Government will delay Sky takeover to allow competition negotiations to continue

A competition law expert has said that such delays and negotiations are common in UK and EU mergers because further action can discourage major deals.

Rupert Murdoch's News Corporation already owns 39.1% of the satellite broadcaster and has offered £8.2 billion for the remainder of the shares. Media regulator Ofcom was asked to assess whether or not the deal would damage the balance of UK media ownership.

Ofcom reported to Hunt in December that the deal should be referred to the Competition Commission, but Hunt has since met News Corporation twice to discuss a way to structure the deal so that it addresses Ofcom's concerns.

News Corporation owns The Times, The Sunday Times, the Sun and the News Of The World newspapers.

Hunt said today that the process of consultation with News Corporation will continue and that he is delaying the referral to the Competition Commission.

"News Corporation says that it wishes me to consider undertakings in lieu which it contends could sufficiently alleviate the concerns I have such that I should accept the undertakings instead of making a reference," said Hunt in a statement. "It is appropriate for me to consider such undertakings."

"If this process produces undertakings in lieu which I believe will prevent or otherwise mitigate the merger from having effects adverse to the public interest, and which I propose to accept, I will then publish the undertakings in lieu and (as required under the [Enterprise] Act) begin a formal 15 day consultation period during which time all interested parties will be able to express their views," he said.

Hunt said he would ask the Office of Fair Trading to participate formally in the process of negotiating undertakings, and would involve Ofcom formally in assessing whether or not any undertakings address its original concerns.

The proposed deal attracted controversy when responsibility for overseeing it was removed from Liberal Democrat Vince Cable following comments he made to undercover reporters that he was "at war" with Murdoch over the issue. Shadow culture secretary Ivan Lewis has accused Hunt of having views that were unfairly favourable to News Corporation.

Hunt's actions, though, are normal for major competition cases, according to Alan Davis, a competition law expert at Pinsent Masons, the law firm behind OUT-LAW.COM.

"These kinds of discussions about what measures companies can offer to address the competition concerns and make a merger acceptable are common," said Davis.

"Indeed, it is OFT and European Commission policy to encourage the merging parties to come forward with proposals, which are called 'undertakings in lieu of a reference' in the UK, as early as possible in the process to avoid a reference to the Competition Commission or a Phase 2 investigation by the European Commission," he said.

"The prospect of a reference to the Competition Commission can have a chilling effect on a merger and many are abandoned once the referral is made," said Davis. "They are time consuming, costly and the uncertainty affects share prices. So in areas such as national security or the media where the Government has the final say it is not unusual that companies will be given extra time to find a way to make a deal work."