Home > Media > A silver lining in Murdoch’s cloud?

A silver lining in Murdoch’s cloud?

The Court of Appeal has upheld a ruling that BSkyB must sell off some of its shares in ITV (to reduce its holding to below 7.5%). The decision is mostly concerned with competition law – but the judgement also considers the public interest test for media mergers.

In the event of a media company merging, the public interest test allows the regulators to consider a range of issues, such as the impact on editorial freedom or the plurality of views in the media. The provisions aim to provide a (limited)safeguard against media concentration over and above the competition laws.

When BSkyB acquired its 17.9% stake in ITV, the regulators looked at the public interest considerations (the first time they had done so under the current legislation). In particular they had to consider the impact of the deal on the need for a ‘sufficient plurality of persons with control of the media enterprises’ – and it was the interpretation of this provision which caused some difficulty.

The question was whether you could consider the degree of BSkyB’s control over ITV when assessing the sufficiency of the plural control. BSkyB argued that as its control was only 17.9%, the effects on plurality were limited (they argued they could not do much to change the direction of ITV). The Competition Commission accepted the line of argument in late 2007.

The Competition Appeal Tribunal in 2008 took a different view and found the regulators should assess the plurality of persons controlling media enterprises on the assumption that BSkyB had total control of ITV (not taking into account the actual degree of control). This approach may seem a bit false, but it provided a stronger restriction on mergers. By assuming a greater level of control, the Competition Appeal Tribunal took a precautionary approach to protect what it called the ‘fragility’ of media plurality (as ‘once lost, it may be very difficult or indeed impossible to restore.’) It also provided a safeguard against future increases in BSkyB’s control over ITV (even if BSkyB’s degree of control over ITV is not thought to be a problem now, that could change in the future).

The Court of Appeal found the earlier approach of the Competition Commission to be correct (and allowed BSkyB’s appeal on this point). Much of the Court of Appeal’s decision on this matter was focused on reconciling two different provisions of the Enterprises Act and seems fairly technical. But it does concern an important issue. While much of the press will portray the ruling as standing up to Murdoch, this part of the decision rules in Murdoch’s favour and potentially weakens the public interest test.

The Court of Appeal added that if its interpretation of the public interest test:

does not allow for sufficient protection of the sensitive interest of media plurality, it should not be difficult to amend the legislation accordingly, now that possible difficulties in applying the current legislation have been identified.

So the ball is in Parliament’s court. Will any politicians be willing to take this up?

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