Both British Sky Broadcasting Group Plc ("BSkyB") and Virgin Media Inc, ("Virgin") are seeking review by the Competition Appeal Tribunal ("CAT") of the Competition Commission ("CC") 2007 report  into BSkyB's acquisition of a 17.9 per cent share in ITV plc ("ITV") ("the Report") and the subsequent decision based on the Report by the Secretary of State for Business, Enterprise and Regulatory Reform (the Secretary of State).

More specifically, BSkyB is challenging the finding that the merger would result in a substantial lessening of competition and the order to divest a substantial part of its holding in ITV. BSkyB requests that the CAT quash, in whole or in part, the Report and the Secretary of State's decision and refer the matter back to the CC with a direction to reconsider and make a new report to the Secretary of State.

On the other side, Virgin is challenging the finding that the merger would not be expected to operate against the specified public interest consideration and the decision that only a partial divestment by BSkyB is required. Virgin requests that the CAT set aside the Report and the Secretary of State's decision in so far as they relate to the public interest test, determine the correct interpretation of the public interest test and refer the matter back to the CC and/or the Secretary of State for proper consideration.

Interestingly, this is the first time a merger decision has been challenged under the Enterprise Act 2002 by both a directly affected party and a third party. This is also the first case in which the Secretary of State has made a public interest reference.  These actions do, therefore, raise some novel issues about the respective roles of the CC and the Secretary of State and the application of the media public interest tests and it will no doubt be of interest to many as to how these issues are resolved.

Background
An outline summary of the key steps along the way is given below:

• November 2006: BSkyB acquires 17.9% stake in ITV for £940 million.
• 24 May 2007: Secretary of State refers acquisition to the CC.
• 14 December 2007: CC submits Report to Secretary of State concluding that the acquisition may be expected to operate against the public interest and recommends BSkyB be required to reduce its shareholding in ITV to less than 7.5%, combined with an undertaking not to be represented on the ITV board.
• 20 December 2007: Secretary of State publishes Report.
• 29 January 2008: Secretary of State announces his decision concluding that (1) the transaction does not have an adverse effect on the relevant specified media public interest consideration (media plurality); (2) taking into account the CC's decision that the transaction is likely to result in a substantial lessening of competition arising from a loss of rivalry between ITV and BSkyB in the all-TV market, makes an adverse public interest finding; and (3) accepts CC's recommendation that BSkyB must divest its shares in ITV to a level below 7.5%, combined with behavioural undertakings not to be represented on the ITV Board, not to dispose of the shares to an associated person and not to re-acquire shares in ITV. Notably, no timescale is given for the divestment of ITV shares.
• 22 and 25 February 2008: notice of applications lodged by BSkyB and Virgin respectively.
• 4 and 6 March 2008: requests for permission to intervene filed on behalf of BSkyB in the Virgin proceedings and of Virgin in the BSkyB proceedings.
• 14 March 2008: CAT publishes Order ruling that both parties be allowed mutual intervention in the other's appeal and ordered to serve a non-confidential version of the notice of application including annexes on each other and provides for the parties to formulate and agree between themselves and, so far as applicable, ITV, arrangements for the disclosure of confidential information and documents relevant to both the BSkyB and Virgin proceedings and submit the agreed arrangements to the CAT in the form of an agreed draft order no later than 4pm on 28 March 2008.
  

27 March 2008

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