BSkyB: proposed merger
The Secretary of State has concerns about the impact on plurality of the media; indeed there has been a more general concern about decreasing plurality in the media. Whilst normally the Enterprise Act 2002 would apply, things are a little bit more complicated due to the possible application of the EC Merger Regulation (Regulation 139/2004). ‘Concentrations’ with a ‘Community dimension’ as defined in the Regulation fall within the scope of the regulation rather than national law. Thus Article 21(3) of the Regulation on the face of it precludes the Office of Fair Trading (OFT) from making a reference to the Competition Commission under section 33 of the Enterprise Act, although the acquisition of the BSkyB shares would result in a ‘relevant merger situation’, as defined in s. 23 Enterprise Act.
Article 21 of the Regulation, however, permits national governments to take action to protect legitimate interests. S. 67 Enterprise Act gives the Secretary of State power to make an intervention notice in such a case; here, the intervention notice in respect of News Corp/BSkyB makes clear, as required by s. 67(3)(b) Enterprise Act that the Secretary of State has concerns regarding plurality of the media as identified in s. 58 Enterprise Act (provisions inserted by the Communications Act 2003). As a result of the intervention notice, both the OFT and Ofcom will investigate and report on the merger following the Enterprise Act 2003 (Protection of Legitimate Interests) Order 2003 (as amended). Consequently, Ofcom’s responsibility will be to report to the Secretary of State on the relevant media public interest consideration whilst the OFT will advise on jurisdiction. Whilst the UK has asserted its right to protect legitimate interests, neither the OFT nor Ofcom will consider competition matters generally; this remains the responsibility of the European Commission, although Article 9 of the Merger Regulation would allow the OFT to seek the repatriation of the competition aspects of a case, in certain circumstances. From the BIS press release, it seems that this has not been do in this case. Indeed, OFT guidance suggests that where such repatriation is envisaged, the Secretary of State should delay issuing an intervention notice so as to avoid procedural confusion.
Ofcom has said that an invitation to comment will be published today, 5th November, with a deadline of 19th November with a deadline to report to the Secretary of State of 31st December 2010. Ofcom has issued a guidance note as to how it will proceed. Essentially, after consulting relevant parties and stakeholders, Ofcom will form a preliminary view as to whether public interest issues are engaged. If so, it will write an ‘issues letter’ to the parties to which they may respond – either in writing or at a meeting. Thereafter, Ofcom will finalise its report. The Secretary of State will then have to decide whether to refer the matter to the Competition Commission.
According to BIS, the European Commission in its parallel procedure will report earlier: 8th December. At European level the issue is not media plurality, but normal competition law (or anti trust) and the issues raised here are probably going to have easier fixes than the questions raised within the UK on plurality.
Some commentators have suggested that the advice that Ofcom gives may be influenced by Ofcom’s own position given the public spending cuts, and it may want to prove a point. At a more political level, it is suggested (in a slightly confused article) that in listening to the various representations on this subject (including a letter from among others BBC, BT, Guardian Media, Daily Mail and Channel 4), (for a press report see here) Vince Cable is doing no more than “throwing a bone” to LibDem backbenchers, and that in the end the deal will go through. Certainly, given the Competition Commission has in its previous investigation into BSkyB and News Corp (regarding the acquisition of ITV shares) found that News Corp effectively owned BSkyB, one might be tempted to ask, ‘What has changed?’. Time will tell!