British Sky Broadcasting Group Plc v The Competition Commission & Anor

A specialist tribunal conducting a statutory judicial review applies the ordinary, flexible principles of judicial review. Its expertise improves its understanding but does not convert review into a merits appeal or require greater intensity.

In prospective merger analysis, the balance of probabilities applies to the statutory conclusions, not separately to every evidential or hypothetical step. A counterfactual is an analytical tool and does not prevent consideration of plausible market developments.

For media plurality, plurality includes the number, range and variety of controllers. Deemed common control determines the headcount, but the qualitative assessment must consider the actual extent of control exercised or exercisable.

Sky acquired 17.9% of ITV. The Competition Commission found that the acquisition created a relevant merger situation and was expected to cause a substantial lessening of competition. It recommended reducing Sky’s holding below 7.5%. The Secretary of State accepted those findings and imposed that remedy.

On applications under section 120 of the Enterprise Act 2002, the Competition Appeal Tribunal upheld the competition findings and remedy. It nevertheless held that the Commission had misconstrued the media plurality provisions: [2008] CAT 25.

Sky appealed on the intensity of review, the standard of proof, counterfactual analysis, remedy and media plurality. Virgin brought a contingent appeal concerning remedy. The central media issue was whether deemed common control excluded consideration of the actual degree of control when assessing whether there remained a sufficient plurality of media controllers.

1. Disposition. Sky’s appeal on the competition issues was dismissed. Its appeal on media plurality was allowed, as were the Commission’s and Secretary of State’s Respondent’s Notices. Virgin’s contingent appeal did not arise.

2. Under section 120(4) of the Enterprise Act 2002, the Tribunal had to apply the normal principles of judicial review. Those principles are flexible and sensitive to statutory context. The Tribunal could use its specialist knowledge to understand technical matters and work efficiently, but its expertise did not alter the nature of review or authorise reassessment of the evidence on the merits. The Tribunal correctly rejected the proposed heightened standard of review.

3. The balance of probabilities applied to the Commission’s ultimate statutory conclusions: whether Sky could materially influence ITV’s policy and whether that situation might be expected to cause a substantial lessening of competition. The Commission did not have to prove every evidential or hypothetical link separately on that standard. Its findings had an adequate evidential basis and were neither legally misdirected nor irrational.

4. A counterfactual is an analytical tool rather than a statutory test. Selecting an independent ITV as the most likely counterfactual did not freeze the market analysis. The Commission could consider plausible future transactions or strategies, including a board-supported merger or acquisition, when assessing material influence and competitive effects.

5. The Commission rationally rejected a voting trust and an undertaking not to vote. It could take account of monitoring difficulties, questionable effectiveness, distortions to corporate governance and the continuing influence associated with Sky’s substantial economic interest. Partial divestiture was a comprehensive, reasonable and practicable solution under section 47(9).

6. For section 58(2C)(a), “plurality” concerned the number, range and variety of persons controlling media enterprises. Section 58A(5) required Sky and ITV to be counted as having one controller. It did not require the Commission to assume complete control when conducting the qualitative sufficiency assessment. The Commission could and should consider the actual extent of control exercised or exercisable. The Tribunal’s contrary construction was set aside.

1. Court of Appeal (Civil Division): Sky’s competition appeal was dismissed, but its media plurality appeal was allowed. The Commission’s and Secretary of State’s Respondent’s Notices were allowed. Virgin’s contingent appeal did not arise: [2010] EWCA Civ 2.

2. Competition Appeal Tribunal: The Tribunal rejected Sky’s challenge to the relevant merger situation, substantial lessening of competition and remedy. It held that the Commission had erred on media plurality, but that the error did not affect the remedy. Virgin’s challenge to the remedy was also rejected: [2008] CAT 25.