News Corp/BSkyB – a blow to an independent competition regime

14 July 2011

In my letter to the editor in today's Financial Times, I reported on the dangers of mixing politics with regulation.

News Corp's decision to withdraw its bid for BSkyB in many ways marks an unwelcome watershed in terms of UK merger control policy.  It is difficult to see the events of this week as anything other than unwelcome political interference in the legal and regulatory process.

The Enterprise Act has a number of safeguards to ensure that the Government retains final decision making powers over mergers which give rise to public interest considerations. This applies irrespective of whether the merger falls under national UK legislation or, as here, under the exclusive jurisdiction (as regards competition implications) of the European Union Merger Regulation. The proper process requires the Secretary of State to issue an intervention notice setting out the relevant public interest considerations. In this case, the intervention notice was issued in November of last year, stating that the public interest consideration was the need to ensure a 'sufficient plurality of persons with control of media enterprises' in the UK.

The process envisages two stages, with the Secretary of State seeking advice first from the specialist media regulator (Ofcom), on whether the transaction may be expected to operate against the public interest taking into account only the relevant public interest consideration identified in the Secretary of State's intervention notice. On the basis of that advice, the Secretary of State must decide whether to clear the transaction or to seek a reference to the CC for a further in-depth inquiry. The CC is required to answer the same question, but has the advantage of basing its final report and advice on an in-depth investigation lasting 24 weeks (or in certain circumstances up to 32 weeks). However, the final decision rests with the Secretary of State who must ultimately decide whether to make an adverse public interest finding.

The CC could and should have started with a blank canvas and up to 8 months to reach its decision based on an in-depth investigation. Yet despite the legal safeguards in placing responsibility for the report in the hands of an independent regulator, there is little doubt that the Secretary of State would have been placed in an impossible position had Parliament already voted on a motion that the takeover was against the public interest.

The real loser in this debate is arguably not Rupert Murdoch or News Corp but rather the independence of our competition regime.

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