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12 September 2017

The Murdochs’ bid for Sky just hit a £100m bump in the road

The unexpected decision to get regulators to look at broadcasting standards makes a deal more uncertain.

By Jasper jackson

Today is not a good day for the Murdoch family. Culture Secretary Karen Bradley’s decision to refer 21st Century Fox’s £11.7bn bid for the 61 per cent of Sky it does not already own adds both uncertainty and cost to a deal that many thought would sail through. 

For a start, it means that even if Fox – run by Rupert Murdoch’s son James – eventually gets the all-clear it will have to pay the extra 10p per share it promised Sky shareholders back in December if the deal is not closed within a year. The CMA’s involvement scuppers any chance of the deal closing before the end of 2017 which could add an extra £100m to the cost.

Perhaps more significantly, Bradley has referred the deal to the Competition and Markets Authority not only on grounds of media plurality, but also, unexpectedly, on “broadcasting standards”.

On plurality, Fox could argue that the rise of huge digital players such as Google, Facebook and Netflix means that the impact of one family controlling two of the UK’s most influential newspapers and its largest pay-TV provider (including its news channel) is no longer a huge threat.

But a review of broadcasting standards brings into play the way the Murdochs, in particular Rupert, have run both their UK newspapers and Fox News in the US.

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That means Fox’s cosy relationship with US President Donald Trump and the string of sexual harassment allegations against the channel’s senior executives – which led to CEO Roger Ailes standing down – become relevant to whether the deal for Sky should go ahead. None of Fox’s recent history suggests a healthy corporate culture, and there also remain fears that a Fox-owned Sky News would try to replicate the US channel’s partisan approach.

And while in the UK Murdoch’s newspapers have tried to put the phone hacking scandal behind them, the almighty stink hasn’t quite dissipated. MPs such as Ed Miliband and Vince Cable have referred to the scandal regularly in their entreaties for Bradley to scrutinise the deal closely, and campaigners such as Hacked Off are still kicking up a fuss with the help of celebrity backers including Hugh Grant and Steve Coogan.

Attempts to move on have not exactly been helped by the fact Rebekah Brooks is now back as chief executive of the Times and the Sun. She was acquitted of all charges related to phone hacking, but few have forgotten that she was in charge when the scandal broke.

And while the criminal trials are now over, civil claims that widen allegations beyond the News of the World to include the Sun are still running, with a new trial set to take place in January.

Involved parties have ten days to respond to Bradley’s decision before it is finalised, but assuming it is all these issues will have to be thoroughly considered by a regulator that currently appears ill-equipped to do so. The Competition and Markets Authority has none of the media experience of communications regulator Ofcom, which itself raised concerns about the deal’s impact on plurality earlier in the process. It’s likely the CMA will have to bring in experienced outsiders to help it make its decision, delaying the process further.

The deal may still get the green light eventually, but it’s proving a lot more difficult than the Murdochs would have expected nine months ago.