The authority will take about six months to investigation whether Fox and the Murdoch family would wield too much power on the British media landscape as a result of the merger and whether they are “fit and proper” owners who would uphold local broadcasting standards.
The decision is a blow for Fox, which had counted on the deal closing by the end of the year. It now faces a delay that not only puts off its long-desired acquisition of European pay-TV giant Sky but also makes it liable to pay a hefty penalty to Sky shareholders for failing to meet the year-end deadline.
Culture minister Karen Bradley had announced Tuesday that she was “minded to” call in the Competition and Markets Authority to examine the takeover bid on both grounds of media plurality and “fit and proper” ownership, saying she was not wholly satisfied by Fox’s assurances that it would adhere to broadcasting standards. Previously, Bradley had only been inclined to send the bid to the authority for scrutiny of media plurality issues. But since that initial declaration of intent in July, opponents of the deal ramped up their criticism of Fox’s corporate governance track record, particularly allegations of sexual and racial harassment at Fox News and the news channel’s allegedly biased reporting.
On Tuesday, Bradley gave Fox and Sky 10 days to submit more comments or declarations before issuing her final decision on sending the bid to the Competition and Markets Authority. She said Thursday that they had declined to do so.
“Yesterday I received letters on behalf of both parties to the merger confirming that while they disagree with my minded-to decision, they would not be making substantive representations in relation to it,” Bradley said in a statement. “As a result, I can confirm my final decision is to refer the merger to the CMA for a Phase 2 investigation on media plurality and genuine commitment to broadcasting standards grounds. I will issue and publish my formal referral decision in the coming days.”
Fox said it had already written to Bradley “expressing disappointment that she had changed her mind” on the “fit and proper” question, against the advice of British regulator Ofcom, which had said it foresaw no problems on that score. “We now, therefore, look forward to engaging constructively with the CMA, as independent authority, and hope that the findings of this process will be respected” by Bradley, Fox said.
Sky said it would “continue to engage constructively in this process.”
Some analysts say Bradley’s decision does not seriously jeopardize Fox’s attempt to buy the 61% of Sky that it does not already own. While the in-depth review will delay closure of the deal, they say that the takeover is still likely to go through and that the Conservative-led British government, which is often accused of being too close to Murdoch, will have the political cover it needs to green-light the bid.
On Wednesday, Lachlan Murdoch, Fox’s executive chairman, called the Sky takeover his company’s “No. 1 priority.”