Although most merger control decisions are taken by the Office of Fair Trading (OFT) or the Competition Commission (CC), there are currently three 'public interest' areas where the appropriate Secretary of State (now the Culture Secretary) can issue an 'Intervention Notice' so that (s)he takes the appropriate decision rather the OFT or CC. The three areas are: national security/defence, media plurality and financial services. Others may be added under secondary legislation.
This was the only area to be specified in the Enterprise Act 2002. There have been no relevant Intervention Notices since then.
This area was added by the Communications Act 2003, and includes TV, radio and newspaper mergers. The legislation is very complex but, in short, the Secretary of State cannot intervene in the decision whether to block a merger on competition grounds - this is still taken by the European Commission or the CC - but (s)he can decide whether the merger is against the public interest because of a reduction in 'media plurality' which might reduce public access to a range of freely expressed views in the media, and/or to accurately presented news.
This legislation was introduced in response to the perceived threat associated with the growing power and influence of Rupert Murdoch's News Corporation empire which, in the UK, includes four News International titles: The Times, The Sunday Times, The Sun and The News of the World, all of which were influential and/or mass circulation newspapers, as well as a significant stake in the Sky Television channels (BSkyB). Therefore, although the final decision was to be left to the Secretary of State for Business, the legislation provides that (s)he can, and presumably always would, seek advice from the determinedly independent Competition Commission, and would generally follow that advice.
A related problem was that senior News International executives were very close to a wide range of senior UK politicians. Incoming Prime Minister David Cameron was a close friend of Rebecca Brooks, and, in 2010, even appointed ex-News of the World editor Andy Coulson as his Head of Communications, despite Mr Coulson having previously resigned as editor of The News of the World when it became clear that he had either authorised phone hacking, or had been incompetent in not realising that some of the paper's key scoops had depended upon such illegal hacking. This triggered an interesting example of senior civil servants failing in their duty to 'speak truth unto power'. The FT's Sue Cameron reported that Whitehall's finest have their heads well down as accusations fly over phone-hacking and the role of former newspaper editor and now Prime Minister's Press Secretary Andy Coulson. Did officials have misgivings about him moving to Downing Street? You bet! Did they tell new Prime Minister David Cameron? No! "You'd have to be suicidal to tell a new Prime Minister that the man he's worked with for three years is trouble."
The legislation was invoked in 2007 when the Labour Secretary of State (SoS) intervened following the purchase by BSkyB (39.1% owned by News Corporation) of a 17.9% stake in ITV, the UK's second largest 'free-to-air' broadcaster after the BBC. Following advice from the OFT (on the competition issues) and from Ofcom (on the media plurality issues) the merger was referred to the CC who said that there was no significant media plurality issue, as ITV News' independence was assured in a number of ways. But the CC advised the SoS that a stake of even as low as 17.9% gave BSkyB a worrying amount of influence over the strategic direction of ITV, and recommended that BSkyB should be forced to sell its shares. The SoS accepted the CC's advice but BSkyB appealed to the Courts, eventually losing in the Court of Appeal in early 2010. It then began to sell its shares - at a considerable loss.
The legislation was invoked again in 2010 when News Corporation sought to acquire further shares in BSkyB so as to then own a majority stake in, and have full control over, the company. The competition aspects of this very large transaction fell to be considered at the European level in Brussels, where DG Competition in due course decided that the merger could go ahead. But Lib Dem politician and Business Secretary Vince Cable intervened on media plurality grounds and sought advice from Ofcom. As there was a clear media plurality issue, the clear expectation was that the matter would then be referred to the CC for advice. However, before the advice arrived, Mr Cable told two undercover journalists that he had "declared war on Mr Murdoch and I think we are going to win". It was thus clear that it would not be possible for him to make an unbiased decision, so responsibility for this and future media-related decisions was transferred to the Culture Secretary.
