How Hunt avoided lengthy review of Murdoch’s Sky bid

 
Jeremy Hunt

The memo written by Jeremy Hunt in November about News Corp's BSkyB bid seems to explain almost everything that transpired in relation to the bid over the succeeding six months or so.

Here is the important passage:

"What James Murdoch wants to do is to repeat what his father did with the move to Wapping and crate the world's first multi-platform media operator, available from paper to web to TV to iPhone to iPad. Isn't this what all media companies have to do ultimately? And, if so, we must be very careful that any attempt to block it is done on plurality grounds and not as a result of lobbying by competitors. The UK has the chance to lead the way. But if we block it our media sector will suffer for years. In the end, I'm sure sensible controls can be put into any merger to ensure there is plurality."

Mr Hunt is saying that the creation of an integrated media giant - containing News International's newspapers, Sky's television, and both businesses' online and digital operations - would be a very good thing for the UK. And, more importantly, if the regulator takes a different view, then there would be ways of getting the deal through by imposing conditions on News Corporation.

As it happens, the regulator Ofcom did take a different view. On 13 January 2011 I reported that "Ofcom has made an unambiguous recommendation that News Corp's plan to acquire all of British Sky Broadcasting should be referred to the Competition Commission for further investigation." This was a scoop, which you can read here.

If you will indulge me, there is another part of what I wrote then which is probably worth repeating. It is this:

"What I don't understand is why Jeremy Hunt, the culture secretary, has not simply published the report and announced that there will be a further Competition Commission enquiry into whether the takeover restricts plurality in the media (or choice for viewers and readers). Instead, he is having talks with BSkyB and with News Corporation (which already owns 39% of Sky and various British newspapers, including the Sun and Times), as the Guardian disclosed a few days ago.

"What is there for Mr Hunt to talk to NewsCorp and Sky about, if - as I say - 'Ofcom's advice is clear and unambiguous'?"

On 25 January it became clear what Mr Hunt had been talking to News Corporation about. Mr Hunt decided to give News Corp a couple of weeks to come up with what are known as "undertakings in lieu", to remedy the harm identified by Ofcom.

To digress for a second, one explosive aspect of this extraordinary drama - which I expect the Leveson inquiry to explore with Adam Smith, Hunt's former special adviser, this morning - is whether Mr Smith may have breached City disclosure rules by tipping off News Corp about Mr Hunt's statement to the markets about all this a day in advance, on the afternoon of 24 January (this is something the City regulator, the Financial Services Authority, is examining).

But to return to the main point, on 25 January Mr Hunt disclosed he was doing what he had said he would do in that secret memo to the prime minister of November: he was looking for "sensible controls" that would allow the merger to proceed.

What were those "sensible controls"? Well at the time I assumed that they would involve BSkyB spinning off its Sky News operation in some way, since it was the combination of Sky News and News International's newspapers that was of greatest concern to Ofcom. And that was confirmed on 3 March.

The clever wheeze that Mr Hunt had negotiated with James Murdoch of News Corporation was that News Corporation would spin off 61% of Sky News into a new independent company, which would have a new board of its own and would be funded by News Corporation for a decade.

In this way, News Corporation avoided the deal being sent to the Competition Commission for a long, detailed and expensive investigation - which is something that News Corporation was very keen to avoid (I know this because I was in regular contact with the company at the time).

Now, to be clear, Mr Hunt secured the formal agreement of Ofcom and the Office of Fair Trading for all concessions extracted from News Corp and James Murdoch that were necessary to avoid a further review by the Competition Commission. In other words, as Mr Hunt will say, he did not breach what the regulators wanted to achieve.

Also Mr Murdoch would say that the concessions he gave Mr Hunt - such as that the board of the partly demerged Sky News should have a majority of independent directors and that the chairman of Sky News should not be a News Corp employee - were very painful for him.

James Murdoch would say that Mr Hunt was being tough on him.

But here is the important fact: concessions were negotiated between Mr Hunt and Mr Murdoch that would have allowed the takeover to take place - if the deal had not eventually been blown up by the public and political furore over News International's role in phone hacking. In that sense, Mr Hunt did precisely what he implied should be done in that remarkable November memo to the prime minister.

