Sky and 21st Century Fox: Proposed Merger

Lord McNally Excerpts

Monday 6th March 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am obliged to the noble and learned Lord for repeating the Secretary of State’s Statement in another place. I am also very grateful to the Secretary of State for coming at what I think must be the earliest possible moment, because she said that she received notification of this only on Friday 3 March. It is very good that she was able to come so quickly. I also put on record our thanks to her for attending a meeting convened by the noble and learned Lord last week where a number of Peers from all sides of the House were able to ask her questions and examine a bit more closely some of the issues that relate primarily to the Digital Economy Bill but also to this subject.

My first question is about who is caught by the quasi-judicial mode, which was mentioned several times by the noble and learned Lord. The Statement refers to the Secretary of State and the Government. Will the noble and learned Lord confirm or deny whether that is departmental Ministers in DCMS or whether there are any other Ministers involved? I will be interested to know to what extent we are able to ask questions and gain answers over this period, which may last a number of weeks.

An important point is that the Statement does not cover the corporate structure which we are now facing with this proposed merger. We know that 21st Century Fox indicated on 9 December that it was making a takeover approach for Sky. It already owns just over 39% of Sky shares, so it is the balance of the shareholding. We know that, after a period of pre-discussion and debate, the European Commission was formally notified of the bid on Friday 3 March. It is important to get it right because there have been changes since we were in this process six years ago. 21st Century Fox is one of two successor companies of News Corporation, which was split up in 2013. It is important that we recognise that Fox is the legal successor of News Corporation and deals primarily with the film and television industries and another company, new News Corp, is a new company focused on newspapers and publishing that was spun out of News Corporation. In the UK, new News Corp owns the Sun, the Times and the Sunday Times. The point is that, although the corporate vehicle under which the acquisition is being made is 21st Century Fox, it is common understanding that the same principles are involved on both sides of that split and therefore the inquiry needs to take account of that. From what the Secretary of State has said, I think there is a willingness to go a little bit further than the straightforward 21st Century Fox approaching Sky. I will be grateful if the noble and learned Lord can respond to that at this stage.

The Secretary of State made the point that there are two dimensions to the inquiry that she is minded to look at. One is plurality. The point was made that, if this bid is successful, it will put an even greater amount of media power in the hands of the Murdoch family in particular and the people involved. Ofcom therefore needs to look at the whole of the group of Murdoch companies in assessing whether the Sky takeover would threaten media plurality. That is a very important aspect in relation to what I have just said about the ownership and control of the family companies that are involved.

The world has changed since 2010-11 when we last looked at this, and Ofcom will need to range much more widely across the media and look at not just newspapers and traditional news delivery through broadcasting but at social media, news aggregators and others from which news is taken. This is quite a substantial change in operation, and I will be grateful if the noble and learned Lord has any observations on whether the resources that are available to Ofcom will be sufficient to cope with that new approach and challenge.

The second ground on which the Secretary of State says she is minded to intervene is on commitment to broadcasting standards. I notice that this section of the Statement is quite carefully phrased. The convention is to refer to the fit and proper test required under the Broadcasting Acts for those who hold a broadcasting licence. Sky holds a broadcasting licence and therefore the controllers of Sky have to be fit and proper persons. The narrow point here is the extent to which that is focused as a process on individuals who may or may not be the named licence holders or on the corporate structure within which they operate. I would be grateful if the noble and learned Lord can confirm that the intention, even though it is not explicit in the Statement, is to look at not only at the individuals but at the corporate structure within which they operate because clearly there are issues on both sides of that.

This is a very important issue, which we will return to in a few days when we understand more about the European intervention notice and whether or not that has been called, and also the extent to which Ofcom will report and whether or not that Ofcom report will lead to further work by the CMA. It is important we get some of the facts on the table now, and I look forward to hearing further from the noble and learned Lord.

[Lord McNally (LD)]

My Lords, from these Benches, I welcome both the speed and tone of the Statement from the Secretary of State. She has been careful to keep to the legal niceties, although any reading of this would welcome what she considers the merits of the case, particularly, as has been said, her emphasis on media plurality and the commitment to broadcasting standards. These were at the heart of the debate we had over a decade ago—putting into legislation the right to intervene on public interest grounds—led by my noble friend Lord Puttnam, with the support of the noble Lord, Lord Lansley.

It is important to remember that, if anything, the arguments we had then which finally persuaded the then Government to accept the public interest test have got stronger over the last decade, in no small measure because of the behaviour of companies and organisations in which Rupert Murdoch has had an influence. We now face that problem again. Does the noble and learned Lord agree that this is still a major issue with the Murdoch empire in particular, and given the need to take on board how these companies change their structures without really ever changing the spider at the heart of the web?

The other, equally important point, as has been said, is the changes in broadcasting and media over the last decade. Mr Murdoch may play a big part in many ways, but he will soon be a small player compared to some of the giants wandering the media jungle. Does the Minister agree that the danger is that, if we get this wrong, we will set precedents which, when those big boys come along, will leave us in a very weak position in defending the very principles the Secretary of State so eloquently expressed in the Statement?

[Lord Keen of Elie]

I am obliged to the noble Lords, Lord Stevenson and Lord McNally, for their observations, and will seek to respond to some of the points they have raised. The noble Lord, Lord Stevenson, asked “whose court”, as he put it, deals with this quasi-judicial decision-making process. It will be for the Secretary of State to carry out that process, with the appropriate officials advising her. It will not involve other government departments or Ministers; it will be her decision and her decision alone that instructs this matter. I hope that reassures the noble Lord as to how the process will be carried on.

As for the corporate structures and the past involvement of News Corporation, as the Secretary of State indicated in the Statement, when we address the question of commitment to broadcasting standards, account will be taken of past breaches of those and of behaviour and corporate governance failures, including those relating to News Corporation.

Ofcom, of course, has a fit and proper person test, but that applies in respect of broadcasting licences rather than this issue. It is a different test to the one that will be considered with regard to the merger, but it is important to bear in mind that the same evidence may of course be relevant to both tests. As the Secretary of State set out in her letter, she considered that a number of relevant matters warranted further investigation, including facts that led to the Leveson inquiry, for example, and the question of corporate governance at the News of the World. It will be open to Ofcom to look at all relevant areas—none are being ruled out in this context. The ultimate question will be whether the bidder shows a genuine commitment to broadcasting standards, which will raise very real and relevant questions with regard to past behaviour.

The noble Lord, Lord McNally, asked whether we might be in danger of setting an unhealthy precedent, given the other tests that may be put before us in due course by other media outlets. With respect, I do not consider that this decision-making process involves the setting of precedents. Each of these proposals will be considered on its individual, stand-alone merits. I hope that provides some reassurance to noble Lords.