The government risked a bruising confrontation with media mogul Rupert Murdoch after it ordered Ofcom yesterday to investigate the public interest issues arising from British Sky Broadcasting Group's controversial move to buy a 17.9% stake in commercial broadcaster ITV last year.
In a test of the influence held by Murdoch, BSkyB's chairman and largest stockholder, over the media, Alistair Darling, the Trade and Industry Secretary, asked the media watchdog to conduct an initial inquiry into the public interest considerations of Sky's holding under the Enterprise Act (2002).
The secretary said he has asked Ofcom to report back to him by April 27.
Darling's decision follows heavy lobbying by MPs for an inquiry. A cross-party early-day motion was put before Parliament late last month.
The "public interest test" invoked by the government is designed to allow it to block mergers it believes could suppress competition in the media.
Darling said he wanted to "emphasise that this decision only means there will be an initial investigation by Ofcom", adding it was "without prejudice to any decisions I take subsequently on whether a fuller investigation by the Competition Commission may be necessary".
BSkyB said it would co-operate fully with each inquiry, but added that it believed its shareholding in ITV had no bearing on media ownership issues.
"It is inconceivable to suggest that, as a result of a 17.9% shareholding in ITV, Sky would be able to influence ITV's broadcasting strategy or policies, including programming or editorial decisions," the satelite broadcaster said.
The Office of Fair Trading announced in December it was also looking into the deal from a competition perspective. Both the OFT and the DTI have the power to instruct the Competition Commission to carry out a full inquiry.
City analysts said they were not surprised by Darling's move. Numis Securities said the DTI investigation into the deal was predictable, "given what a hot potato it is politically".
BSkyB, which is 39% owned by Murdoch's News Corporation, bought the ITV stake in November 2006 in a move that most analysts viewed as an attempt to prevent its pay-TV rival NTL from acquiring ITV.
NTL, which is now called Virgin Media after a merger with Richard Branson's Virgin Mobile, had announced shortly before BSkyB's move that it was in initial talks with ITV about an offer.
NTL and Branson complained bitterly about BSkyB's decision to buy a stake in ITV, but the OFT's investigation will not consider whether the satellite company's holding was intended to block NTL, but simply if BSkyB itself intends to take over ITV. BSkyB has denied any such ambitions.
In addition to the stake in BSkyB, News Corp's British subsidiary News International also owns the Times, Sunday Times, the Sun and the News of the World.
The Sun threw its suppport behind New Labour in 1997 after supporting the Conservatives for many years. Prime Minister Tony Blair and Chancellor Gordon Brown have met Murdoch several times since New Labour came to power and deem the support of his newspapers important.
Virgin Media and BSkyB are also locked in a separate dispute over the fees that BSkyB charges Virgin for its content.
BSkyB has warned that its operating profit could be hit by up to £20m if it failed to reach a deal to allow its channels to be broadcast on the rival Virgin Media service.
Talks broke down last week after Virgin Media accused BSkyB of "bullying" and "arrogance". Virgin said BSkyB was charging too much for the channels that broadcast top programmes including 24, Lost, and new episodes of The Simpsons.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article