Ofcom ‘should halt Murdoch takeover if necessary’

MPs are urging Ofcom to launch an immediate investigation into BSkyB and Rupert Murdoch’s News Corp in the wake of the phone hacking scandal – and scupper the companies’ £8.8bn merger if necessary.

Lib Dem Deputy Leader Simon Hughes said he would visit the broadcasting regulator personally in the coming week to call for an urgent inquiry, following claims that journalists at the Murdoch-owned News of the World hacked into the voicemail messages of murder victim Milly Dowler.

Police have also confirmed that the parents of murdered Soham schoolgirls Holly Wells and Jessica Chapman were contacted by officers investigating hacking, and Channel 4 News has learned of allegations that a Metropolitan Police detective was put under surveillance by News of the World journalists.

News Corp, which owns the News of the World, the Sun and the Times via its UK subsidiary News International, already has a 39 per cent share in BSkyB but wants to buy out the rest of the company to form the largest private media company in UK history.

Ofcom, which called for the Commission to investigate News Corp’s bid, released a statement on Wednesday confirming it had the power to investigate the executives running BSkyB to see if they were “fit and proper” people to hold a broadcasting licence.

But the watchdog suggested there would be a significant delay in any inquiry due to the ongoing police investigation into the hacking allegations.

The statement said: “In the light of the current public debate about phone hacking and other allegations, Ofcom confirms that it has a duty to be satisfied on an ongoing basis that the holder of a broadcasting licence is ‘fit and proper’.

It is clearly not for Ofcom to investigate matters which properly lie in the hands of the police and the courts, however we are closely monitoring the situation and in particular the investigations by the relevant authorities into the alleged unlawful activities.”

Speaking in an emergency Commons debate, Mr Hughes said: “I think that it is appropriate that they are formally requested to consider in relation to BSkyB whether they are a company whose directors are fit and proper people.

“I think that they now need to know that this house…wants that matter to be considered at the earliest possible opportunity.

“They of course are not going to pre-judge a criminal trial. They cannot come to a conclusion that somebody is guilty of an offence before they are found to be guilty of an offence, but they have a statutory obligation to consider at any time who is appropriate to hold a broadcasting licence.

“The message from this house must be that we want them now actively to consider that obligation and if they come to a view that BSkyB is inappropriate, to rule accordingly, and it would mean that the activity of merging BSkyB would not be able to go ahead.”

Company records show that three people sit on the boards of both BSkyB and News Corp: Mr Murdoch’s son James, who is the Deputy Chief Operating Officer of News Corp and the Chairman of BSkyB, David DeVoe Chief Financial Officer at News Corp and a non-executive director at BSkyB, and Arthur Siskind, who is Senior Advisor to the Chairman at News Corp and a non-executive director at BSkyB.

Channel 4 News understands that Ofcom would not have to limit a “fit and proper” investigation to the board of BSKyB, but could extend it to major shareholders in the company, including News Corp executives.

MPs opposed to the Murdoch takeover are focussing on Ofcom as their main hope of delaying the deal after the Government ruled out making an intervention on legal grounds.

The European Commission has already cleared the takeover bid and Culture Secretary Jeremy Hunt has said he would accept undertakings from the company in lieu of referring the proposed deal to the Competition Commission.

A consultation period will run until 8 July, and Mr Hunt will make a decision on whether the takeover to go ahead some time after that.

Mr Hunt said last week that the phone hacking allegations were “very serious” but “they were not material to my consideration” of the proposed takeover.

If he were to go back on that view, it could open the Government up to a judicial review, ministers fear.

David Cameron said in Parliament that the Government feared a legal challenge by News Corp if it let the hacking scandal influence Mr Hunt’s decision, which was concerned with the separate issue of competition and plurality.

The Prime Minister said: “We have followed the correct legal processes and if you don’t follow the correct legal processes you will be judicially reviewed and all the decisions you would like to make from a political point of view will be struck down in the courts.

“You would look pretty for a day, but useless for a week.”

Law ‘inadequate’ to prevent Murdoch deal

There were mixed views from legal experts contacted by Channel 4 News on the subject.

Stephen Critchley, a solicitor at Teacher Stern, said Mr Hunt had powers to intervene under the Enterprise Act and said the Government was overstating the dangers of a legal challenge.

“There is always the possibility of a judicial review. That’s quite a cheap currency to throw out.”

There had been only a handful of similar Government interventions similar situations in the past, he said, adding: “We’re really in the twilight zone legally.”

In almost every other advanced democracy, this kind of transaction wouldn’t have been allowed to go ahead. Chris Goodall

Simon Holmes, Head of EU and Competition for SJ Berwin, said Mr Hunt would find it very difficult to change his mind about clearing the deal now and would score “a classic own-goal” if he referred the matter to the Competition Commission.

Dr Pablo Ibáñez Colomo, an expert in competition law at the London School of Economics, agreed that Mr Hunt’s hands are tied by the narrow scope of the law, saying: “The powers of the Secretary of State are not a device conceived to punish phone hackers (that would be a blatant misuse of powers).

“By the same token, simply claiming that a media operator is already ‘too big’ (and there is no doubt that NewsCorp is a very big media conglomerate) is insufficient. It is necessary to define what we mean by ‘big’ and why the acquisition of BSkyB would alter the current landscape in a significant manner.”

Chris Goodall from Enders Analysis said Ofcom are very unlikely to be able to block the deal and politicians who want to limit Mr Murdoch’s empire would be better off trying to change Britain’s laws on the ownership of media companies.

He said: “I’m afraid to say the law has proved to be inadequate at dealing with this problem. In almost every other advanced democracy, this kind of transaction wouldn’t have been allowed to go ahead.”