Hunt and News International: a market abuse angle

Was there a wrongful disclosure of price sensitive information?

One potential issue for Culture Secretary Jeremy Hunt and his former special adviser Adam Smith in the developing scandal of how the News International bid for the remaining shares of BSkyB was handled is the possible application of the law relating to the unauthorised disclosure of market sensitive information.

As the BBC’s Business Editor Robert Peston blogged this morning
 
Many of the emails by News Corp's director of public affairs, Fred Michel - which were published yesterday - speak to this point. But I will simply look at the one sent to James Murdoch on 24 January which contains the resonant phrase (in bold), "managed to get some infos on the plans for tomorrow (although absolutely illegal..>!)."
 
This discloses to James Murdoch that Mr Hunt would make a press statement at 7.30am and a statement to parliament at 9.30am.
 
This statement would confirm that Ofcom felt the BSkyB takeover would harm plurality and should be passed to the Competition Commission - but would also say that News Corp would be given an opportunity to come up with remedies (or undertakings in lieu, to use the jargon), to prevent the Commission investigation.
 
Now Mr Hunt's planned statements to the press and parliament were confidential and price sensitive (with a bearing on the share prices of BSkyB and of News Corp). I know this because the DCMS said this to me, explicitly, at the time.
 
But Mr Michel had learned what Mr Hunt would say, from Mr Smith (or so Mr Michel says). And Mr Michel was discussing Mr Hunt's planned statement with Mr Murdoch at 3.21pm, the time of the email, or while markets were still open. 
 
So, on the face of it, Mr Michel and Mr Murdoch should not have been given this information, or at least not without signing a formal confidentiality agreement.
 
Mr Michel implied, with his "absolutely illegal" comment, that no confidentiality agreement had been signed.
 
Now it may be that the transmission of this information was covered by some general duty of confidentiality. But it does all look a bit odd.
 
The wrongful disclosure of market sensitive information can come under the prohibition on various market abuses in the Financial Services and Markets Act 2000 (FSMA), which in turn can lead to rigorous enforcement action by the Financial Services Authority (FSA).
 
The FSA refused to comment on any particular case, and it also would not confirm whether any complaint about Hunt or Smith has been made.
 
Today Hunt told parliament that he is looking forward to giving his side of what happened to the Leveson Inquiry.  It may well be that concerns of an unauthorised disclosure are baseless. 
 
But given the robust policy of the FSA in respect of possible market abuses, Hunt may need to explain exactly how the information Michel was providing to James Murdoch  was not gained through an unauthorised disclosure contrary to the FSMA.
 
David Allen Green is legal correspondent of the New Statesman
 
Many thanks to Patrick Osgood.
Is the sun still shining for Jeremy Hunt? Photograph: Getty Images

David Allen Green is legal correspondent of the New Statesman and author of the Jack of Kent blog.

His legal journalism has included popularising the Simon Singh libel case and discrediting the Julian Assange myths about his extradition case.  His uncovering of the Nightjack email hack by the Times was described as "masterly analysis" by Lord Justice Leveson.

David is also a solicitor and was successful in the "Twitterjoketrial" appeal at the High Court.

(Nothing on this blog constitutes legal advice.)

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The EU’s willingness to take on Google shows just how stupid Brexit is

Outside the union the UK will be in a far weaker position to stand up for its citizens.

Google’s record €2.4bn (£2.12bn) fine for breaching European competition rules is an eye-catching example of the EU taking on the Silicon Valley giants. It is also just one part of a larger battle to get to grips with the influence of US-based web firms.

From fake news to tax, the European Commission has taken the lead in investigating and, in this instance, sanctioning, the likes of Google, Facebook, Apple and Amazon for practices it believes are either anti-competitive for European business or detrimental to the lives of its citizens.

Only in May the commission fined Facebook €110m for providing misleading information about its takeover of WhatsApp. In January, it issued a warning to Facebook over its role in spreading fake news. Last summer, it ordered Apple to pay an extra €13bn in tax it claims should have been paid in Ireland (the Irish government had offered a tax break). Now Google has been hit for favouring its own price comparison services in its search results. In other words, consumers who used Google to find the best price for a product across the internet were in fact being gently nudged towards the search engine giant's own comparison website.

As European Competition Commissioner Margrethe Vestager put it:

"Google has come up with many innovative products and services that have made a difference to our lives. That's a good thing. But Google's strategy for its comparison shopping service wasn't just about attracting customers by making its product better than those of its rivals. Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.

"What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation."

The border-busting power of these mostly US-based digital companies is increasingly defining how people across Europe and the rest of the world live their lives. It is for the most part hugely beneficial for the people who use their services, but the EU understandably wants to make sure it has some control over them.

This isn't about beating up on the tech companies. They are profit-maximising entities that have their own goals and agendas, and that's perfectly fine. But it's vital to to have a democratic entity that can represent the needs of its citizens. So far the EU has proved the only organisation with both the will and strength to do so.

The US Federal Communications Commission could also do more to provide a check on their power, but has rarely shown the determination to do so. And this is unlikely to change under Donald Trump - the US Congress recently voted to block proposed FCC rules on telecoms companies selling user data.

Other countries such as China have resisted the influence of the internet giants, but primarily by simply cutting off their access and relying on home-grown alternatives it can control better.  

And so it has fallen to the EU to fight to ensure that its citizens get the benefits of the digital revolution without handing complete control over our online lives to companies based far away.

It's a battle that the UK has never seemed especially keen on, and one it will be effectively retreat from when it leaves the EU.

Of course the UK government is likely to continue ramping up rhetoric on issues such as encryption, fake news and the dissemination of extremist views.

But after Brexit, its bargaining power will be weak, especially if the priority becomes bringing in foreign investment to counteract the impact Brexit will have on our finances. Unlike Ireland, we will not be told that offering huge tax breaks broke state aid rules. But if so much economic activity relies on their presence will our MPs and own regulatory bodies decide to stand up for the privacy rights of UK citizens?

As with trade, when it comes to dealing with large transnational challenges posed by the web, it is far better to be part of a large bloc speaking as one than a lone voice.

Companies such as Google and Facebook owe much of their success and power to their ability to easily transcend borders. It is unsurprising that the only democratic institution prepared and equipped to moderate that power is also built across borders.

After Brexit, Europe will most likely continue to defend the interests of its citizens against the worst excesses of the global web firms. But outside the EU, the UK will have very little power to resist them.

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