Proposed Media Mergers

Tuesday 5th June 2018 Commons Chamber

14:00

[The Secretary of State for Digital, Culture, Media and Sport (Matt Hancock)]

With permission, Mr Speaker, I shall make a statement about the proposed merger between Comcast and Sky and the proposed merger between 21st Century Fox and Sky. In my quasi-judicial role I have considered the mergers separately, on their own merits, and wish to set out my decisions taken on the basis of the relevant evidence.

First, let me update the House on Comcast’s proposed acquisition. On 7 May, Comcast notified an intention to acquire Sky. As Secretary of State, I am required to consider whether the merger raises public interest concerns that meet the threshold for intervention set out in section 58 of the Enterprise Act 2002. As required, I considered the need for a sufficient plurality of people with control of media enterprises; the need for a wide range of high-quality broadcasting; and the need for a genuine commitment to broadcasting standards. Last month, I informed the House that I was minded not to intervene in the merger, on the basis that it does not meet the threshold for intervention. I gave interested parties time to make representations, but received no further representations. As a result, I have concluded that the proposed merger does not raise public interest concerns, so I can confirm today that I will not be issuing an intervention notice.

Turning to Fox’s proposed acquisition of Sky, in March 2017, my predecessor issued an intervention notice on public interest grounds, because of concerns about media plurality and the genuine commitment to broadcasting standards. The intervention notice triggered phase 1 investigations by Ofcom and the Competition and Markets Authority. In September, having considered their reports, along with further advice from Ofcom, my right hon. Friend referred the proposed merger to the CMA for a phase 2 investigation on both grounds. The CMA published its interim report in January and provided its final report to me on 1 May. I have published that report today and deposited a copy in the Libraries of both Houses. The report confirms, as previously set out, that the proposed merger does pass the threshold for a relevant merger situation, and provides recommendations on both public interest tests.

On broadcasting standards, the CMA carried out a thorough and systematic assessment, taking into account the approach of Fox and Sky to broadcasting standards, both in the UK and outside, and the approach of Fox and News Corp to wider regulatory compliance and corporate governance. The CMA concluded, in line with its interim findings, that the merger may not be expected to operate against the public interest on the grounds of a genuine commitment to broadcasting standards, and I agree with that finding.

On media plurality, the CMA’s final report confirms its interim findings that the proposed merger may be expected to operate against the public interest. The CMA found cause for concern in two areas: first, the potential erosion of the editorial independence of Sky News, which could in turn lead to a reduction in the diversity of viewpoints available to and consumed by the public; and secondly, the possibility of an increase in influence of the Murdoch family trust over public opinion and the UK’s political agenda. The CMA used a clear and logical approach and took into account Ofcom’s media plurality framework. It took great care to obtain a wide range of written and oral evidence, and I agree with its finding, too.

When the CMA finds that a merger is likely to operate against the public interest, it is required to consider what remedy would be appropriate. To address plurality concerns, the CMA considered a range of options, including those proposed by the parties. Specifically, the options were: first, a firewall of behavioural commitments to insulate Sky News from the influence of the Murdoch family trust; secondly, a ring fence, whereby Sky News would be separated structurally from Sky but still owned by Fox, along with the same behavioural commitments; thirdly, divesting Sky News to a suitable third party; and fourthly, prohibition of the transaction as a whole.

I have considered the CMA’s detailed assessment and its conclusions on how effective and proportionate the different remedies are. I agree with the CMA that divesting Sky News to Disney, as proposed by Fox, or to an alternative suitable buyer, with an agreement to ensure that it is funded for at least 10 years, is likely to be the most proportionate and effective remedy for the public interest concerns that have been identified. The CMA report sets out some draft terms for such a divestment, and Fox has written to me to offer undertakings on effectively the same terms.

