competition in the crazy economics of sport is a peculiar one. Even in America, land of the free market and home of the brave capitalist, the multi-billion industries of baseball, football and basketball are run by cartels enjoying special exemptions from competition law.

At one level, sport is simply a branch of the entertainment industry, and should be treated in the same way as the movies, television and ten- pin bowling. In this country, if you do not think you are getting a good show for your money from BSkyB, or from going to see a live football match, then you can go to see Shakespeare In Love or go bowling instead.

But soccer is not - yet - a show put on by a single company for consumers to choose freely in the marketplace. It is a sport which grew organically from thousands of local teams, sustained by the loyalties of millions of supporters. Even Man Utd began as Newton Heath, a local railway works' team. For one company to cream off the value made possible by these local loyalties would be oppressive. But it would also be counter-productive from the point of view of economics. If soccer is to thrive as a business, it must thrive as a sport, which requires it to nourish its roots and to pay attention to the non-commercial loyalties of the fans. That is why the flogging of Ryan Giggs shirts for a small fortune is a short-sighted business practice.

Nor are individual clubs genuinely competitive corporations operating in a free market. Their product is the game; a game requires two teams; and repeat purchases require a series of games which need to be organised, and a winner declared according to the rules of sport rather than the rules of the market.

Man Utd, as the Coca-Cola of soccer, being the worldwide brand leader, is already close to achieving such a dominance of the Premiership that it could result in the entire competition being rendered both boring and pointless. That would not be good for business.

Even as a business, however, soccer is much more complex than that because the value of the game lies in its television rights, which means that the loyalties that are generated in one - apparently competitive - market can be used as leverage in order to prop up a dominant position in another market. That was Mr Murdoch's strategy: to use sport as a lever to maintain his dominance in pay-TV, which in turn cross-reinforces his dominant position in newspapers (which is where we declare an interest).

He wanted to buy Man Utd as an insurance policy. His near-monopoly of televised football is threatened from two different directions. First, the Office of Fair Trading is still investigating the Premiership cartel. If it concludes that it operates against the public interest, BSkyB's deal to broadcast Premiership games is off. Secondly, digital technology gives other broadcasters the means to charge people for watching television, which means they can match the huge amounts BSkyB can offer for the television rights to Premier League games.

The decision by the MMC and Mr Byers means that when the rights come up for renegotiation, Mr Murdoch will be competing on something resembling a level playing field. That is good for English football. Just as important, it is good for a diverse, competitive and plural media in this country.