Ofcom to probe Sky's stake in ITVMedia watchdog looks into 'public interest issues'

27 February 2007

The government has ordered Ofcom to investigate the public interest issues arising from BSkyB's controversial move to buy a 17.9 per cent stake in ITV last year.

Trade and Industry Secretary Alistair Darling has asked the media watchdog to conduct an initial inquiry under the Enterprise Act 2002.

The decision follows heavy lobbying by MPs for Mr Darling to order the investigation, with a cross-party early day motion made late last month.

Unprecedented move

The government's decision is an unprecedented move in the sector.

Mr Darling said: "As a general rule, Ministers have withdrawn from the regulatory consideration of mergers.

"However, having given careful consideration to the provisions of the relevant legislation and to the representations I have received, both from the parties directly concerned and from interested third parties, I believe that in this case it is appropriate."

He added that there were 'reasonable grounds to suspect that a relevant merger situation may have been created as a result of BSkyB's acquisition' and grounds to investigate the public interest considerations.

Ofcom and the Office of Fair Trading (OFT) are already looking into the competition aspects of BSkyB's stake in ITV, which it bought last November.

April deadline

Mr Darling today gave both Ofcom and the OFT until April 27 to report back with their findings for all current inquiries.

He said: 'This decision only means there will be an initial investigation by Ofcom and is without prejudice to any decisions I take subsequently on whether a fuller investigation by the Competition Commission may be necessary.'

The OFT announced last month that it believed BSkyB may have 'material influence' over ITV, which was widely seen as giving ministers the green light to order an inquiry.

BSkyB has maintained it is only a minority shareholder in ITV after snapping up the stake last November.

The £940 million deal sent shockwaves through the City, effectively scuppering NTL's hopes of a £5 billion takeover of ITV and raising concerns over competition issues.

BSkyB claims it can take its stake up to 19.9 per cent under the Communications Act, but the 2002 Enterprise Act prevents any shareholder with more than 15 per cent of a company from having material influence over the commercial operations of another firm.

'No material influence'

A Sky spokesman said: 'The Secretary of State's action contradicts the Government's published guidance, which clearly sets out the circumstances in which intervention will be considered.'

The spokesman added: 'Our minority shareholding in ITV has no bearing on the considerations of the public interest test relating specifically to media plurality. Indeed, when Parliament debated the 2003 Communications Act, it expressly considered that plurality would be protected if Sky were to own no more than 20 per cent of ITV.

'ITV is a major public company led by an independent and experienced board.

'It is inconceivable to suggest that, as a result of a 17.9 per cent shareholding in ITV, Sky would be able to influence ITV's broadcasting strategy or policies, including programming or editorial decisions, which remain entirely the responsibility of the board and, under its direction, management.'

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