(by Andreas Stephan) This week there is continued pressure on the UK Culture Secretary, Jeremy Hunt, to resign. This follows revelations that his department was communicating with a News Corporation lobbyist at the time of its proposed acquisition of BSkyB, precisely when he was meant to be acting in an independent and impartial manner. This follows a media sting that revealed the apparent personal prejudice, this time against NewsCorp, which led to the Business Secretary, Vince Cable, being stripped of the role. Such incidents highlight why it may be inappropriate to retain even the limited role of the secretary of state in UK merger control in relation to public interest considerations.

UK Merger Control generally hinges only on competition grounds, but there is a retained role for the secretary of state to intervene on public interest grounds in media, defence and (since 2008) financial markets. In these areas, a quasi judicial role is assumed by the secretary of state in deciding whether a merger should be allowed. It is meant to be the Business Secretary who assumes this task, but in the News Corporation / BSkyB case Vince Cable . Undercover journalists posing as his constituents secretly filmed him saying he had “declared war” on Rupert Murdoch, suggesting that he was biased against the merger being allowed to go ahead.

Cable was allowed to carry on as Business Secretary, but responsibility for considering the merger was handed to the Culture Secretary. He gave the acquisition the green light and it failed to go ahead only following the involving News Corporation newspapers. When Rupert Murdoch gave evidence at the into media ethics last week, emails came to light which suggested News Corporation had a running commentary from Mr Hunt’s office while the merger was being considered. In a , a News Corporation lobbyist detailed what the Culture Secretary would say to parliament the next day in connection to the takeover, noting that his obtaining of this information was “absolutely illegal”. The in the UK media is that at worst Hunt was helping the News Corporation bid succeed, and at best he was incompetent in not knowing about the communications emanating from his department.

Whether it is personal prejudice against a merger or a desire to help a powerful media group, the case highlights the importance of leaving merger control entirely to a rotating panel of independent experts. Politicians should have no role in merger control – even in the narrow public interest areas allowed for by the Enterprise Act. In particular, public interest is such an ill defined consideration that it allows individual politicians to justify a decision to block or allow a merger too easily, with little in the way of meaningful independent scrutiny. The role for public interest considerations in the UK was rightfully restricted under the Enterprise Act, to avoid populist decisions designed to win votes. For example, the labour government might have been tempted to block the acquisition of Cadburys by Kraft before the last General Election. Public interest tests also create uncertainty for businesses and may be viewed as a protectionist measure by foreign firms thinking of investing in the UK.

Thankfully, there is an extremely limited number of UK merger cases in which public interest considerations are engaged. Some might suggest the strongest justification for a retained public interest role was highlighted by the financial crisis. In 2008, Business Secretary Lord Mandelson on the newly created public interest ground of ‘stability of the UK financial system’. This was despite the merger being opposed by the OFT on competition grounds. It was thought to be necessary to save HBOS and prevent a Lehman Brothers banking crisis of the type seen the previous year. However, the headed by Sir John Vickers, found that the merger only succeeded in restoring market confidence for a short period. The newly formed bank had to be bailed out by the Government anyway and the market was left with the anticompetitive effects of the merger.

What is particularly revealing (and worrying) about the News Corporation / BSkyB case, is that the allegations of bias only came to light as a result of investigative journalism and an independent enquiry into media ethics.