2017-04-21 - Competition vs public interest’s protection
Merger between Sky plc and Twenty-First Century Fox, Inc: a twofold assessment
The merger between Sky plc and Twenty-First Century Fox has been assessed under the European Merger Regulation. The Commission cleared this operation. But this assessment is complemented at a national level by an evaluation on Media Plurality and commitment to broadcasting of the standards objectives set out in section 319 of the Communications Act 2003. This assessment is based under the provisions set out in the Enterprise Act 2002
The purpose of, and legal frameworks for, competition assessments and media plurality assessments are very different. The competition rules focus broadly on whether consumers would be faced with higher prices or reduced innovation because of a transaction. A media plurality assessment looks at wider concerns about whether the number, range and variety of persons with control of media enterprises is sufficiently diverse.
The European Commission has approved unconditionally under the EU Merger Regulation (Council Regulation (EC) No 139/2004) the proposed acquisition of Sky (1) by Twenty-First Century Fox (2), a US-based diversified global media company. Given that the merging companies are mainly active at different levels of the market, the Commission found that the proposed transaction would lead to only a limited increase in Sky\'s existing share of the markets for the acquisition of TV content as well as in the market for the wholesale supply of TV channels in the relevant Member States.
Fox and Sky are mainly active in different markets in the Austria, Germany, Ireland, Italy and the UK. They compete with each other only to a limited extent, mainly in the acquisition of TV content and in the wholesale supply of basic pay-TV channels. The Commission concluded that these possible concerns were not founded. This is because the parties\' audience shares remain limited and pay-TV distributors would continue to have access to content from Fox\'s competitors and alternative channels with comparable programming and audiences in the relevant Member States.
Sky could prevent competing channels from accessing its platform. The investigation found that the merged companies\' ability to shut out Fox\'s rivals was significantly mitigated by existing regulations in the UK, Germany and Austria. In addition, competitors that could have been targeted for exclusion are either contractually protected for a sufficient period of time or are not dependent on Sky\'s retail platform in the relevant Member States. Based on the results of its market investigation, the Commission concluded that the proposed transaction would raise no competition concerns in Europe and cleared 21st Century Fox\'s proposed acquisition of Sky under EU merger rules. The clearance decision is without prejudice to the UK\'s ongoing media plurality review of the proposed transaction (3).
UK media plurality review
The article 21 (4) of the EU Merger Regulation recognizes that Member States may take appropriate measures, including prohibiting proposed transactions, to protect other legitimate interests, such as media plurality, that are considered under that regulation. Under the powers set out in the Enterprise Act 2002, the UK Secretary of State for Culture, Media and Sport is able to intervene on the basis of specified media public interest considerations, which refer to the need for there to be a sufficient plurality of media ownership, for the availability of a wide range of high-quality broadcasting and for those with control of media enterprises to have a genuine commitment to broadcasting standards objectives set out in section 319 of the Communications Act 2003. She issued a European Intervention Notice (EIN) on 16 March 2017, under 67 section of Enterprise Act 2002.
The Enterprise Act 2002 (Protection of Legitimate Interests) Order 2003 (“the 2003 Order”) provides that, when a EIN has been issued, the Secretary of State may require the Competition and Markets Authority (“the CMA”) and Ofcom to provide reports on certain issues relevant to the merger and the specified public interest considerations. These authorities are required to investigate and report respectively on jurisdictional issues and on protection of legitimate interests by 16 May 2017. These reports will provide factual information on whether the proposed transaction is, or may be, against the public interest.
The Secretary of State considers the correct approach to assessing plurality to be the one adopted by Ofcom and the Competition Commission in previous plurality cases, namely that the sufficiency of plurality should be assessed “by reference to the current levels of plurality, having regard to any change in plurality that arises as a result of the acquisition”(4). This approach is appropriate in part because, as the parties themselves have noted, the past few years have seen changes to the way in which news is consumed, in particular as a result of the growth of online news sources, aggregators and the increased role played by social media. The parties contend that this has brought about a ‘remarkable’ increase in plurality. However, Ofcom has stated that caution must be exercised when considering the impact of these developments (5). The specific concern here is that the Murdoch Family Trust (MFT)’s increased shareholding in Sky may increase its ability to exercise influence over Sky News. The parties have submitted that Sky has not previously exerted influence over Sky News’ agenda, but that in itself provides no guarantee that 21CF or the MFT will not exert influence over Sky News in the future.The Secretary of State considers that the extent to which the MFT could or would be likely to influence Sky News is another issue that could usefully be investigated and reported on by Ofcom, in particular given the need for a qualitative assessment and perhaps further factual inquiries.
(1) Sky plc (Sky), the leading pay-TV operator in Austria, Germany, Ireland, Italy .
(2) Twenty-First Century Fox, Inc (Fox), one of the six major Hollywood film studios (20th Century Fox), as well as a TV channel operator (Fox, National Geographic).
(3) case number M.8354, IP/17/902.
(4) Ofcom Report on BSkyB/News Corporation, para 1.14; Competition Commission, Acquisition by British Sky Broadcasting Group plc of 17.9 per cent of the shares in ITV plc, 14 December 2007, para 5.15. Available at: http://webarchive.nationalarchives.gov.uk/20101227023510/http:/www.bis.gov.uk/files/file43218.pdf
(5) Ofcom Report on BSkyB/News Corporation, para 1.47.