Ofcom decision on Fit and Proper Assessment of Sky

Last week Ofcom published its decision that British Sky Broadcasting Limited (‘Sky’) remains a fit and proper person to hold a broadcasting licence. This decision follows an assessment carried out in the light of phone hacking activities conducted at newspapers owned by News Group Newspapers Limited (‘NGN’). Under section 3(3) of the Broadcasting Act 1990 Ofcom has an ongoing duty to remain satisfied that broadcast licencees are fit and proper to hold their licences. The character and conduct of James Murdoch, Rupert Murdoch and the corporate entity News Corporation were considered as persons exerting “significant influence” over Sky. Ofcom has been careful to note that these persons’ activities are relevant to the fitness and propriety assessment of Sky, “notwithstanding the fact that such wrongdoing [is] not related to the performance of broadcasting functions”.

In its FAQs guidance on the fit and proper requirement Ofcom stresses the importance of any “relevant misconduct of those who manage and control the licensee”. However, there are no further details specifying the type of misconduct that would be considered as relevant. It has been suggested that Ofcom’s assessment is based on practical rather than moral considerations. These practical considerations relate to the licencee’s record of compliance with the Ofcom Broadcasting Code.

In November 2010 Ofcom determined that Bang Media Ltd and Bang Channels Ltd (‘Bang’) were not fit and proper persons to hold a licence. The notice published in relation to this decision cites “serious and repeated breaches of the Ofcom Broadcasting Code and their licence conditions… [demonstrating] …a disregard for the licensing regime” as a basis for establishing a failure to meet the fit and proper requirement.

In relation to Bang Ofcom noted 48 breaches of the Code. The breaches concerned “material of a sexual nature which was either too explicit for the time it was broadcast or too explicit for transmission on an unencrypted, free to air service”. In particular, Bang had contravened Rule 1.3 of the Code which is aimed at protecting children through appropriate programme scheduling. It is easy to assume that a moral judgement was made with regard to Bang’s conduct. However, on examining Ofcom’s report detailing the seriousness of Bang’s contraventions a more dispassionate and technical analysis is evident. Ofcom states that it had provided Bang with guidance on a number of occasions. It subsequently issued a sanctions decision in July 2010 noting “recklessness indicative of a ‘wholly inadequate compliance system’”. Ofcom then issued a financial penalty in July 2010 no doubt intended as a deterrent. Finally, having breached a direction passed in November 2010 to cease broadcasting, Bang’s licence was revoked.

It is interesting to compare this methodical procedure against the decision of one of Ofcom’s predecessors, the Radio Authority, to require Owen Oyston to divest his shares in four local radio licensees in 1997. The Radio Authority came to this decision following charges of rape and indecent assault being made against Mr Oyston. It is unclear what view Ofcom would now take in such a situation. While Ofcom requires to be informed of whether any director or shareholder of the broadcaster has ever received a criminal conviction or civil penalty it has stated that a criminal record will not automatically serve to render that broadcaster inappropriate to hold a licence.

In relation to Sky Ofcom concluded that there was insufficient evidence to establish that the Murdochs or NGN were aware of wrongdoing or criminality, or were complicit in a cover up. While the regulator does not shy away from serious criticism, particularly with regard to James Murdoch, in terms of the impact on Sky its overall conclusion remains benign. Ofcom highlights that the company has a good compliance record and states that as this record includes the period of James Murdoch’s tenure on the board “he must be given credit in this regard”. It is also noted that changes to Sky’s board indicate “independent oversight” and controls within the business. Ofcom appears sufficiently assured that Sky will conduct itself with proper compliance to the Code.

So, whilst the test is an ongoing one it seems highly unlikely that we will hear further word from Riverside House on this particular issue.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 020 7404 0606 and ask for your usual Goodman Derrick contact.