Murdoch bows to parliament’s will

After a week of high drama, Rupert Murdoch has bowed to the will of the British parliament. He has withdrawn News Corp’s bid for BSkyB voluntarily rather than face an overwhelming vote in the legislature calling on him to do so.

Dropping the offer is not just the right course; it is the only sensible one open to Mr Murdoch. Thanks to the escalating phone-hacking scandal surrounding News Corp’s UK operations, the very idea of the deal proceeding has become odious to public opinion. To press on would have invited only backlash.

News Corp’s legalistic attempt to separate the hacking allegations and the merger process was always a non-starter. To be blessed by the regulatory authorities, the deal would have required undertakings from News Corp about its conduct to satisfy concerns arising from its strengthened grip on the UK media market. No government could have accepted these while some of the company’s senior executives were accused of misleading parliament and hindering police inquiries. Before returning to the fray, News Corp must put its house in order and answer the allegations laid at its door.

This newspaper welcomes the bid’s abandonment on broader public interest grounds. We have long argued that a News Corp takeover of Sky raises troubling questions about UK media plurality. It would give News Corp, which already owns 37 per cent of newspaper circulation, about 35 per cent of the television market. The FT should, of course, declare an interest but such an extension of cross-media ownership would change the landscape permanently.

Moreover, the regulatory framework itself is deficient. The UK’s laws on media ownership are not fit for purpose. Although they prohibit newspaper groups from owning the country’s main commercial broadcaster, ITV, no such injunctions apply to Sky or Channel 5, even though BSkyB’s revenue is three times that of ITV’s and growing much faster. The rules regarding media plurality are unclear.

Mr Murdoch’s withdrawal may not be the end of the story. News Corp could be forced by the media regulator, Ofcom, to reduce its stake if the hacking allegations against it are proven. But if not, News Corp may renew its overtures. This is why the government must seize the opportunity created by its withdrawal to reform media ownership rules. The prime minister, David Cameron, has this week trailed the opposition leader, Ed Miliband, in calling for the bid to be shelved. He must be more forward in pursuing reform.