Is there anything fundamentally wrong in Jeremy Hunt having used his discretion in this way to facilitate News Corp's takeover of BSkyB? If another member of the cabinet had been in his position, would he or she have done the same?

Or would most other ministers have simply taken the advice of Ofcom and referred the deal for lengthy scrutiny to the Competition Commission - with the attendant risk that an unpredictable review by the Commission might have blown up the takeover?

UPDATE 12:15

The DCMS has responded to my note of this morning. This is what an official says:

"He [Jeremy Hunt, as relevant minister] has a power to accept undertakings, deriving from the Enterprise Act 2002 (Protection of Legitimate Interests) Order 2003, and that power carries with it a public law duty to consider undertakings if they are offered. So legally he was obliged to consider undertakings."

I had better translate. Mr Hunt's defence of negotiating the remedies with News Corporation that avoided the deal going to the Competition Commission is that he was obliged to do this.

Now I have spoken to competition lawyers about this. They say something a bit different - which is that Mr Hunt may have been able to consider these undertakings or remedies from News Corporation.

But they add that it is not clear that he was obliged to do so - given that Ofcom's recommendation was quite clear that there should be a "fuller second stage review of these issues by the Competition Commission to assess the extent to which the concentration in media ownership may act against the public interest."

In theory, Mr Hunt could have accepted Ofcom's conclusion and announced on the next working day that the takeover would be submitted to the Competition Commission for further investigation.

But that is not what he did. Ofcom's conclusion was shared with News Corporation - and negotiations between Mr Hunt and James Murdoch were then initiated on how the perceived harm from the deal could be mitigated through modifications to the structure of the proposed acquisition (which, as I said earlier, is strikingly consistent with what Mr Hunt said was the best way forward in his November memo to the prime minister).

It will be fascinating to see what Leveson makes of all of this. Quite a lot hinges on whether Mr Hunt chose to facilitate the takeover or was obliged to do so.

FURTHER UPDATE 13:15

I have now had a response from the DCMS to my last update.

An official says that Mr Hunt had a greater duty than normal to consider undertakings or remedies offered by News Corp, because of the "situation in which Jeremy took over the bid".

The concern was that News Corp "had a strong case for judicial review" of any verdict frustrating the takeover, because of Vince Cable's unguarded remarks that he had "declared war on Murdoch".

Which carries two fascinating implications:

a) that Jeremy Hunt's putative duty to consider News Corp's remedies was not an absolute one; and

b) that if Jeremy Hunt is perceived to have been too helpful to James Murdoch, he would lay the blame at Vince Cable's door.

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +2

    Comment number 79.

    I think your point that Mr Hunt felt constrained by Mr Cable to try to settle with Newscorp is part of DC's defence this morning. He "had" to appoint Hunt because of a situation not of his making. Neither, apparently, were able to act as if in power, apparently because of a LibDem minister. But their impotence, happily (at the time), was in accordance with the joint Murdoch-Tory party interest.

  • rate this
    -1

    Comment number 78.

    Fascinating work, thank you.
    This is like a referee giving one team a yellow card, then regretting it, and so giving them a penalty to 'even things up'.
    You could sort of understand that, I suppose, (assuming the refereee wasn't horseriding with the team's captain and also employing their ex-players).

  • rate this
    +1

    Comment number 77.

    I thought the whole idea with having OFCOM and Competition Commissioners et al was for them to make the rulings for the ministers to act on so as to remove conflict .

    In this case it appears the answer was decided they were then cooking up a case to allow it with the minister in lead role.

    So we may as well do away with Ofcom and the other quangos and let the ministers get on with it.

  • rate this
    0

    Comment number 76.

    #66 Alan.

    Are you saying Cameron: sack Hunt?

  • rate this
    +3

    Comment number 75.

    Hunt being pro-Murdoch, and Cable being anti-Murdoch were both biased and therefore unsuitable for an adjudicating role.

    Cameron, by appointing Hunt, when he knew Hunt's pro-Murdoch stance, was also supporting that outcome, and therefore showed himself to be biased.

    An unbiased minister should have taken OfCom's recommendation and passed the matter to the Competition Commission.

  • Comment number 74.

    All this user's posts have been removed.Why?

  • rate this
    +5

    Comment number 73.

