British regulators have dealt a blow to 21st Century Fox’s planned £11.7 billion (Dh59.8bn) takeover of Sky, saying the deal is not in the public interest because it would give the global media mogul Rupert Murdoch and his family “too much control” over the country’s media.
The Competition and Markets Authority (CMA) said: “While there are a range of other news outlets serving UK audiences, the CMA has provisionally found that they would not be sufficient to moderate or mitigate the increased influence of the Murdoch family Trust if the deal went ahead.”
The CMA said a deal would cede too much control over news providers across all media platforms, and therefore too much sway “over public opinion and the political agenda”.
However, the regulator suggested possible “remedies”, which could enable the deal to proceed, including selling Sky News, or seeking to “insulate” it from the Murdochs’ influence.
It also hinted it may reconsider its decision once Disney’s purchase of most of Fox – including its existing stake in Sky – goes through. This would “significantly weaken” the Murdochs’ links with Sky, making concerns over media plurality “fall away”.
Disney last month announced a US$52.4bn deal to buy Fox’s entertainment assets, including Fox’s current 39 per cent stake in Sky.
“The Disney/Fox transaction, if completed, would significantly weaken the link between the Murdoch family Trust and Sky, which is at the root of our provisional concerns about media plurality,” the CMA said.
“Consequently, on the face of it, these concerns would fall away if the Disney/Fox transaction went ahead as announced.”
However, that deal is unlikely to be completed before Britain’s review of the Sky deal is wrapped up. Therefore, the regulator said, it could not take the second merger into account in its inquiry.
21st Century Fox welcomed the report but added it was “disappointed” by the ruling.
Fox bid two years ago for the 61 per cent of Sky it does not already own, following a failed earlier takeover attempt.
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The Murdochs want to consolidate their control over the pan-European satellite TV juggernaut as media companies try to combine content creation and distribution channels amid pressure from competitors such as Netflix, Google and Amazon.
The Sky deal has already been approved by European authorities. However, it has been hit by unexpected regulatory delays in the UK because of the family's widespread media holdings, including newspapers such as The Times and The Sun.
The Murdoch Family Trust is the largest shareholder in Fox and News Corp. Sky operates an UK news channel as part of its European pay-TV business.
The UK government referred the matter to the regulator for an in-depth inquiry last September because of concerns about media plurality and broadcasting standards.
Meanwhile, Sky said it took note of the authority’s preliminary ruling, but also highlighted the possible remedies.
"Sky News is possibly the unintended victim of this whole saga," Alex DeGroote, a media analyst at Cenkos Securities, told The National. "The sale, closure or ringfencing of Sky News is a real possibility now."
“But the reality is, the Fox/Sky deal has been superseded by the Disney deal,” he said. “The Disney deal forms, in a way, a natural antidote to a lot of the regulator’s concerns about the Murdochs’ influence.
“If the Disney deal wasn’t going on, it’s pretty clear by now that the Fox/Sky deal wouldn’t happen – and I think even the Murdochs have accepted this.
“Whatever happens, the anti-Murdoch brigade will certainly feel vindicated by the CMA’s rulings today.”
The CMA’s decision will be finalised by May 1, when the regulator will send its report to the secretary of state for culture, media and sport, who will make a final decision on the deal.