By DANICA KIRKA
LONDON (AP) — British regulators say 21st Century Fox's takeover of London-based broadcaster Sky is not in the public interest because it would give Rupert Murdoch and his family too much control over the country's news media.
But it offered solutions that raised hopes that a deal would eventually be reached as the Murdochs press ahead with an even bigger deal — Disney's own bid to buy Fox.
The preliminary finding on Tuesday by the Competition and Markets Authority is the latest hurdle for Fox's effort to buy the 61 percent of Sky PLC it doesn't already own for 11.7 billion pound ($16.3 billion). Its attempt six years ago was derailed by the phone-hacking scandal at Murdoch's British newspapers.
The ruling will be finalized by May 1, when the authority will send its report to the government, which who will make a final decision on whether the deal should proceed.
Regulators said the proposed takeover raises concerns about Murdoch's influence over British media because his family trust already controls News Corp., which owns newspapers such as the Times and the Sun, and the deal would increase its control of the influential Sky News channel. Even before the Sky bid, liberal politicians claimed Murdoch had too much influence over public debate, with his papers often supporting conservative causes.
"The (Murdoch family trust's) news outlets are watched, read or heard by nearly a third of the U.K.'s population, and have a combined share of the public's news consumption that is significantly greater than all other news providers, except the BBC and ITN," the regulator said in a statement. "Due to its control of News Corp., the Murdoch family already has significant influence over public opinion, and full ownership of Sky by Fox would strengthen this even further."
But the regulators offered potential solutions to their objections, including the spin-off of Sky News or "behavioral remedies" that would reduce the Murdoch family's ability to direct Sky's news coverage.
Fox said it was "disappointed" by the ruling on media plurality, while Sky took note of the suggested remedies.
The authority also suggested that the completion of Walt Disney Co.'s planned $52.4 billion takeover of Fox would weaken Murdoch's control over Sky and lessen concerns about media plurality. However, there is no guarantee that the deal will be completed, so the British government's review of the Sky merger must go forward.
"We cannot be sufficiently confident at this stage whether, when, or how the Disney/Fox transaction will complete," the regulator said.
Former British Culture Secretary Karen Bradley asked the authority to evaluate the takeover in September, directing it to look at Fox's commitment to broadcasting standards and the deal's impact on media plurality in the U.K.
In its decision, the regulator dismissed concerns about broadcasting standards, saying that Fox and Sky had a good record in this area. As part of its investigation, the authority considered allegations of sexual harassment at Fox News in the U.S.
"While these are serious, the CMA has provisionally found that these are not directly related to the attainment of broadcasting standards and do not call into question Fox's or the (Murdoch family trust's) commitment to broadcasting standards in the U.K," the authority said.
Analysts said the ruling may actually be good news for the takeover because one possibility — the spinoff of Sky News is workable. But it would have been difficult for the companies to mitigate concerns about broadcasting standards.
"An acceptable framework for spinning out Sky News appears to us quite attainable, and the CMA is showing flexibility in extending timetables to explore this," the investment bank Jeffries said in a note to investors.
Fox is seeking to consolidate its control over Sky as media companies try to combine content creation and distribution channels amid pressure from competitors such as Netflix, Google and Amazon.
Sky's European pay TV operation has 22.5 million customers, attracted by offerings such as English Premier League soccer and "Game of Thrones."
A previous bid for the whole of Sky foundered amid the 2011 phone-hacking scandal, in which journalists working for Murdoch newspapers were accused of gaining illegal access to the voicemail messages of celebrities, members of the royal family and crime victims. Murdoch's News Corp. withdrew its bid for Sky in 2012.
Labour Party Deputy Leader Tom Watson, a long-time opponent of the Murdochs, tweeted that the regulator was "right to say that the Fox takeover of Sky would give the Murdoch family too much power."
"This is the right decision for the U.K.," he said.
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