In an apparent setback for Rupert, Lachlan and James Murdoch’s $14.8 billion bid to take total control of Europe’s profitable Sky satellite television and online company, British authorities on Thursday delayed the merger for further study.
But the holdup could prove only temporary if Tory MP Karen Bradley—the U.K.’s secretary of state for culture, media and sport—ultimately accepts the Murdochs’ as-yet unmade promises to take as-yet unknown measures to allay public concerns that the acquisition would give the moguls too much power over the British media landscape.
The transaction would increase the Murdochs’ Sky holdings from 39 percent to 100 percent. Measured in total audience reach, if the Sky deal goes through, the Murdochs would end up controlling three of the U.K.’s top 15 news sources across all platforms, including television, radio, newspapers and the Internet.
The 86-year-old Rupert Murdoch badly wants this deal. It would restore his ownership of a business, Sky, that he founded in 1989 when it was a visionary gamble. Sky is not only one of the most influential operators of pay-TV channels in Europe, it is also a highly-regarded journalistic organization, a worthy competitor to the BBC.
Bradley gave the Murdochs until July 14 to offer solutions to those concerns. In today’s ruling, Bradley said she had rejected various “undertakings” proposed thus far by the Murdochs to assure Sky’s continued editorial independence as insufficient to address the problem of overpowering media domination.
Bradley’s carefully parsed announcement, in a statement to Parliament, was greeted with suspicion by opponents of the merger, notably the global citizens advocacy group Avaaz, which has been campaigning aggressively against it.
“Karen Bradley should make this decision based on what’s best for the British people, not Rupert Murdoch,” said Avaaz campaign director Alex Wilks. “If the government green lights the deal based on more empty Murdoch promises, we’ll look hard at a legal challenge to protect our democracy.”
But in an undiminished victory for the Murdochs’ multimedia media empire 21st Century Fox, Bradley said she won’t block the merger based on allegations that the parent company of scandal-plagued Fox News isn’t a “fit and proper” enterprise or has violated broadcasting standards.
Ofcom, Britain’s communications regulator, detailed the various Fox News scandals in its report to Bradley—especially those involving Fox News founder Roger Ailes and its biggest star Bill O’Reilly—but suggested that the cable outlet was trying to clean house; Ofcom provisionally concluded that the scandals weren’t disqualifying.
Bradley agreed, despite multiple lawsuits in the United States portraying 21st Century Fox’s right-leaning cable outlet—under the late, disgraced Ailes as the enabler of a toxic corporate culture that tolerated executive misconduct, racial discrimination, spying on employees, and payments to cover up the sexual harassment of women.
“While there are strong feelings among both supporters and opponents of this merger,” Bradley declared in her statement to Parliament, “in this quasi judicial process, my decisions can only be influenced by facts, not opinions—and by the quality of evidence, not who shouts the loudest.”
Ofcom’s report to Bradley concluded that Fox News, for all its apparent malfeasance, wouldn’t tarnish Sky in a merger because there’s “a high threshold to finding a broadcaster unfit and improper”—a determination that would prompt the revocation of its license to operate.
As for meeting recognized broadcast standards, “Fox’s and Sky’s records of compliance are in line with other broadcasters. However, Fox News failed to put in place regulatory compliance procedures; that is a serious weakness, only recently rectified,” Ofcom stated, adding that “extremely serious and disturbing…allegations of sexual and racial harassment at Fox News” are for U.S. courts to decide, not Ofcom.
The proposed acquisition by 21st Century Fox “raises public interest concerns as a result of the risk of increased influence by members of the Murdoch Family Trust over the UK news agenda and the political process, with its unique presence on radio, television, in print and online,” Ofcom said in its report to Bradley, which recommended that she refer the merger to Britain’s Competition and Markets Authority for an investigation of the “media plurality” impact of the transaction .
Bradley told Parliament: “The reasoning and evidence on which Ofcom’s recommendation is based are persuasive. The proposed entity would have the third largest total reach of any news provider - lower only than the BBC and ITN—and would, uniquely, span news coverage on television, radio, in newspapers and online. Ofcom’s report states that the proposed transaction would give the Murdoch Family Trust material influence over news providers with a significant presence across all key platforms.”
But Bradley indicated that 21st Century Fox could avoid a detailed and time-consuming investigation if the company’s new undertakings are deemed acceptable.
“I am required by legislation to allow the parties the opportunity to make representations to me on this position before I reach a final decision,” she said.
Britain’s opposition Labour Party, freshly reenergized by gains in the recent election that left Tory Prime Minister Theresa May severely weakened, signaled that the government’s handling of the Murdochs’s bid will be a target-rich political issue.
“If the executives who ran a company involved in systematic and widespread criminality, including phone hacking and police bribery, can pass a fit and proper test, it begs the question – is the test itself fit for purpose?” Labour said in a statement, citing a previous Murdoch media scandal that provoked public outrage, Parliamentary hearings, criminal prosecutions, and the shutdown of the popular News of the World after disclosures that the tabloid’s reporters had illegally intercepted the cell phones messages of, among dozens of others, a murdered schoolgirl named Millie Dowler.
That scandal seven years ago thwarted the Murdochs’ previous bid to take over Sky, and resulted in the momentary sidelining of the executive considered by many most responsible for the debacle—21st Century’s Fox’s current CEO, James Murdoch.
Labourite House of Lords member David Puttnam, the legendary movie producer, added his own concern in a statement:
“One question does not seem to have been addressed and that is the scale and nature of the commercial and political benefits that could accrue to the Murdoch family from access to Sky’s vast database of almost thirteen million households in the U.K. and Ireland. This could represent unaccountable power of a very different order to that which has ever existed in the past.”Claire Enders, a widely-respected media analyst, told The Daily Beast: “This is a time when there is an entirely new level of political risk. The avoidance of controversy is a priority.”
Enders said Karen Bradley has purposely left open two options to avoid arousing the elder Murdoch’s wrath. The first is giving him the chance to make the July 14 deadline with more concessions on the independence of Sky News to avoid the “media plurality” probe.
The second option is to pass the issue to the Competition and Markets Authority with a wink and a nod, with the expectation that the agency will ultimately clear the deal. The CMA has a reputation of leniency, following a long-standing Tory policy of “soft touch” financial regulation.
New York attorney Douglas Wigdor, who is representing two dozen plaintiffs in racial discrimination and sexual harassment lawsuits against Fox and recently met with Ofcom in London to make his case against the deal, told The Daily Beast: “In its bid to salvage the merger, Fox has represented to Ofcom that no executive director was aware of any allegations of sexual and racial harassment at Fox News prior to July 2016. I can assure you that the veracity of that statement will be probed in our current litigations.”