Ofcom faces Murdoch ‘fit and proper’ challenge

A London High Court Judge has approved a legal challenge by global citizens movement Avaaz against Ofcom, calling to question the regulator’s decision that Fox and the Murdoch family could be trusted to fully control Sky.

Honourable Mr Justice Morris ruled that Avaaz’s case against Ofcom’s ‘fit and proper’ ruling in the Fox/Sky bid is arguable, raises important points of principle, and should be heard rapidly, before the end of June. The ruling rejects Ofcom’s claim that the Avaaz suit was without merit.

In response to the judge’s ruling, Ricken Patel, CEO of Avaaz, said: “If the Murdoch empire is fit and proper to hold’ broadcasting licences after massive hacking, harassment and hush money, then virtually anyone is. Ofcom has put licensing standards in the gutter with this decision. They got down there by steadily shifting the goalposts to ensure the Murdochs passed the test. The Murdochs may believe they are above the law but the court has made it clear Ofcom is not.”

According to Avaaz, the challenge presents another hurdle to the planned acquisition of the remaining 61 per cent of Sky Plc by Murdoch-owned 21st Century Fox. As with all broadcasters, a future merged Murdoch-owned Sky/Fox entity would need to be ‘fit and proper’ to hold a broadcast licence in the UK. Avaaz has accused Ofcom of clearing the Murdochs too easily without a thorough investigation of Fox News content or corporate governance failures across the family’s empire.

If Avaaz – represented by George Peretz, a competition QC and Azeem Suterwalla, a specialist in judicial review at Monckton Chambers – wins its case, Ofcom will be forced to reconsider its fit and proper decision, opening up the possibility that the regulator could examine significant new evidence on sexual harassment and phone hacking.

Avaaz challenged Ofcom’s fit and proper decision on four grounds:

• Ofcom disregarded overwhelming evidence put before it by Avaaz and others that Fox News routinely broadcasted content with deliberate gross bias and fake news.
• Ofcom created an artificially “high threshold” for an “unfit” finding, with no basis in law, that enabled the Murdoch’s corporate governance fiascos to pass without serious challenge.
• Ofcom made factual errors in assessing the sexual and racial harassment scandals at Fox, and subsequently rewrote parts of its decision after Avaaz took the first step towards a legal challenge. Specifically, of great concern is the question of which senior Fox executives knew about sexual and racial harassment allegations and settlements, and when they knew.
• In an earlier Fit and Proper decision in 2012, Ofcom severely criticised James Murdoch’s conduct at News Corporation and found Sky fit to retain a licence only after noting that he had stepped down as chair of Sky. In its 2017 report, however, Ofcom failed to explain why it was content with James Murdoch’s role as CEO of a merged Fox/Sky, including his new assurances on corporate governance.

Avaaz has campaigned against the bid since it was launched in December 2016.

Following Ofcom’s 2017 initial investigation, the bid is now in a phase 2 probe by the Competition and Markets Authority (CMA). The CMA has made an interim ruling that the Murdochs’ full takeover of Sky would be against the public interest as it would give them too much power and influence. Avaaz has recently written to the CMA urging it to prohibit the Fox/Sky deal on this basis, until and unless the Murdochs sell much of Fox to Disney, in a deal announced in December 2017 that will take a year or more to clear.