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Fox takeover of Sky would give Murdochs too much control, British regulator says

Fox takeover of Sky would give Murdochs too much control, British regulator says
Rupert Murdoch and his family control 21st Century Fox and News Corp. (Evan Agostini / Invision)

Dealing another setback to 21st Century Fox, British regulators said Tuesday that the company’s proposed takeover of the London-based Sky pay-TV service was not in the public interest because it would give Rupert Murdoch and his family too much control over media in Britain.

However, regulators did not slam the door entirely on Fox’s proposed takeover of Sky. Instead, Britain’s Competition and Markets Authority said measures could be taken — such as insulating the Sky News channel with a board that was independent of the Murdochs — to clear the way for the $16-billion deal.

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Fox also could sell the Sky News channel, which would provide another path to win regulatory approval.

In addition, if Walt Disney Co. buys major Fox assets, then the Murdoch family’s influence over Sky News would be sufficiently diluted, regulators said. Disney has its eye on Fox’s stake in Sky, which would give the Burbank entertainment giant TV distribution in Europe.

Tuesday’s findings were the latest wrinkle in the Murdoch’s long odyssey to control Sky — which has 22 million customer homes in Britain, Ireland, Germany, Austria and Italy. Six years ago, the Murdochs abandoned an earlier bid for Sky after damaging revelations that Murdoch’s London tabloids had hacked into cellphone messages of celebrities, crime victims and the royal family.

Fox owns 39% of Sky, which Rupert Murdoch helped launch in the late 1980s. In December 2016, Fox tried again to gain full control by offering more than $15 billion to buy the 61% of Sky that it does not own. The European Union supported Fox’s Sky bid, but Britain’s regulators have been reviewing the deal since.

Murdoch has a long history influencing British politics, through his ownership of newspapers in London, and British regulators are particularly sensitive. In addition, the ruling Conservative Party has been weakened, and leaders of the rival Labor Party have campaigned to block the Murdochs’ purchase.

The Competition and Markets Authority findings were preliminary, and the body will make a final determination on the Fox-Sky deal by May 1.

“We are disappointed by the CMA’s provisional findings,” Fox said in a statement. “We will continue to engage with the CMA ahead of the publication of the final report in May.”

In its report, the CMA said news outlets controlled by the Murdoch family “are watched, read or heard by nearly a third of the U.K.’s population.” Only the British Broadcasting Corp. and ITN have a greater share of the public’s news consumption.

“The Murdoch family already has significant influence over public opinion, and full ownership of Sky by Fox would strengthen this even further,” the CMA wrote.

The Murdochs’ second company, News Corp., owns the Times of London, the Sun and, in the U.S., the Wall Street Journal and the New York Post.

Disney’s $52.4-billion bid to buy key Fox assets could be a game-changer because Disney does not have substantial media properties in Britain. If the Disney-Fox deal goes through, the Murdoch family would control only about 5% of Disney, reducing the government’s concerns about the Murdoch family’s influence.

However, the Disney deal is a long way from the finish line, so the government’s review of Fox’s plans continue.

Former British Culture Secretary Karen Bradley in September asked the CMA to scrutinize Fox’s proposed Sky takeover, specifically evaluating media concentration in Britain as well as whether the Murdochs and Fox were fully committed to British broadcasting standards.

The CMA dismissed concerns about broadcasting standards, saying Fox and Sky had a good record. The authority said it looked at the allegations of sexual harassment at Fox News in New York.

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“While these are serious, the CMA has provisionally found that these are not directly related to the attainment of broadcasting standards and do not call into question Fox’s or the [Murdoch family’s] commitment to broadcasting standards in the U.K.,” the authority said.

Analysts saw a glimmer of hope in the findings because Fox could sell Sky News or install an independent board over the news division to shield it from Murdoch meddling.

“On a positive note, the CMA believes Fox does meet U.K. broadcasting standards, which we think would’ve been a bigger challenge to overcome for closing the deal,” Wells Fargo Securities media analyst Marci Ryvicker said in a report.

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