Sky’s ITV stake referred to Competition Commission

Secretary of State for Trade and Industry, Alistair Darling, has officially referred BskyB’s (Sky) acquisition of a 17.9% stake in ITV to the Competition Commission (CC) under Section 45(2) of the Enterprise Act.

What is interesting is that the Government has also published the Ofcom and OFT reports that helped it make its decision. Interesting reading.

Ofcom looked at the cross-media/media plurality issues the stake throws up, in particular in relation to the provision of national news services. This is important as according to Ofcom the majority of people rely on TV as their main source of national news, and ITV and Sky are the second and third largest providers of national TV news, accounting respectively for 25.8% and 4.8%9 of the audience. A further reason for focusing on the cross-media and TV audiences for news is that both ITN, in which ITV has a 40% shareholding, and Sky are major suppliers of news services to TV channels and radio stations. In addition, the acquisition creates an ownership link between ITV, as the second largest provider of TV news, and News International, which is a subsidiary of News Corporation and the largest UK supplier of newspapers (with 35.9% of national newspaper circulation).

The OFT, interestingly, felt concerns that the acquisition would result in a reduction in competition for the supply of news and other premium content were too speculative – on the evidence currently available – to warrant reference. It had issues with the potential effects on advertising pay TV and the acquisition of sports rights markets. According to the OFT, the acquisition will provide the parties with the ability and incentive to share sensitive information and coordinate their behaviour in order to reduce future discounting and/or to reduce innovation within the advertising sector; raises potential entry barriers for ITV into retail premium pay TV; and could deter third parties from partnering with ITV to bid jointly for sports rights in competition with BSkyB, due to the deterrent effect of the fact that BSkyB might obtain sensitive information relating to the bid (or other activities of the third party) as a result of the structural link with ITV.

Given that the OFT was not convinced that BskyB had proposed any remedies that would satisfy competition concerns the referral was a bit of a forgone conclusion and one legally speaking the Government couldn’t avoid. As things stand it is hard to see any other outcome other than BskyB having to sell all or some of its stake to resolve this one.

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