Sky and 21st Century Fox: Proposed Merger

Debate between Lord McNally and Lord Stevenson of Balmacara

Thursday 16th March 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am obliged to the noble and learned Lord for repeating the Statement made in the other place. On this side of the House we welcome the decision that has been reached, that having been minded to go ahead with a full referral, the Secretary of State today confirmed that that is what she is doing. That is entirely right and appropriate. It is perhaps worth mentioning in the process, as alluded to in the Statement, that 21st Century Fox also welcomed the referral. That needs no further comment from me.

The two grounds on which the referral is made are broadcasting standards and the question of being a fit and proper person. I will deal with them both and ask a couple of questions around them. The broadcasting standards ground is a relatively new departure in this area because previous referrals have been done on much narrower grounds. Broadcasting standards is a very broad term but I welcome this. It is right that the consideration of this merger, since it involves a global media company, needs to engage with all areas that might affect the plurality of sources of information but also the entertainment and other features of the broadcasting world today. Will Ofcom have the power to investigate all corporate governance issues affecting 21st Century Fox, including anything that may arise from the phone-hacking scandal, any cover-up of illegality at News International, the rehiring of people responsible for corporate governance failures and ongoing sexual harassment claims currently being heard by a grand jury in the United States which, if proved to be the case, might lead to withdrawal of that company’s licence to broadcast there?

Secondly, plurality is a term that probably needs to be reinterpreted as technology has moved on considerably since the first time this issue was raised in the events of 2010-11. The work done at that time by Ofcom, which involved a 40-day period of investigating similar but not necessarily the same issues, resulted in a report provided to the Secretary of State. The Secretary of State has the power to publish that report but, as far as I can understand, that has not yet been published. Can the report now be made available, since it clearly bears on the issues before us? Whether or not it is published, can and will the issues raised in that report by Ofcom with the then Secretary of State be considered in the work going forward at this point?

I welcome Ofcom’s announcement that it will conduct the assessment under the fit and proper regulations at the same time as the other work it has been commissioned to do, so that we have a timetable of 40 days. That may prove a bit challenging given the amount of material that must be covered but it is important that we do so. The question of the “fit and proper” assessment is undefined in the legislation and it may be that there are, as we discussed in the Digital Economy Bill before your Lordships’ House, questions raised about exactly what tests are required for this. In some ways, it may be appropriate to reconsider those, and we may be able to find time in the remaining stages of that Bill to do so. Today, could the noble and learned Lord confirm that while the report issued after the fit and proper assessment at the time of the last merger investigation was largely couched in terms of directorial duties, this report will deal with not only individuals but the corporate structures within which they operate and that the level at which “fit and proper” persons are concerned will be adjusted to make sure that it covers the responsibilities inherent in a corporate as opposed to an individual structure?

Many of the questions I raise today and which are raised more generally by the approach that the Government are taking—which, as I said, we welcome—would have been considerably aided had they been informed by the work that could have been done under part 2 of the Leveson inquiry. That has been delayed and, for reasons that the Secretary of State gave at a recent meeting in this House, cannot be reopened until such time as judicial processes going forward are complete. I understand that and do not seek to raise any questions about it. But I put it to the noble and learned Lord that the issues that are likely to be part of that review will be germane to what we are discussing today, and I wonder if he has any comments on that.

Finally, on the question of powers, the founding document for the investigations being announced today is the Enterprise Act 2002. The current thinking is that sufficient powers to carry these out are available to Ofcom and the CMA under the different regulations that affect them. But will the Minister confirm that the Ofcom investigation has the power to obtain documents and compel witnesses to appear before it? That power is available to the CMA but may not be explicit in the regulations that are operating this investigation.

[Lord McNally]

My Lords, I, too, welcome the Statement and the way that the Secretary of State is approaching her responsibilities in this regard. The big problem is that we have been here before. In many ways, we are dealing with an issue that we have faced many times—since the end of the war there have been five royal commissions on the press, and Leveson—and yet we still have these concerns about power and influence.

I am still haunted by the word that Mr Murdoch used at the height of the hacking scandal when he appeared before the Select Committee and said it was the humblest day of his life. I always thought that that was an odd word to use. It is not humbling, it is not regretting, it is not “I am going to mend my ways”. In fact, everything that has happened since has warned us that there has been no change in the approach.

Can the Minister tell us what were the points that Fox contested? It would be interesting to know how it contested what we thought a week ago was a very good Statement. As the noble Lord, Lord Stevenson, said, where does this sit in the timetable of other decisions to be made about Leveson 2 and about setting up one of the great prizes of Leveson—a genuine, low-cost arbitration system under Section 40? It is important that we look at this in a holistic way, not a siloed way. I also worry about the 40-day time limit. We should not put false timetables on these decisions because we will be stuck with them for a very long time.

I welcome the Secretary of State’s emphasis on her assurances about respecting her quasi-judicial authority. Will the Government also guarantee that any meeting or communication between Mr Murdoch and the Prime Minister, or their emissaries, is made immediately public, as well as the record of any meetings that do take place? There is a long record of Mr Murdoch having access outside the direct ministerial responsibilities, in all the jurisdictions in which he operates.

The wording of the Statement gives us confidence but will the Minister assure us that we are in a process which is going to satisfy somebody he will be well aware of—the man or woman on the Clapham omnibus? When we get to the end of this process, will it feel right? Will it smell right? Will it look right? If it does not, we will have created another problem that we will have to face further down the road.

Sky and 21st Century Fox: Proposed Merger

Debate between Lord McNally and Lord Stevenson of Balmacara

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?