Sky’s proposed bid to buy the broadcasting arm of ITV would “raise competition law concerns” for the UK’s competition regulator, says top competition lawyer.
Ellen Huison, a competition law expert at regional legal and professional services business, Knights, says the Competition and Markets Authority (CMA), the UK’s principle competitions regulator, is “unlikely to ignore” Sky’s bid to acquire ITV and could call the deal in for investigation up to four months after completion, should the deal go ahead without prior authorisation.
Ellen’s comments come after it was revealed that ITV is in preliminary talks to sell its media business to Sky in a deal worth £1.6 billion. The deal would provide Comcast, Sky’s parent company, with around 70% of the UK advertising market.
Commenting on the deal, Ellen Huison, a Commercial Associate at Knights, said: “I think it’s unlikely that the CMA would ignore a deal with this kind of profile, nor is it likely that the parties would want to proceed at risk knowing the CMA has up to four months after completion to call the deal in.
“A deal of this size will easily trigger the jurisdictional thresholds for review under the Enterprise Act.
“The real arguments will come in relation to determining whether the transaction will result in a “Substantial Lessening of Competition”, and we expect will center around market definition. The key question will be whether other competitors genuinely pose a competitive constraint on both Sky and ITV in relation to advertising, and whether advertising on (for example) streaming platforms can be considered to compete with advertising on broadcast TV.”
“Given the profile of the deal, and the likely impact on competition, it is possible that the parties will seek to fast-track the process to a phase two investigation in order to speed up the review process. This option was recently introduced by the CMA, which has led to a number of decisions moving much faster than under the more conventional review procedure.
Ellen adds that while the CMA does have a defining say in clearing a deal of this kind, so does the Secretary of State and although intervention of this kind is rare, the Government does have the power to block major acquisitions of UK businesses where public interest is a key consideration.
Ellen said: “What may be particularly interesting in the course of this deal, if it goes ahead, is that the CMA may not end up having the final say. Whilst rarely used, the Secretary of State has powers under the Enterprise Act to intervene in acquisitions where wider public interests must be considered, including plurality of media ownership, and the need for a wide range of high-quality broadcasting.
“It would also not be the first time that the Secretary of State has used these powers in relation to a transaction involving ITV and Sky, with the acquisition of 17.9% of the issued share capital of ITV plc by British Sky Broadcasting plc (Sky) in November 2006 having been subject to review on these grounds, and with dire consequences for Sky.
“Sky became embroiled in long-running litigation with the OFT (the predecessor to the CMA) and the Secretary of State, challenging various decisions, however Sky was forced to sell a stake in ITV of approximately 10.4% at a loss of £339m. It is interesting that Sky therefore wishes to attempt to take another bite of the cherry.”
“There is also an indication that Sky wish to take over ITVs 40% stake in the ITN business which makes news programmes for both ITV and Channel 4. Whilst this aspect of the deal may pose competition concerns, the public interest arguments in relation to a US buyer purchasing a shareholding in an organisation which is responsible for news services for two of the UK’s most popular news channels will be particularly interesting in light of the current political climate.”