BskyB, Virgin and others have replied to the possible remedies and the provisional findings of the Competition Commission (CC) that the acquisition by British Sky Broadcasting plc (BSkyB) of a 17.9 percent share in ITV restricts competition, and therefore operates against the public interest.
The CC invited views on three potential remedies to alleviate the situation: (i) BSkyB sells its entire stake; (ii) BSkyB sells enough of its stake to ensure it no longer has material influence over ITV (previous examples include reductions to just below 10% and just below 15%); and (iii) BSkyB sells some of its stake and is subject to behavioural restrictions, which might relate to areas such as voting behaviour and the solicitation or acceptance of board representation; as well as asking for any other proposals.
Needless to say, BSkyB started by stating that the CC is wrong and they will submit evidence to back up their argument that a ‘relevant merger situation’ hasn’t been created or that the creation of such a situation would be expected to lead to a lessening of competition in the market due to a loss of rivalry between ITV and BskyB. However, they pragmatically say that ‘if’ the CC persists with its incorrect view then the only viable solution to the problem identified by the CC in its preliminary findings would be for Sky to place 3% of its 17.9% in the hands of ‘a voting trust with a respected institutional trustee’. This, according to Sky, would address their alleged ability to block special resolutions of the ITV Board, put to shareholders.
‘A Media Company’ seemed to agree the pacing of shares in trust could work, but argued that whole of BskyB’s holding be put in a discretionary trust.
Unsurprisingly, Virgin Media doesn’t agree with either the trust or the 3% reduction (however achieved), and on this very point states in its response to the possible remedies that even if BskyB had to sell that 3% “BskyB would still be able to vote shares representing almost 21% …[and] would need shareholders holding only 2.9% of ITV shares to vote with it in order to block a special resolution of ITV in circumstances in which up to 4.9 % of votes were cast against resolutions at the last ITV AGM”
Virgin states the only solution is for BskB to sell its whole 17.9% and get out of ITV altogether. At 14%, Virgin reckon BskyB would still represent 21% of votes cast at ITV General Meetings; and at around 10% would stop potential bidders for ITV (for which, read Virgin Media) being able to buy the company outright, by essentially acting as a pain in the arse (a ye olde technical legal term, I believe).
Of course, it is not just a Sky/Virgin spat. Rapture, who are also not exactly Sky’s biggest fans [ They are currently appealing a determination by Ofcom, to the Competition Appeals Tribunal (CAT), that charges levied by BSkyB for the provision of electronic programme guide (EPG) services between November 2005 and November 2006 were fair, reasonable and non-discriminatory] also chipped in.
They were short and sweet in their response stating ” Please note my objection to the BSkyB purchase of ITV shares and I would recommend that BSkyB be forced to sell all shares in ITV without delay. Furthermore BSkyB should be forbidden to extend its influence to any and all other broadcasters/content providers and should certainly not be allowed to launch its technology on any other platforms in the UK. This would at least help reduce the risk of future abuse by BSkyB.”
Incorporated Society of British Advertisers Ltd (ISBA) remain disappointed that the CC dismissed competition concerns in airtime sales and TV News arising form the ITV stake, but think that either a complete divestiture of divestiture to below 10% would be acceptable.
The CC is expected to issue its final report to John Hutton, Secretary of State for the Department for Business, Enterprise & Regulatory Reform (BERR) in December (although it has until January 2008 to do so).