The proposals include significant commitments from Fox, but some important issues on the draft undertakings still need to be addressed. I need to be confident that the final undertakings ensure that Sky News remains financially viable over the long term; is able to operate as a major UK-based news provider; and is able to take its editorial decisions independently, free from any potential outside influence. As a result, I have asked my officials to begin immediate discussions with the parties to finalise the details with a view to agreeing an acceptable form of the remedy, so that we can all be confident that Sky News can be divested in a way that works in the long term.

Under the legislation, I am required to consult formally on the undertakings for 15 days. Subject to the willingness of the parties to agree the details, I aim to publish the consultation within a fortnight. I am optimistic that we can achieve our goal, not least given the willingness that 21st Century Fox has shown in developing these credible proposals. However, if we cannot agree terms at this point, I agree with the CMA that the only effective remedy would be to block the merger altogether. That is not my preferred approach.

We have followed a scrupulously fair and impartial process, based only on the relevant evidence and objectively justified by the facts. I wish to thank Ofcom, the CMA, the parties, my predecessor and my fantastic team at the Department for Digital, Culture, Media and Sport for all their hard work. I hope we can reach a final agreement very soon. I want to see a broadcasting industry in Britain that is strong, effective and competitive. I commend this statement to the House.

14:07

[Tom Watson (West Bromwich East) (Lab)]

I thank the Secretary of State for advance sight of the statement, for which I had a little more time to read than usual; I suspect that was a benefit of the usual delays caused by Heathrow airport. [Interruption.] I had to get that gag in.

This is a saga which we have been living through for 18 months. In December 2016, when 21st Century Fox announced its bid for Sky, the world looked very different: the Tories were riding high in the polls; the Prime Minister was popular, even among her own Back Benchers; we had a different Culture Secretary; and I was six stone heavier. I do not think that even the Murdochs would have anticipated the changes that have happened since then.

To her credit, the previous Secretary of State, the right hon. Member for Staffordshire Moorlands (Karen Bradley), took her time over the bid. She ensured that it was subject to the full gaze of regulatory scrutiny and did not just provide the rubber stamp that Fox hoped for. During that time, Fox found itself not only covering scandals but embroiled in scandals, with sexual harassment allegations and high-profile dismissals at Fox News. A rival bidder, Comcast, has come forward. The approval of both bids today means that this is not the end of the story.

The Murdochs will be relieved that the old order is at least starting to reassert itself. Even before today, the new Secretary of State was doing what they asked of him, dumping the promises made to the victims of phone hacking by announcing that Leveson 2 would not go forward. Why is that relevant to this announcement? Well, the information that Leveson 2 would have revealed about corporate governance failure on an industrial scale is entirely relevant to the question of whether the merger would be good or bad for Sky’s adherence to broadcasting standards. Let us remind ourselves that the most recent allegations in the civil litigation against News Group Newspapers claim that senior executives at the top of the empire were not just culpably ignorant, but knowingly complicit about criminal conduct going on at News Group papers. Leveson 2 would have looked at that. The European Commission raided the London offices of 21st Century Fox just a few weeks ago as part of an investigation into violations of EU anti-trust rules. The Murdochs will be grateful that the Secretary of State is less curious than the officials who raided that building.

We on the Labour Benches understand that there are many commercial and technical elements of this bid to consider, but for us the priority has been to safeguard the future of Sky News. From Kay Burley to Adam Boulton, Sky News has some of the best presenters on TV and has always been a beacon for independent and rigorous journalism. Our priority is protecting that and ensuring that Sky News thrives going forward. The Secretary of State has given his approval for the Fox bid today subject to Fox’s proposed remedy that Sky News be divested to Disney or a suitable alternative. We have serious concerns about that, including how we ensure the long-term future of Sky News as a UK-based independent organisation under this option. Were the Fox-Disney deal to fail, it could leave Sky News isolated from Sky and owned by a foreign company with few news interests in the UK. It is hard to see how that would be in the public interest. Does the Secretary of State really think that this proposal of divestment is in the best interests of Sky News, or would it become isolated and at sea? He made it clear that he had no concerns about the broadcasting standards. Is he concerned that the civil cases that are currently being brought against Murdoch papers such as The Sun will reveal corporate maladministration that could have altered his decision?

