Feeds

Sky's ITV stake anti-competitive, says regulator

Competition Commission could force sale of shares

Beginner's guide to SSL certificates

Sky's purchase of 17.9 per cent of ITV was anti-competitive and against the public interest, the Competition Commission has ruled. It could force the broadcaster to sell the shares which are now worth over £200m less than Sky paid in 2006.

A competition law expert said a crucial factor in the Competition Commission's provisional finding is likely to have been the control that Sky could have exerted over ITV's future strategy.

Giles Warrington of Pinsent Masons, the law firm behind OUT-LAW.COM, said Sky may have been able to exert a stranglehold on ITV's future.

"If ITV wanted to fund certain departments or investments they would have to raise funds," said Warrington. "Because Sky could effectively block special resolutions if it has 25 per cent of votes at a meeting, they would be able to restrict ITV's access to finance and affect plans for expansion."

Warrington said Office of Fair Trading analysis showed that with the reduced numbers of shareholders who participate in a meeting, Sky's 17.9 per cent is often enough to block a special resolution. "Sky could have an incentive to do that, to block future innovation by ITV, so it could be of benefit to Sky," he said.

A special resolution is only passed with the support of 75 per cent of votes cast – so it can be blocked by any party that has a shareholding equating to 25 per cent of votes cast plus one vote. Because many shareholders do not exercise their right to vote, a shareholder owning less than 25 per cent of a company can often block a special resolution.

The Competition Commission announced its provisional findings and will produce a full report later this year. It said Sky parent BSkyB's shareholding did not have a detrimental effect on overall plurality in the market or news production, but it did say the deal could have a negative effect in the arena of long term ITV strategy.

"The acquisition has made BSkyB ITV's largest shareholder by some margin and whilst our provisional view is that this would not necessarily affect day-to-day operations, BSkyB would be able to influence ITV's key strategic decisions, particularly relating to investment, whether in content, capacity or new technology," Competition Commission chairman Peter Freeman said.

Though it was a minority stake in the broadcaster, Sky's was the biggest single shareholding in the company. This gave it more power than anyone which, Warrington said, could have been as big a factor for the Competition Commission as the exact amount of the shareholding.

"It raises the fact that a minority interest can raise concerns if it is held by a trade player in one of its competitors, where the trade player is the largest shareholder," said Warrington. "That can be the case even if it is a relatively low shareholding."

Sky bought its stake in ITV in November last year for £940m. This week the stake was worth just £720m.

The Competition Commission will send a report to the Secretary of State for the Department for Business, Enterprise & Regulatory Reform (BERR) John Hutton. Hutton can only decide what remedy to impose on Sky if part of the remedy relates to the public interest complaints about the deal.

Because the Commission does not have concerns about the public interest part of the complaint, it is likely that Hutton will have to pass the issue back to the Competition Commission to decide on a remedy, said Warrington.

Copyright © 2007, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

Providing a secure and efficient Helpdesk

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
DOUBLE BONK: Testy fanbois catch Apple Pay picking pockets
Users wail as tapcash transactions are duplicated
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
Google Glassholes are UNDATEABLE – HP exec
You need an emotional connection, says touchy-feely MD... We can do that
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
prev story

Whitepapers

Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
New hybrid storage solutions
Tackling data challenges through emerging hybrid storage solutions that enable optimum database performance whilst managing costs and increasingly large data stores.