Sky stake in ITV to be probed by Ofcom

The British government today ordered media watchdog Ofcom to investigate the public interest issues arising from BSkyB’s controversial move to buy a 17.9% stake in ITV last year.

Trade and Industry Secretary Alistair Darling has asked the media watchdog to conduct an initial inquiry into the public interest considerations of Sky’s stake 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.

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Mr Darling said: “As a general rule, Ministers have withdrawn from the regulatory consideration of mergers.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 British Office of Fair Trading (OFT) are already looking into the competition aspects of BSkyB’s stake in ITV, which it bought last November.

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

He said: “I wish to emphasise that 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 £940m (€1.4bn) deal sent shockwaves through the City, effectively scuppering NTL’s hopes of a £5bn (€7.5bn) takeover of ITV and raising concerns over competition issues.

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

News of the public interest inquiry comes on the same day that BSkyB warned of a possible £20m (€30m) hit to profits if it cannot reach an agreement with rival Virgin Media – rebranded from NTL earlier this month – to renew the cable operator’s contract to air basic Sky channels, including Sky One and Sky News.

The two groups have been locked in a bitter battle since Sky thwarted Virgin Media’s deal to buy ITV last year.

Virgin Media chief executive Steve Burch said: “Both policy-makers and the public have good reason to be concerned about BSkyB’s acquisition of material influence over one of its principal competitors and the resulting concentration of media ownership in the UK.

“We are pleased the Secretary of State has decided to initiate an investigation into these issues and we look forward to playing an active role in this process.”

BSkyB was not immediately available for comment.