Fox made many undertakings to get to this stage. Will the Secretary of State take personal political responsibility if Fox’s bid is successful and the guarantees that it made are broken, bearing in mind that the CMA opinion, expressed earlier this year, was that this deal was against the public interest? With Comcast now in the ring, the future for Sky is uncertain. A bidding war is on the horizon. That might be good for shareholders, but it is the Minister’s duty to protect the interests of the public. Sky is a gem of British broadcasting and is respected worldwide. Its future and global reputation for excellence is at stake in this process, so it is right that, if there is any doubt about whether the proposed solution is workable, it is the duty of the Secretary of State to ensure that this merger is blocked.

[Matt Hancock]

As I said in the statement, the analysis that I announced today and have put in the Libraries of the House follows a scrupulous process of scrutiny not just by me and Ofcom, but by the CMA. No matter how long debates over Heathrow took, I am sure that the shadow spokesman has not yet had the chance to read the full 410 pages of the CMA report. It goes into great detail in answering several of the questions that he raised. When it comes to the question of Leveson, it does take into account everything that was disclosed during the Leveson process and, of course, that which was made public by the many court cases since and it has looked over this area rigorously. The CMA concludes that what matters most in the broadcasting standards test is that which is most recent, so while it does take past behaviour into account, it ensures that that which is most recent is also weighted. The behaviour that was described and found under the Leveson inquiry was some time ago, as we have debated already.

I agree with the hon. Gentleman very strongly about the value of Sky News. This is very important to the UK broadcasting environment. I agree that we must be confident that the proposed solution and undertakings that have been given are robust. That is what I will be seeking to nail down over the next fortnight before consulting formally on those undertakings.

I am seeking to strengthen the undertakings that were given to the CMA and that have been repeated to me. When I am confident that those undertakings will ensure the long-term sustainable future for high-quality independent broadcasting at Sky News, as we know it now, I will be prepared to consult on those undertakings, take them and live by that decision.

[Mr John Whittingdale (Maldon) (Con)]

May I welcome my right hon. Friend’s statement and congratulate him and his predecessor on their handling of this matter? He will be aware that it is 16 months since the regulatory process got under way. Does he agree that it would be infinitely preferable if the future of Sky was determined by its shareholders and by the market, rather than by the regulatory timetable? Will he therefore give us an assurance that he will do his utmost to resolve the regulatory process before the summer recess begins?

[Matt Hancock]

Absolutely. My goal on the timeline is to consult within a fortnight. That consultation is required by law to take 15 days, which means that, hopefully, within a month, I will be able to get undertakings in which I have full confidence and can then consult on and conclude this process.

[Hannah Bardell (Livingston) (SNP)]

I thank the Secretary of State for an advance copy of his statement. I wish briefly to pay tribute to my predecessor in this role, my hon. Friend the Member for Argyll and Bute (Brendan O'Hara). He will continue his excellent work on the Digital, Culture, Media and Sport Committee and I feel sure that we will make a formidable team.

The primary concern of the Scottish National party and the Scottish Government was always around the potential impact of the proposals on media plurality. We firmly believe that it is unhealthy for too large a proportion of the media to be under the control of one single group. It is interesting to note that the CMA findings specifically cite public interest and the concern that there will be an erosion of Sky’s editorial independence as well. I am interested to hear the Secretary of State’s views on that issue, particularly on jobs at Sky. As the hon. Member for West Bromwich East (Tom Watson) has said, the Sky News brand is well known, particularly in Scotland and the other devolved nations, so I would like to hear about any impact on jobs. The Secretary of State will know, I am sure, that Sky is one of the biggest private employers in my constituency of Livingston, so I would be very keen to discuss any impact on the call centres there.

I welcome the statement. It has taken some time to get to this point. The concerns that have been raised, including over consultation, must be addressed robustly. Given the scandals that have happened and the families that have been damaged, it is in the public interest that the behaviour of these organisations is considered in this process and in this merger.

