EC Okays News Corp. Purchase Of BSkyB

The European Commission (EC) gave the final nod to the proposed acquisition of British and Irish pay-TV operator BSkyB by U.S.-based News Corporation, ruling the deal would not chill competition in the European Economic Area.

However, the decision does not stand in the way of the U.K. continuing to look into whether the proposed transaction “is compatible with the U.K. interest in media plurality, which is different from the Commission’s competition assessment. The UK remains free to decide whether or not to take appropriate measures to protect its legitimate interest in media plurality (as permitted under Article 21 of the EU Merger Regulation).”

Commented Commission Vice President and Commissioner for Competition Joaquin Almunia earlier today, "I am confident that this merger will not weaken competition in the U.K.”

The history: The proposal was announced last June, with News Corp saying it wanted to acquire the remaining 60.9 percent of the shares in BSkyB it didn’t already own. The EC then began its vetting process in early November, at which time the U.K. Secretary of State for Business Innovation and Skills issued a European intervention notice requiring the relevant U.K. authorities to investigate and report December 31 as to whether this buyout would be against public interest.

Here’s what happens now: BSkyB will become part of News Corp, which also owns one of the six major Hollywood film studios (20th Century Fox) while being a TV channel producer (Fox, National Geographic), a newspaper publisher in the U.K. and Ireland (The Sun and The Times); and a pay-TV operator in Italy (Sky Italia) and in Germany and Austria (Sky Deutschland).

Prior to making its final decision, the EC investigated whether News Corp would be able to “prevent or significantly limit access by BSkyB’s competitors to premium movie content.” It found that News Corp “lacks sufficient market power in the market for the licensing of broadcasting rights for premium movies, and that BSkyB’s competitors would retain several alternative suppliers with equally attractive content.” This question remains under investigation by the UK Competition Commission following a recent decision by U.K. regulator Ofcom.

The EC also looked into whether transaction would “lead to a risk of exclusion from BSkyB’s pay-TV offering of competitors of News Corp in the licensing of premium film content and TV programmes and in the wholesale supply of basic pay-TV channels.” The investigation revealed that News Corp’s premium movie content and TV programming and basic pay-TV channels “constitute a minimal part of Sky’s bouquet and that BSkyB would continue to have the incentive to acquire content from News Corp’s competitors to have the most attractive retail packages.”

Lastly, because the deal adds BSkyB to Sky Italia and Sky Deutschland, the EC wanted to make sure News Corp would not have an “increased bargaining power” when it comes to purchasing premium content jointly for several territories. The Commission found it was “unlikely” that News Corp “would be able to impose upon content rights holders a change from current licensing practices (along national territories or language areas) towards simultaneous negotiations across several countries such as Germany, Austria, Italy, U.K. and Ireland.”