Photographer: Simon Dawson/Bloomberg

U.K. Media Proposal Would Hinder Fox Plan to Buy Rest of Sky

  • Fit-and-proper test would be required for media acquirers
  • Ofcom review would include corporate-governance failures

Film director and lawmaker David Puttnam is proposing measures in the U.K.’s House of Lords aimed at frustrating Rupert Murdoch’s 11.7 billion-pound ($14.6 billion) plan to merge his U.S. media company, 21st Century Fox Inc., with European pay-television broadcaster Sky Plc.

The amendments to the proposed Digital Economy Bill would subject media acquirers to a so-called fit-and-proper test in order to hold a broadcasting license. The test would look at any past criminal wrongdoing and corporate-governance failures -- ensuring Murdoch and his son, James, who is chairman of Sky and chief executive officer of Fox, would face new scrutiny over their handling of a hacking scandal that derailed an earlier offer for Sky.

David Puttnam

Photographer: Justin Tallis/AFP via Getty Images

Puttnam’s proposals mark one of the first concrete moves by political opponents who argue the deal, which would unite the Murdochs’ TV empire, would threaten U.K. media plurality. Culture Secretary Karen Bradley is under pressure from the opposition Labour Party to have regulator Ofcom review the deal on public-interest grounds. Campaigners include Hacked Off, a media-accountability advocacy group formed during the phone-hacking scandal.

“These amendments would provide the necessary safeguards to ensure the public interest is protected as the bid for Sky by the Murdochs is scrutinized,” Evan Harris, joint executive director of Hacked Off, said in a statement.

Fox already holds a 39 percent stake in Sky. Uncertainty over whether it will succeed in buying the rest has led traders to discount Sky stock, which fell 0.2 percent to 10.04 pounds on Wednesday and remains about 6.6 percent below the offer price of 10.75 pounds per share.

The difference shows traders are concerned that political obstacles may block the deal, said Neil Campling, head of global tech, media and telecom research at Northern Trust Securities.

Officials at Sky and Fox declined to comment.

Puttnam also called for safeguards to protect editorial freedom in broadcast acquisitions, and restrictions related to influence over cultural expression. Another clause widens the fit-and-proper test that would be conducted by Ofcom, asking the media regulator to look into past conduct, including corporate-governance failures.

“We don’t think this is going to derail the bid at all,” said Alice Enders, director of research at Enders Analysis, citing difficulties of getting the amendments passed through both houses of Parliament. “It’s not going to interfere with the process of regulatory clearance at the European Commission.”

The proposals will be debated Wednesday in the House of Lords, the unelected upper chamber of Parliament, but are unlikely to be voted on until March. Puttnam, a member of the Labour party, has secured cross-party backing, with Conservative lawmaker Andrew Lansley supporting some of the proposals and Liberal Democrat peer Jane Bonham-Carter joining him as well.

Fox abandoned a bid for Sky in 2011 after revelations that reporters at News Corp.’s News of the World newspaper hacked into the voice-mail of a murdered schoolgirl, sparking widespread outrage in Britain. News of the World was closed, and James Murdoch, who had overseen the company’s U.K. newspaper operations, and his father, who is now 85, faced questioning in Parliament.

News Corp. later split the newspaper company from the Fox TV and film business that James Murdoch, 44, now leads as CEO. He stepped down as chairman of Sky’s predecessor BSkyB in 2012, returning to that role last year.

Harris, of the group Hacked Off, said the current U.K. government is blocking the completion of work by the Leveson Inquiry that was established in the wake of the hacking scandal to scrutinize media practices.

“It is no surprise that Members of the House of Lords have stepped in to hold the government to account over their promises on completing the Leveson Inquiry and ensuring the public interest is protected,” Harris said.

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