[Matt Hancock]

I agree with the hon. Lady about the importance of Sky News and about making sure that it remains financially viable over the long term. I want to ensure that we can have confidence in that in the final undertakings that are given. Of course Sky News has an excellent record for broadcasting. I am talking about its formal broadcasting standards and, as every Member in this House knows, its ability sometimes to reach the news faster than anybody else. Its interviews with those of us in public office are probing and invigorating. We thoroughly enjoy the service and I want it to be viable for the long term.

[Michael Fabricant (Lichfield) (Con)]

My right hon. Friend is absolutely right to praise Sky and Sky News. He will recall that it opened in 1989 and almost bankrupted, through its costs, the Murdoch family. What concerns me and the shadow Front-Bench spokesman is the long-term viability of Sky News. Ten years is a long time, and we are seeing a changing atmosphere and environment in broadcasting. How can he be assured that, over a 10 year period—and I hope many more years after that—Sky News will survive?

[Matt Hancock]

We have been given encouraging assurances thus far— not only in the bid directly before us, but in other bids associated with this takeover—that there will be long-term undertakings on the financial viability of Sky. I want to ensure that the organisation is robust, and that Sky News continues to do the brilliant job that it does now. I know that others have raised concerns about broadcasting standards within companies owned or part-owned by the Murdoch family trust, but Sky is an example of a brilliant broadcaster with incredibly high broadcasting standards, on a par with the BBC, ITV and Channel 4. That is why ensuring its long-term viability has so much resonance in the House, and it is also the reason why it matters so much to me.

[Chris Bryant (Rhondda) (Lab)]

The thing is, I can see exactly what is going to happen. The Secretary of State is going to accept any assurances that come in over the next few weeks and it will all be signed off. Then, in a few years’ time, Sky will be starved of money by whoever buys it and the broadcaster will end up coming to the next Secretary of State, or maybe even the same Secretary of State—I know he loves the job—to say, “Terribly sorry; it didn’t work out. Can we please now be subsumed back into Fox, or can we just let Sky die?” Kay Burley will then be out of a job, so she will stand in West Suffolk and defeat the Secretary of State, because most people in this country would prefer diversity of media ownership and want to keep Sky as independent as possible.

[Matt Hancock]

I relish the prospect of a contest against anybody in West Suffolk. I am not sure that the path set out by the hon. Gentleman, who is normally an optimist by nature, is the most likely one, not least because I will seek undertakings to ensure that Sky News remains viable over the long term and independent so that it can pursue us politicians without fear or favour.

[Mr Nigel Evans (Ribble Valley) (Con)]

Nobody could accuse the Secretary of State’s Department of rushing this decision; it has been made very carefully and cautiously, as it should, because Sky is well loved. I fought the Pontypridd by-election in 1989, which was the first by-election to be broadcast on Sky TV, so I have great fondness for the organisation. Sky has clearly weathered better than I did at the Pontypridd by-election. None the less, there is great plurality out there with the changing way in which people are accessing news these days. Given the diversification of Sky News and these guarantees, surely now is the time for the decision to be made so that the shareholders can make their decision.

[Matt Hancock]

I recognise the amount of time that has passed since we were first notified of this proposal. That is why I want to reach an agreement on the undertakings within a fortnight. I am absolutely certain that the parties will stand ready to meet that deadline, as my team and I also stand ready. We must then have the 15-day formal consultation, but I hope that will mean that the formal approval process from the Government side can be concluded within a month from now. There is a merger battle closer than on the horizon.

[Christine Jardine (Edinburgh West) (LD)]

Liberal Democrats have been consistent in expressing our concern about the Sky-Fox deal should it have gone ahead in its entirety. I therefore welcome the Secretary of State’s assurances that Sky News will be protected and sold off. Will he also reassure us that that there will be similar undertakings about the future of Sky News in the event that Comcast is the buyer?

