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Government ‘minded to’ refer Sky-Fox merger to competition regulators over fears Murdochs will have too much control of UK media

Last updated: 22:14 29 Jun 2017 AEST, First published: 21:33 29 Jun 2017 AEST

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Bradley is expected to give her final decision next month, once she’s received responses from interested parties

The UK government plans to refer 21st Century Fox Inc’s (NASDAQ:FOX) proposed £11.7bn takeover of Sky PLC (LON:SKY) to competition authorities amid concerns that the deal would give Rupert Murdoch too much control over the country’s media.

It’s a blow for Murdoch and Fox, who were hoping to get the acquisition over the line as soon as possible, as it now looks likely that they will have to wait for another six months or so while the CMA launches a more in-depth phase two review.

Addressing Parliament, culture secretary Karen Bradley said the decision was not final but that she was “minded to” refer the deal to the Competition and Markets Authority on the grounds of media plurality.

‘Risk of increased Murdoch influence’

Bradley’s decision was guided by a report from broadcasting regulator Ofcom, which read: “The transaction raises public interest concerns as a result of the risk of increased influence by members of the Murdoch family trust over the UK news agenda and the political process.”

She added that the regulator’s reasons were “persuasive”, noting that the enlarged entity would have the third largest reach of any UK news provider in the UK, spanning TV, radio, online and print.

Remedies rejected

Unusually, the minister revealed that Fox had pre-empted the issues surrounding media plurality and had already submitted editorial guarantees around Sky News.

The proposed undertakings included establishing a separate editorial board and a commitment to maintaining Sky-branded news and funding for five years.

Ofcom’s report said that the remedies would likely mitigate any media plurality concerns, but added that they could be stronger. As a result, the culture secretary said she was “minded not to” accept the undertakings.

Bradley added she would give Fox and other interested parties until Friday 14 July to respond to her initial decision.

‘No issue with broadcasting standards’

There was some better news for Fox and Sky though, as the MP said there was no need for the CMA to investigate the merger on the grounds of broadcasting standards.

Quoting the second part of Ofcom’s report, she said: “We do not consider that the merged entity would lack a genuine commitment to the attainment of broadcasting standards.”

Again, Bradley has asked for interested parties to submit representations on this matter by 14 July.

Fox would be a ‘fit and proper’ owner

The culture secretary also waved away concerns that recent allegations surrounding Fox – which include accusations of sexual harassment – would affect its ability to be a ‘fit and proper’ owner of Sky.

“[Ofcom] concluded that behaviours alleged at Fox News in the US amount to significant corporate failures,” she said.

“However, these did not, in its view, demonstrate that the merged company would lack a genuine commitment to broadcasting standards.”

Fox shares edged modestly higher in after-hours trading to US$27.77, while Sky shares jumped 3.4% to £9.89.

--Updates for additional info and share prices--

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