    "There has been no "preferential" treatment of NI since there were no competing bidders."

    Media plurality/monopolies ARE the concern of the government of the day.

    Enormous commercial advantage to NI if they secure an effective monopoly - barriers to new entrants are as huge as in banking

    But if NI are shown to have been corrupting public officials here the FBI will soon be involved in the US...

  • rate this
    +1

    Comment number 72.

    There must be more to be revealed. If not Daz Dave would have hung Hunt out to dry weeks ago.

  • rate this
    +11

    Comment number 71.

    it seemed to me that Cable's and Hunt's positions are mirror images of each other. If Cable couldnt act impartially after OFCOM and MC process why did the Prime Minister think that Hunt would act impartially during the process?

    He didnt as Hunt had told him the month before what UK Gove policy should be.

  • rate this
    0

    Comment number 70.

    #52 if you believe that ministers are not the servant of the law but its master then it follows that ministers must be above the law.

    That is simply wrong. Ministers in considering bids MUST follow the process laid down by law. Because of the previous ITV case I believe there was no case at all to block the bid and the fact that undertakings were offered was a bonus

  • rate this
    0

    Comment number 69.

    I thoughts the quangos, regulators and think tanks were there to prevent ministers taking any flak?

    Doesn't Hunt realise that if he's going to make the decision, he either follows the advice of non-democratic institutions or does it based on democratic principles rather than nepotistic ones?

    If ministers want responsibility, restore democracy first!

  • rate this
    -7

    Comment number 68.

    "Explosive","extraordinary drama","secret memos" and "blown up deals". Really?Calm down, I thought I was ready about the next Bond film. All that's missing is a SWAT team descending from the sky on ropes...No, wait, here they come and they're after another Leveson witness. Apparently a journalist who was "in regular contact with the company at the time."

  • rate this
    +4

    Comment number 67.

    Why is it that the PRIMARY reaction to questions asked about political and personal integrity these days are ALWAYS either pseudo-plausible sidetracking with legal caveats or plain, simple "spin doctoring"?
    Thes people answer to ***US***.
    About time they respected our intelligence and gave answers, not SPOOF!

  • rate this
    +18

    Comment number 66.

    DC should not have appointed Hunt to oversee the bid when Hunt had previously expressed his support for it.
    Hunt through his advisor should not have been in such close daily contact with News International.
    Hunt obviously wanted the bid to go through and he tried to facilitate it.
    IMO he did not act impartially and even-handedly.
    He should be sacked.
    Alan

  • rate this
    +4

    Comment number 65.

    It would appear that the only saving grace in all of this is down to the NoW revelations that forced Newscorp to withdraw the bid. The revelations a couple of weeks later would probably have been too late.

  • rate this
    +2

    Comment number 64.

    It's obvious that the usual political nods and winks between politicians and big business went on here. I'm confident we will find lots of friends of friends getting jobs and making a killing at the expense of British democracy and freedom of speech. Any bets that when Leveson is all over it will end with a slippery cover up, an unproven case, can't do anything about it. "Off with their head".

  • rate this
    +4

    Comment number 63.

    I objected in an email to J.Hunt as did many others, about SkyB affair being bad for our democracy. It was apparent to many following the matter, that it should be referred to the monopolies commission when it was recommended. Hunt's huddle with the Murdochs to tell them how to get over this was unbelievable. He was bent on the deal going through. Why?

  • rate this
    0

    Comment number 62.

    Or though it pains me to say so if its a 50/50 split then we must always give him the benifit of doubt.

  • rate this
    0

    Comment number 61.

    54.WunderfulBBC

    The only thing that is not good for democracy, is our outdated voting mechanism. If the British people are so stupid and naive that their voting intentions are dictated by what they read in the red tops, they don't deserve to have the vote. You get the government you deserve.

  • rate this
    0

    Comment number 60.

    Adam Smith believably honest, naively 'not fussed', doing best to keep at bay pushy empire, ALMOST 'caught' by gallic-charm e-mails

    IF in Equal Democracy, educated, immune to corruption & degradation, THEN any 'bias carried by skill' in Media would be harmless 'phases', alongside Beano, Desperate Dan & weaker elements of TV children's programming over the years

    How far does 'naivety' extend?

 

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