Fox-Sky Opponent Starts Legal Challenge of Ruling on Deal

Updated on
  • Activist group Avaaz calls fit-proper ruling ‘fatally flawed’
  • Group demands Ofcom correspondence with Fox, DCMS over deal

A key opponent of 21st Century Fox Inc.’s bid to acquire Sky Plc has initiated a legal challenge to the deal, calling on regulators to revisit their ruling that the U.K. pay-TV provider would remain fit to hold a broadcasting license under the control of media billionaire Rupert Murdoch.

In a letter to the chief of the U.K.’s Office of Communications, lawyers for political advocacy group Avaaz said the regulator’s initial ruling was “fatally flawed by material errors of law, fact and reasoning,” and demanded a fresh review of the 11.7 billion-pound ($15.1 billion) plan for Murdoch’s Fox to acquire the 61 percent of Sky it doesn’t already own.

Rupert Murdoch

Photographer: Drew Angerer/Bloomberg

“Ofcom used an irrational legal standard, ignored significant and relevant evidence, made basic factual errors and used Fox executive assurance -- despite a long history of false statements by Fox representatives to the regulator -- as evidence of likely compliance,” Avaaz said in the letter, which is a precursor to a formal challenge.

Reopening the “fit and proper” debate would subject the Murdochs to added scrutiny over their handling of recent sexual and racial harassment allegations at Fox News in the U.S., while potentially handing opponents of the Sky deal more ammunition to challenge the deal. Avaaz is seeking documents related to Ofcom’s dealings with Fox, as well as with Culture Secretary Karen Bradley, who is separately weighing whether to ask for a deeper, six-month probe of the merger.

Bradley has said she intends to call for the Competition and Markets Authority to investigate further whether the tie-up would give Murdoch and his family too much control over U.K. media. Opponents of the deal are also demanding a CMA review of Fox’s commitment to broadcasting standards. Ofcom made recommendations to Bradley on those matters, and separately cleared Sky on the fit-and-proper test, an ongoing assessment the regulator makes on its own.

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“Ofcom’s made mistake after mistake in deciding to give the Murdochs a clean bill of health,” said Bert Wander, campaign director at Avaaz. “It’s time they put these errors right if they’re to have any credibility.”

Avaaz said it wants minutes of meetings between Ofcom and Fox representatives and/or the Murdoch family trust, as well as letters or other correspondence. “It appears that Ofcom have relied extensively on what they were told in those meetings,” Avaaz said.

Ofcom said it received the letter and will respond “in due course.” Fox and Sky declined to comment.

The legal challenge marks the latest effort by opponents to throw sand in the wheels of the deal’s progress. The merger is already behind schedule, having been delayed by the U.K. general election and Bradley’s decision to go back to Ofcom for further clarifications after receiving a flood of feedback about the bid. Fox now expects the deal to complete by June 2018, after initially predicting it would be sealed by the end of 2017.

Avaaz’s complaints include the claim that Ofcom gave too much credence to a new compliance policy for broadcasting standards, introduced by Fox in May at the regulator’s behest. Avaaz argues the policy was broken the day after its implementation when Fox News broadcast false allegations about the deceased Democratic National Committee staffer Seth Rich.

Avaaz also argues that Ofcom was wrong to rule that almost all of the alleged misconduct around sexual and racial harassment at Fox News related to the period before 2012, an important assumption in Ofcom’s initial assessment. In the letter, Avaaz lists several cases that it alleges relate to complaints against Fox after 2012, when the Murdoch’s News Corp. -- which has since been split -- overhauled its corporate governance in response to the phone-hacking scandal at its U.K. newspapers that derailed the first bid to buy Sky.

New York-based Avaaz was founded in 2007 as an online advocacy group by people including Canadian student-activist Ricken Patel and MoveOn Executive Director Eli Pariser. The group only accepts small donations and doesn’t take funding from companies or government agencies. It has concentrated its activism around global issues such as climate change, human rights and poverty. The group employs around 100 campaigners around the world, most working remotely via Skype and email.

— With assistance by Rebecca Penty

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