Sky dreams dying for Murdoch

JAMES Murdoch's long-cherished dream of taking over the broadcaster BSkyB was yesterday delayed when the bid was referred for a full investigation by the Competition Commission.

News Corp gave the British Culture Secretary Jeremy Hunt just five minutes’ warning that it was withdrawing assurances it had made to hive off Sky News into a separate company - triggering an automatic referral.

However, while the new investigation will delay the bid by at least six months, significantly the Competition Commission will only investigate issues of media plurality and not whether News Corp is a “fit and proper” company to take over BSkyB.

That test lies with the British media regulator Ofcom. Last night, sources at Ofcom suggested that it had already begun its investigation.

In theory it has the power to demand that News Corp divests itself of its entire stake in BSkyB. It could also order the removal of James Murdoch from the board of both News Corp (as a main shareholder of BSkyB) and as chairman of BSkyB if it concludes that he as an individual is not “fit and proper” to have involvement with the broadcaster.

In a hastily redrafted statement to the Commons after News Corp’s decision to withdraw its assurances on plurality, Mr Hunt told MPs that the Competition Commission would be able to consider “all relevant recent developments”.

However, Government sources later confirmed this would only be in relation to what media assets the company already controlled.

Its decision to shut the News of the World - which sold more than 2m copies a week - could actually increase its chances of arguing that its control of Sky would not give it undue dominance in the market.

“I understand that in the last few minutes News Corporation have withdrawn their undertakings in lieu,” Mr Hunt said. “As a result of News Corporation’s announcement this afternoon, I am now going to refer this to the Competition Commission with immediate effect.”

Labour leader Ed Miliband took the unusual step of responding to the statement personally and accused Prime Minister David Cameron of leaving Mr Hunt to “carry the can” in an “insult to the House and to the British public”.

“The Culture Secretary chose not to follow the recommendation of Ofcom to refer this bid to the Competition Commission,” he said.

“He has been insisting for months that he can proceed on the basis of assurances from News Corporation. Now he has adopted the very position he has spent months resisting.”

Labour sources said any decision by the Competition Commission on whether to recommend the deal should only come at the end of the police investigation. They added they had not yet decided whether to drop an opposition day motion to be debated on Wednesday about the BSkyB bid.

In a combative statement, News Corp said while it would be “ready to engage with the Competition Commission on substance” it still believed it should be allowed to take control of BSkyB.

“News Corp continues to believe that, taking into account the only relevant legal test, its proposed acquisition will not lead to there being insufficient plurality in news provision in the UK,” it said.

Shares in BSkyB closed nearly 5 per cent lower yesterday. In the past week they have fallen 15 per cent - wiping around $3.7 billion (AUD) off the market value of the company. News Corp shares were seven per cent lower.

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