Draft Enterprise Act 2002 (Mergers Involving Newspaper Enterprises and Foreign Powers) Regulations 2025
(Limited Text - Ministerial Extracts only)
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The Chair
Before we start, I take this opportunity to wish my hon. Friend the Member for Meriden and Solihull East a happy birthday—I can think of no finer way of celebrating. Members, including those on the Front Bench, may remove their jackets, if they wish to do so.
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stephanie Peacock)
I beg to move,
That the Committee has considered the draft Enterprise Act 2002 (Mergers Involving Newspaper Enterprises and Foreign Powers) Regulations 2025.
It is a pleasure to serve under your chairship, Sir Roger. I also begin by wishing the Opposition spokesperson, the hon. Member for Meriden and Solihull East, happy birthday. These regulations were laid before the House, in draft, on 15 May. This Government are clear in our commitment to a free and pluralistic media where all citizens, in all parts of the UK, can access high-quality news and other information from a range of sources, enabling them to form their own opinions. The public’s continued access to diverse news, views and information is fundamental to the health of our democracy and wellbeing as a nation.
It is therefore vital that the UK has in place strong measures ensuring that foreign states, whether allies or foes, cannot control or influence UK newspapers or news periodicals. The Digital Markets, Competition and Consumers Act 2024 amended the Enterprise Act 2002, creating a new foreign state influence merger control regime for UK newspapers and news periodicals.
The changes were introduced by the previous Government in response to concerns raised by Parliament about gaps in the UK’s media merger regime. There was wide cross-party support for the principle that all foreign states, including long-standing allies, should not be able to control or influence the policy of UK newspapers or news periodicals. The question on the level of acceptable thresholds for investments made by state-owned investors was not settled, which is of course why we are here today, and these regulations will address that issue.
State-owned investors include sovereign wealth funds and public pension or social security schemes that make long-term investments on behalf of states. In many cases, these are operated at arm’s length. They are global investors, holding interests in a wide range of UK and international companies and businesses. The previous Government consulted on proposals to create exceptions for passive investments made by state-owned investors using powers contained in the amendments to the 2002 Act. These included a complex cap on investments held by state-owned investors, which was set at 5% of shareholdings, but at 10% if the state-owned investor held shares in a UK newspaper indirectly as part of a diverse business.
We have looked carefully at the responses to the consultation. In particular, we have paid close regard to the views of UK newspaper groups. They are concerned that the level of threshold settled on by the previous Government was drawn too tightly and could have a detrimental impact on their ability to raise investment funding that they may need to support future sustainability. In coming to a final view, we have had to carefully weigh up a number of things. First, there is the need for strong measures, which is what Parliament intended when, with Labour party support, it passed the amendments, creating the foreign state influence regime. Secondly, there are the concerns about the unintended effects of the exception regulations, such as risking a chilling effect on investment in the UK newspaper industry.
Having considered that, we have decided to set the threshold for state-owned investment at 15% of shares or voting rights in a newspaper or news magazine, where this is a passive investment. In our view, this is an effective, simple and proportionate approach. The 15% threshold is below the level where the Competition and Markets Authority typically believes that material influence may arise. It is also well below the 25% level, which is the lowest trigger point for mandatory notifications under the National Security and Investment Act 2021.
The changes we have made to the thresholds carefully balance the need for strong protections from foreign state influence, with the need for UK newspapers and news magazines to have access to a range of investment. The changes will also avoid the need for the Secretary of State to refer low levels of investment by state-owned investors to the Competition and Markets Authority where there is no likelihood at all of foreign state influence, such as where state-owned investors acquire shares in newspaper groups that are part of listed companies.
The regulations will, as the previous Government proposed and as permitted by the 2002 Act, come into force with retrospective effect on 13 March 2024. There are three important considerations that relate to the 15% threshold that are relevant to the Committee’s deliberations. First, state-owned investors acting on behalf of foreign powers can benefit from the exception only if the investment is a passive one. The legislation will not permit state-owned investors to acquire rights to directly, or indirectly, appoint directors or other officers of the company, or any rights to direct, control or influence the policy or activities of a UK newspaper.