[Matt Hancock]

Undertakings and assurances have been made by Comcast. By law, I was required to look at the Comcast bid because it is also of material size. We have done that and, as I set out, it does not raise the public interest concerns. I have therefore confirmed today that we will not be issuing an intervention notice. I know well the Liberal Democrats’ concerns in this area, having worked with the right hon. Member for Twickenham (Sir Vince Cable) in government. I hope that the resolution we come to over the coming weeks will be one that demonstrates with confidence that Sky News will be independent and viable, and that we can therefore be content with the media plurality.

[Justin Tomlinson (North Swindon) (Con)]

Although it was right that we had a thorough and transparent process, may I echo the comments that we need swiftly to come to a conclusion? The UK is a proud hub for investment in broadcasting and production, creating high-skill jobs. We need to demonstrate that the UK is both open to and welcoming of further investment.

[Matt Hancock]

I very much agree with the sentiment that my hon. Friend expresses. In coming to the House with this decision a week before the deadline and being clear about the rapidity of the next phases, I hope that we have demonstrated not only that we will be thorough and do this by the book, but also that we will get on with it.

[Ian Paisley (North Antrim) (DUP)]

I refer to my entry in the Register of Members’ Financial Interests.

I welcome the Secretary of State’s statement, particularly his most welcome comments about protecting Sky News. Will he assure us that Comcast will be put through the same rigorous tests that others have been put through? Will he also assure us that we are going to see not more tunnel but some light at the end of the tunnel, and that there will be a final and conclusive decision before the summer recess?

[Matt Hancock]

On the latter question, yes; I very much hope so, and I am optimistic, presuming that the parties engage in full and rapidly. I have deployed my team to take forward immediately after this statement the work that is needed to finalise the procedures.

On the hon. Gentleman’s first point, we have subjected Comcast’s bid to the law in exactly the same way. The truth is that Comcast’s existing UK media footprint is very small, so it simply does not raise the same concerns over plurality. The Murdoch family trust has very significant other media interests—not least in newspapers—whereas Comcast does not, so it is in a different situation, but we have applied the law in the same rigorous way.

[Rebecca Pow (Taunton Deane) (Con)]

Having been a journalist and broadcaster for most of my life, I was prompted to speak because I think we should speak up for maintaining the high-quality news and journalism that Britain is famous for. That should be at the heart of this decision. We need competition, and we need Sky News still to be giving a professional service, especially in these days of fake news. That is essential. I am sure that the Secretary of State is taking this to heart, because it is important.

[Matt Hancock]

It is an incredibly important point on which to end. You will know, Mr Speaker, as my hon. Friend does, that I am absolutely committed to high-quality journalism in the UK. The decisions that I have announced today, along with decisions—sometimes controversial ones—to protect the future of high-quality journalism are at the cornerstone of my approach to media policy. It is vital to have a free press and free media to ensure that we have high-quality journalism underpinning our high-quality political debate.

[Mr Speaker]

I entirely accept that the Pow moment was a magnificent one, but the Secretary of State erred in suggested that it was the conclusion of our proceedings, for it would be a very considerable deprivation to the House if we were denied the opportunity to hear the voice of Strangford; and we will hear the voice of Strangford, I am sure, in full force and now. I call Jim Shannon.

[Jim Shannon (Strangford) (DUP)]

Thank you, Mr Speaker; you are always very generous. It is always a pleasure to speak on behalf of the people of Strangford. I thank the Secretary of State for his statement. Avaaz has won permission to have its case for a judicial review of Ofcom’s decision heard in court on 19 and 20 June, so this statement is not the last word. Does the Minister accept that if Avaaz were to win the case, Ofcom would have to go back and reinvestigate the Fox-Sky bid, adding even more uncertainty to the outcome?

[Matt Hancock]

There are a number of ongoing court cases in this space, and they have all been taken into account up to their most recent stages. Everything relevant has been taken into account and we have followed the process scrupulously. Nevertheless, the decision that I have set out today is based on a thorough assessment of the relevant evidence. I hope that that means that we can now proceed with getting firm and final undertakings that secure the future of Sky News and allow this to go ahead.