The business secretary Vince Cable has referred a proposed buyout of BSkyB by Rupert Murdoch’s News Corporation to the media regulator Ofcom.
News Corp, led by chief executive Rupert Murdoch, is proposing to buy the 61 per cent of the British satellite broadcaster it does not already own for £7.8bn to consolidate a business it helped build. BSkyB’s non-executive chairman is Mr Murdoch’s son, James Murdoch.
The US media conglomerate also owns The Times and The Sun, which supported Prime Minister David Cameron during this year’s election campaign.
Given News Corp’s vast influence in Britain, there had been mounting public pressure on the government to vet the deal because of concerns it would affect the plurality of opinion of the UK’s media.
“On the basis of the information and submissions available to me, I have decided that it is appropriate to issue an intervention notice in this particular case,” business secretary Vince Cable said in a statement.
“The independent experts at Ofcom will now investigate and report to me on the media plurality issues that may arise from this proposed acquisition.”
This really comes down to whether BSkyB currently has a material degree of independence. Oliver W Bretz, lawyer Clifford Chance
The notice requires that Ofcom investigates the public interest consideration of media plurality that arises from News Corp’s proposal and that it submits a report on this by 31 December.
News Corp has maintained the deal would not have a detrimental impact on the British media: “News Corp is confident that the proposed investment will not adversely affect media plurality in the United Kingdom and looks forward to discussing any substantive issues with the relevant authorities,” the company said in statement.
There was support for the referral from the shadow culture secretary Ivan Lewis, who said: “Rupert Murdoch and BSkyB have been a force for good in improving the quality of broadcasting for British consumers and stimulating investment in our creative industries.
“But the Murdoch empire has sometimes crossed reasonable boundaries with over-zealous business practices and the assertion of political power.
“There is a case to answer, and the public interest can only be determined through proper scrutiny by the competent authorities.”
Mr Lewis added: “It is important for democracy in Britain that the power to influence opinion and shape debate is in the hands of a broad range of organisations and prevents any one organisation dominating the landscape.”
'Either way it seems David Cameron had no choice'
Business Correspondent Siobhan Kennedy
Vince Cable had said he would give himself two weeks after News Corporation submitted its formal bid for BSkyB to the European Commission before making a decision about whether or not to press ahead with his own probe into the proposed deal.
In reality it took him less than a couple of hours! No sooner had James Murdoch filed the 1,000 page document with regulators in Europe, Mr Cable sent his own "intervention" decision to Ofcom, the media regulator here, in the UK.
By referring the deal to Ofcom, Mr Cable has signalled that he believes Rupert Murdoch's plan to buy out the rest of Sky that he doesn't already own would, potentially, reduce the number of "voices" in the UK's media market. At least, that's the signal. Whether or not he actually believes that, or is simply throwing a bone to his backbench Lib Dem colleagues isn't clear.
Either way, it's a coup for the gaggle of newspapers - the BBC and BT - that jointly wrote to the secretary of state and urged him to block the deal. When News Corp first announced its plans to buy the 60.1 per cent of Sky it doesn't own, in June, most people's reaction was "I thought he owned the whole thing already?"
So in that sense, Mr Murdoch's rivals have done well to place it front and centre of Mr Cable's agenda and to succeed in kicking up such a fuss. At the very least, there will be formal investigation into the inner workings of the Murdoch empire and the power it wields, which will no doubt infuriate many.
But where it goes from here is unclear. Remember there is already an ongoing Competition Commission investigation into the deal - on the grounds the merger of News Corp and Sky ticks a number of the boxes (combined revenue and so on) required to kickstart a probe in Europe.
And then there is the awkward fact that when Ofcom carried out the only other investigation into media plurality in the UK - when BSkyB bought a stake in ITV in 2007 - it ruled that News Corp effectively controlled BSkyB. Will it now be hard for them to conclude the opposite? On the face it, the answer has to be yes, although sources close to the regulator today stressed that deal was then and this is now...
Either way, it seems that David Cameron - not exactly an enemy of the Murdoch family (The Times, Sunday Times, The Sun and News of the World all endorsed the Conservatives in May's general election) had no real choice in allowing Vince Cable to press ahead with his intervention. To overrule Mr Cable, or to be seen to waive the complex and controversial merger through without so much as an eyebrow being lifted would have left him open to all sorts of accusations of Mr Murdoch pulling the strings.
The tricky part will come if Ofcom rules that there are media plurality issues and recommends the deal be passed to European regulators. Then things could start to get very uncomfortable.
News Corp officially informed the European Union of its proposal on Wednesday, and EU competition regulators will also examine the matter on competition grounds because of the size of the buyout and will decide by 8 December whether to clear the bid. BSkyB shares dipped 0.1 per cent to 705 pence earlier this morning, although some analysts have said that it was likely that News Corp will ultimately get its way and get full control of BSkyB.
“The market still believes that the deal will go through,” said Conor O’Shea, an analyst at broker Kepler. Lawyers also said the decision was not surprising given the degree of political interest and outright opposition from certain quarters, including executives from the BBC, the Daily Mail, The Guardian newspaper and Channel 4, who all signed a letter calling for the business secretary to investigate the proposed buyout.
Oliver W Bretz, a partner at law firm Clifford Chance, said Ofcom would only focus on the plurality issues as the European Commission was responsible for the competition side:
“This really comes down to whether BSkyB currently has a material degree of independence,” he said.
The government will decide whether to refer the matter to the UK’s Competition Commission after receiving the Ofcom report.
BSkyB and News Corp first said in June that they were in talks about a possible takeover. News Corp, which owns 39 per cent of BSkyB, proposed paying £7.8bn or 700 pence per share, for the BSkyB stock it does not own.