If the Secretary of State has grounds for suspecting that a state-owned investor has secured, or will secure, the right to direct, control or influence a UK newspaper, they must ask the Competition and Markets Authority to review the case. If the Competition and Markets Authority concludes that the transaction has resulted, or will result, in a foreign state acquiring control or influence, the Secretary of State must take action to unwind the transaction or block such a transaction. The four-month time limit for the Secretary of State to intervene in a completed merger will start running from the point at which facts about whether there is foreign state influence come to light. This means that action can be taken years after the transaction is completed, if relevant information was concealed beforehand, which will act as an important deterrent.
Finally, the legislation includes specific provisions for joint arrangements. These state that if a foreign power and other entities—potentially other foreign powers—own shares in a UK newspaper as part of a joint arrangement, each party is considered to hold the combined shares or voting rights of all. If these provisions applied to a joint arrangement between state-owned investors from different countries, and the total of the state-owned investors’ combined shares or voting rights in a newspaper exceeds 15%, the Secretary of State would again be required to take action.
Our policy intention has always been to prevent any foreign state influence over the affairs and policies of UK newspapers and news periodicals. Although a remote risk, we acknowledge that, in some circumstances, different state-owned investors from different states could, in theory, each acquire up to 15% of a UK newspaper enterprise. They would then be able to organise arrangements so that each was treated as a passive investor with no ability, at least on paper, to influence a newspaper in any way, but still collectively own the majority of the enterprise.
As explained, there are measures in the legislation that mean that the Secretary of State must refer a merger to the Competition and Markets Authority if they suspect that there is a joint arrangement of this kind, and the combined holding of shares or voting rights of the parties to the arrangement exceeds the 15% limit. The Secretary of State is also able to consider the range of relevant public interest considerations in the core media merger regime provided by the 2002 Act.
We also recognise the strong views expressed by Members, and in the other place, that the issue should be put beyond doubt. I can therefore confirm to the Committee that the Government intend to lay, in draft, a second statutory instrument in the autumn to amend the foreign state investment exemptions to put the issue beyond doubt. We have chosen not to withdraw the regulations before us today due to the pressing need to have the main foreign state investment exemptions in place as soon as possible. It is important in order to give UK newspapers and potential investors greater certainty about the overall regime. We will, however, publish a draft of the secondary statutory instrument for consultation by 16 July. This approach will allow time for the detailed provisions to be considered and ensure that the drafting does not create unintended consequences. The second statutory instrument would also be subject to the affirmative procedure, requiring review and approval by Parliament.
I stress that the UK has a strong track record for encouraging investment critical to growth within the media industry. These regulations ensure that the foreign state influence regime operates in a way that minimises the burden for UK newspapers while strengthening the robust regulatory framework that protects press freedom and free speech. Accordingly, I commend the draft regulations to the Committee.
Stephanie Peacock
This has been an important and interesting debate and I am grateful for the contributions by the Conservative party and the Liberal Democrats. The debate has shown the wide support across the House for stronger measures to protect UK newspapers and news periodicals. It also highlights the challenge in setting exceptions in a way that balances Parliament’s desires against the legitimate concerns about the ability of UK newspapers to raise investment if restrictions are set too tightly.
Government need to balance the importance of creating certainty and sustainability for our newspaper industry with the need to protect against the risk of foreign state influence by setting a clear threshold for exceptions within the regime at 15%. We believe that we have done that effectively. Safeguards in the legislation will prevent multiple states each investing up to 15% via state-owned investors from acquiring control or influence over the policy of a newspaper enterprise, whether acting alone or in a joint arrangement. We have listened to the concerns, however, and have committed—I commit to this again now—to further legislation to put this beyond any doubt.
To respond to the points made, we have reached a final position on thresholds due to the concerns expressed by newspaper groups about the unintended effects of the strict threshold proposed by the previous Government. We have considered those points, and we agree with the concerns to reset the level of the threshold, which is still below the level at which material influence generally arises in merger cases. The change balances the need to protect our press from foreign state influence against sufficient flexibility to support inward investment by newspaper groups that poses no risk of foreign influence or control.
I will endeavour to follow up on that letter from the shadow Secretary of State. On the question on new powers from the hon. Member for Meriden and Solihull East, there is now a duty for the Secretary of State to report to the Competition and Markets Authority if there are any concerns or uncertainty. Also, the “state-owned investor” definition will include public pension funds if they satisfy the conditions for eligibility in the legislation. I am happy to continue the conversation with Members from across the House.
Question put and agreed to.