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Murdoch given time to prove his BSkyB bid will not harm competition

Miliband criticises concession offered to media mogul

Ian Burrell,Media Editor,Andrew Grice
Wednesday 26 January 2011 01:00 GMT

Rupert Murdoch's News Corp has offered to give guarantees on the editorial future of the Sky News channel in an effort to head off a Competition Commission inquiry into its attempt to take complete control of satellite broadcaster BSkyB.

But a political row broke out yesterday when the Culture Secretary Jeremy Hunt announced that, as a result of the "undertakings" by News Corp, he was taking the unprecedented step of postponing his decision – despite a clear finding by the broadcast watchdog Ofcom that the takeover would be harmful to the plurality of media in the United Kingdom.

In a long-awaited report the regulator said: "Full control would allow News Corp to take decisions involving Sky which are in the exclusive commercial interests of News Corp." It said the takeover would extend News Corp's reach as a provider of news from 32 per cent to 51 per cent.

Speaking to The Independent, Ed Miliband, the Labour leader, criticised Mr Hunt's action and said the Sky bid should be referred to the Competition Commission immediately. "The sensible thing and right thing would be to do what Ofcom wants to do," he said. "The Government may go round the houses and end up with a reference to the Commission. That would just create a delay and not help anybody."

Mr Murdoch's News Corp, which holds 39.1 per cent of BSkyB, owns four of Britain's biggest newspapers: The Sun, the News of the World, The Times and The Sunday Times. Criticisms of the proposed £8bn buyout had included fears that News Corp might allow Sky News to turn into an equivalent of its American channel Fox News, which is known for the polemical and right-wing output of some of its presenters. This despite the UK's strong controls over the impartiality of news coverage.

It is thought that News Corp's undertakings include the possibility of an independent editorial board which would oversee the output of Sky News and its team of well-known presenters such as Adam Boulton, Dermot Murnaghan and Kay Burley.

Instead of referring the takeover directly to the Competition Commission, Mr Hunt said yesterday he had asked Ofcom to consider whether News Corp's undertakings would address the regulator's concerns over media plurality. He will also seek a view from the Office of Fair Trading. But Mr Hunt has said he is minded to pass the matter to the Commission.

Mr Hunt acknowledged that he had been advised by Ofcom that the takeover "may operate against the public interest in media plurality". His decision not to refer to the competition authorities, provoked his Labour opposite number Ivan Lewis to say: "All of this risks undermining public confidence in what should be a quasi-judicial process."

Relations between Ofcom and News Corp are fraught, with the regulator furious at being accused of partiality.

In a submission to Mr Hunt's department on 14 January, released yesterday, News Corp complained that Ofcom's report was "flawed" and made reference to the removal from the decision making process of Business Secretary Vince Cable, after he was recorded saying he had "declared war" on Mr Murdoch.

"News believes that Ofcom has failed to approach the effects of this transaction with an open mind and has carried out a review process with the intention of identifying concerns. Ofcom has been notably more receptive to submissions made by third-party complainants than it has been to submissions made by News and has chosen to present the evidence in a one-sided way."

One Ofcom source said: "They've presented it as if there might be further evidence out there. We're not at all impressed." To clear its name, the regulator published its correspondence with The Department for Business on its website. "Ofcom's dealings have been absolutely proper at all times," said a spokesman for the regulator.


What is this all about?

News Corporation, Rupert Murdoch's media empire, wants to take its 39.1 per cent stake in BSkyB up to full ownership. Vince Cable was stripped of his powers to adjudicate on the deal after unwise comments about Mr Murdoch.

What is the argument against?

Merging the owner of The Times, The Sunday Times, The Sun and the News of the World with that of Sky News would lessen diversity in the British media.

What does News Corporation say?

There is plenty of competition in the UK, and in an earlier investigation into its stake in ITV, the Competition Commission considered News Corp and Sky as one and the same.

Who makes the ultimate decision?

The media regulator Ofcom has recommended it be scrutinised by the Competition Commission as the merger "may operate against the public interest". But the Culture Secretary, Jeremy Hunt (given the powers stripped from Cable) has delayed a decision on passing the deal on to the Competition Commission, so that he can scrutinise undertakings offered by News Corp that could meet Ofcom's concerns.

Has this happened before?

No. This is only the second public interest test that Ofcom has carried out since its creation in 2004.

What does News Corp think of all this?

It wasn't happy with the regulator, surprise surprise, saying its analysis was "deficient in a number of ways".

How does this affect the bid?

It will drag it out and could see either Sky or News Corp offer up one of their crown jewels to seal the deal – such as the divestment of the Times titles, or Sky News being hived off.

What next?

If Hunt accepts News Corp's plans there will be a 15-day consultation. If not, the deal will go to the Competition Commission, which will take up to six months.

So will a deal go through?

Probably yes. Hunt has opened the door for News Corp's remedy and the Murdochs are fierce negotiators.

Nick Clark

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