As noted above, Mr Cable's next step would almost certainly have been to refer the plurality issue for investigation by the Competition Commission, and for evidence-based advice on what concessions ('undertakings') might be offered by News International in order that the merger might be allowed to proceed. (The CC is very experienced in devising watertight undertakings - a far from easy task.) However, for reasons which are far from clear, and which presumably included a reluctance to annoy News Corporation, Conservative politician and Culture Secretary Jeremy Hunt made it clear that he was minded to allow the merger to proceed without first receiving advice from the CC, subject, however, to News Corporation offering satisfactory (i.e. satisfactory to him) undertakings in lieu of a CC reference (UiLs). News Corporation certainly wanted to avoid professional CC scrutiny, given their earlier experience (see above) and because the CC would insist on very watertight undertakings. News Corporation accordingly offered UiLs direct to Mr Hunt. The UiLs, in essence, provided for Sky News to be spun off into a new company owned 39.1% by the News Corporation/Sky merged entity. But Mr Hunt had to offer a public consultation on the package, and consultees inevitably objected very strongly; there were 40,000 submissions including protests from BT, Channel 4 and the publishers of a number of major newspapers. As a result, or perhaps inevitably, the detail of the UiLs was found to contain a good number of devils. It was eventually reported, in early June 2011, that Mr Hunt had called in external lawyers to give him advice, following which a yet further period of consultation would be needed. The CC would almost certainly have given robust evidence-based and fully-consulted-upon advice before then, so it may well be that Mr Hunt had begun to rue the day he decided to try to short circuit due process.
If so, then Mr Hunt's regrets will certainly have increased during the latter part of 2010 and then 2011 as it came to light that News International journalists and their associates had hacked into the private mobile phone voicemails of a wide range of victims of crime, victims of terrorism, celebrities and politicians. There were subsequent allegations of bribes being paid to police officers. These allegations in turn raised doubts about whether News Corporation - and/or its senior executives - were 'fit and proper persons' and so legally able to become owners of Sky Television. That question fell to be considered separately by Ofcom. In parallel with this, Andy Coulson was arrested (see above re his relationship with the Prime Minister) and News International announced the closure of the News of the World.
These scandals also caused some, including Ed Miliband, leader of the Labour Party, to suggest that it would now be clearly wrong for Mr Hunt to accept News Corporation's 'media plurality' assurances and allow the company to acquire BSkyB. The media plurality issue should therefore, even after all this delay, be referred to the CC. News Corporation itself then recognised that there was so much public and political opposition to the take-over of BSkyB that it would be better if the issue were kicked into the long grass and the CC allowed to examine the transaction. They accordingly withdrew their offer to spin off Sky News, thus triggering a July 2011 CC reference that should in truth have been made in the previous year. But then, only a few days later and under intense political pressure, they withdrew their bid altogether. It was left for experts to wonder whether both News Corporation might not have already completed the acquisition, subject to satisfactory and watertight undertakings, if they had been willing to face the CC who had, after all, cleared the media plurality aspects of their previous ITV transaction.
This area was added in late 2008 when the UK financial services industry appeared close to meltdown in the wake of the worldwide financial crisis and the collapse of the UK's Northern Rock bank. Halifax Bank of Scotland (HBOS) was also coming under pressure and, following discussions with Prime Minister Gordon Brown, its rival Lloyds TSB agreed to acquire HBOS and likely save it from collapse. As the financial services sector had not previously been designated as one of 'public interest', it seemed almost certain, however, that the merger would be prohibited on competition grounds. The SoS accordingly issued an Intervention Notice, the sector was designated, the OFT recommended to the SOS that the merger be referred to the CC for investigation - and likely blocked on competition grounds, the SoS decided not to refer the merger to the CC, and so the merger was allowed to stand. This intervention and decision was at the time regarded by most commentators as a perfectly sensible overriding of competition policy in view of the wider threat to the UK economy. A year or two later, however, some began to wonder whether it had been such a good idea after all.