21st Century Fox/Sky
In December 2016, 21st Century Fox announced that it would pursue a takeover of the UK satellite broadcaster Sky. The deal resurrected an earlier attempt by another part of the same media empire, News Corporation, to purchase Sky. The earlier News Corporation deal was approved by the EC, but ultimately fell apart under considerable political pressure in relation to the question of whether News Corporation fulfilled the requirement for media proprietors to be ‘fit and proper’ persons under the public interest test as applied to media mergers. A range of remedies were proposed to strengthen editorial independence, notably in relation to board membership, but were not ultimately agreed.
It is important to emphasise how unusual the context was giving rise to these concerns. The concerns stemmed from allegations of ethical issues in the running of News Corporation newspapers, especially in relation to the use of telephone hacking. The case thus represented a very rare example of politics intruding into normal competition-based analysis under very specific and unusual circumstances.
As the Sky/Fox deal was again proposed, a 2017 letter signed by many of the main protagonists in the case against the 2010 deal, with signatories including Sir Vince Cable, the former leader of the Liberal Democrats, and the former Labour Party leader Ed Miliband, was published raising similar concerns about the deal.
The letter pushed for Ofcom to open a new inquiry into the question of whether the improprieties at News International undermine the case that Sky is a fit and proper broadcast licence holder, revisiting the question of James Murdoch’s role in the company, and raising the issue that James Murdoch has a management position in Fox and issues concerning the extent and nature of control of Sky through the Murdoch family trust.
The secretary of state Karen Bradley requested that Ofcom consider the merger in light of three public interest considerations: media plurality, broadcasting standards, and fit and proper person to hold a broadcasting licence. Ofcom delivered its report to the secretary of state, highlighting in particular concerns about media plurality. The parties had offered undertakings in lieu of a Phase 2 reference, which the secretary of state indicated on 29 June 2017 she was not minded to accept, instead indicating that she was minded to refer the merger to the CMA for the Phase 2 investigation on the media plurality ground, and minded not to refer on the broadcasting standards ground, indicating a period in which interested parties could make further submissions.
In a letter to Ofcom dated 7 August 2017, the secretary of state indicated that a number of submissions received were considered to be substantive, and requested further advice in relation to Ofcom’s broadcasting standards analysis. Following correspondence throughout August, the secretary of state announced on 20 September 2017 the referral of the merger to the CMA for a Phase 2 investigation on both media plurality and commitment to broadcasting standards grounds. At the time of writing, the CMA has issued an issues statement, requesting input from interested parties for their investigation, and both Sky and Fox have made initial submissions to the CMA on both grounds.
The CMA issued an Issues Statement, requesting input from interested parties for their investigations, and both Sky and Fox made initial submissions to the CMA on both grounds.
On 23 January 2018, the CMA provisionally found that the transaction would not be in the public interest owing to media plurality concerns, but not because of a lack of genuine commitment to meeting broadcasting standards in the UK.
The CMA sent its final report to the Department for Digital, Culture, Media and Sport, on 1 May 2018, and on 5 June 2018 the secretary of state accepted the CMAs recommendation that the transaction was not in the public interest owing to media plurality concerns, and accepted the CMA’s recommendation that the most effective and proportionate remedy would be for Sky News to be divested to a suitable third party.
In the end, the transaction did not complete, as Fox was drawn into a bidding war by Comcast, resulting in a rare supervised bidding process in which the Takeover Panel oversaw the submission of blind bids, from which Comcast emerged the victor, offering £30 billion for full control of Sky.
Connect Bidco Limited/Inmarsat
On 25 March 2019, Inmarsat plc announced that it had agreed to the acquisition of its entire issued share capital by Connect Bidco Ltd, a private equity-led consortium. Inmarsat is a satellite telecommunications company, offering global mobile services.
On 15 July 2019, the CMA launched an inquiry into the merger.
The Secretary of State for Digital, Culture, Media and Sport issued a public interest intervention notice on 22 July 2019, citing national security grounds. The transacting parties offered undertakings to address any concerns. The CMA completed a report for the secretary of state. This report was published by the secretary of state on 9 October 2019, along with the launch of a public consultation on the draft undertakings before the secretary of state and the CMA.
On 29 October 2019, the undertakings were accepted by the secretary of state. A redacted version of the undertakings can be found on the CMA website.
Tobii AB (Publ)/Smartbox
This is an Interesting transaction as it is an example of the CMA employing the share of supply test to intervene in a transaction once it has closed. The CMA launched a merger inquiry on 27 November 2018. During the CMA’s inquiry, an unwinding order was issued, requiring the parties to unwind any aspects of the merger that had been completed before intervention.
The inquiry went through both Phase 1 and Phase 2 review, with the CMA ultimately finding that the transaction would result in a substantial lessening of competition and recommending full divestiture of the Smartbox entity.
The CMA’s Final Report was subject to a review by the CAT, heard in early November 2019. The CAT handed down judgment on 10 January 2020, in which it ruled that four of the five grounds for review had not been made out, but in respect of the fifth ground for review, finding that the CMA had failed to gather sufficient evidence upon which to base its vertical theory of harm that the merger would result in partial input foreclosure in relation to a particular software. The judgment requests submissions from the parties on the implications of this partial quashing of the CMA’s Final Report. It is not clear at the time of writing what the ultimate consequences of the judgment will be.
Back to top