Fox's Sky Deal Faces Challenge to "Fit and Proper" Decision

Courtesy of Sky
Sky

Avaaz is "seeking to have Ofcom's decision quashed and a new investigation opened," saying "repeated, large-scale scandals in the Murdoch empire indicate that something is very rotten at the core of their businesses."

An activist group that has opposed 21st Century Fox’s bid for European pay TV giant Sky on Friday filed court papers seeking a judicial review of British media regulator Ofcom's conclusion that the company would remain a "fit and proper" broadcast license holder if Fox, controlled by the Murdoch family, takes full control of it.

The group, Avaaz, had over the summer already threatened to file the legal challenge to urge a review, arguing that Ofcom “made mistake after mistake in deciding to give the Murdochs a clean bill of health to take over more of our media" in a report submitted to the British government in June.

Avaaz said on Friday that it was "seeking to have Ofcom's decision quashed and a new investigation opened. "Repeated, large-scale scandals in the Murdoch empire indicate that something is very rotten at the core of their businesses," said Avaaz campaign director Alex Wilks. "Ofcom didn’t dig deep enough before declaring the Murdochs fit to own even more of our media."

An Ofcom representative responded by saying: "We will defend our 'fit and proper' assessment, which was independent, expert and based on the evidence."

Ofcom CEO Sharon White recently highlighted that the regulator followed a "very, very careful, detailed process" that was "very rigorous" in analyzing the Fox-Sky deal.

"Ofcom has considered allegations of sexual and racial harassment at Fox News that are extremely serious and disturbing. It seems clear that there were significant failings of the corporate culture at Fox News," the U.K. media regulator had said at the end of June. "In order to have a concern about fitness and properness, we would need to see evidence of misconduct in the parent company, Fox. However, we have no clear evidence that senior executives at Fox were aware of misconduct before it was escalated to them in July 2016, after which action was taken."

It added: "We have concluded that the overall evidence available to date does not provide a reasonable basis for Ofcom to conclude that, if Sky were 100 percent owned and controlled by Fox, it would not be a fit and proper holder of broadcast licenses. Our assessment finds that Sky would remain a fit and proper license holder in the event of the merger."

Ofcom also highlighted that it would continue to keep an eye on anything that may change its analysis, as it does with all companies. "As fitness and properness is an ongoing duty, we can re-examine our position if new evidence comes to light," it said.

The media regulator also recommended at the time a more in-depth review of the Fox deal for Sky on media plurality grounds. The U.K. government recently followed that suggestion, but also ordered a more in-depth review of the transaction's impact on broadcasting standards, even though Ofcom had not found that necessary.

Avaaz had in a recent letter urged Ofcom to withdraw its June report and “reconsider the question of Sky’s fitness post-merger.” The letter gave Ofcom two weeks to respond. Otherwise, Avaaz said it would seek a court review of the matter. It has now filed the paperwork with the High Court of Justice Queens Bench Division Administrative Court to request that.

In a statement, it cited four reasons to challenge Ofcom's "fit and proper" decision. The first: "Ofcom cleared Fox News, despite the overwhelming evidence put before it by Avaaz and others, of the deliberate gross bias and fake news the channel routinely broadcasts." Fox recently ended its Fox News feed in the U.K., citing commercial reasons. 

"Ofcom made basic factual errors in assessing the sexual and racial harassment scandals at Fox and subsequently rewrote parts of its decision when Avaaz took the first step towards a legal challenge," Avaaz argued as a second reason for its legal challenge. "Both the old and new versions show it failed to assess the efficacy of Fox’s corporate governance policies in stopping large-scale wrongdoing."

Thirdly, the group cited Ofcom's "fit and proper" decision in 2012 when it criticized Fox CEO James Murdoch following the phone-hacking scandal. It back then "found Sky fit to retain a license only after noting that he had stepped down as chair of Sky," Avaaz said. "In its 2017 report, Ofcom failed to explain why it was content with James Murdoch’s role as CEO of a merged Fox/Sky, including his assurances on corporate governance."

Avaaz also cited a fourth reason for submitting a legal challenge, arguing that Ofcom "created an artificial 'high threshold,' with no basis in law, that enabled the Murdochs’ corporate governance scandals to pass without serious challenge."  

Research firm Enders Analysis earlier this year said: "It is well-established that the Administrative Court does not have the power to substitute its own view of the primary facts for the view, if reasonably adopted, by the body [in this case Ofcom] to whom the fact-finding power was entrusted." It concluded: "We very much doubt that judicial review of Ofcom’s decision will lead [the deal] to be overturned." 

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