BSkyB tells government: see you in court

Never one to shirk a fight, BSkyB plans to contest the forced sale of its ITV stake in court...

Last Updated: 31 Aug 2010

BSkyB confirmed today that it plans to launch a legal appeal against the pesky Competition Commission, which has insisted that it must cut its stake in broadcaster ITV from 17.9% to less than 7.5%. It’s putting the finishing touches to its stroppy letter to the Competition Appeal Tribunal even as we speak.
News that it intends to contest the ruling comes as no great surprise. If BSkyB is forced to sell the shares, which have plummeted in value since it bought them in 2006, it will be left with a loss of about £250m. So it’s no wonder that new CEO Jeremy Darroch wants to try his luck in court.

What’s more, lawyers seem to think he has a decent case. The reason BSkyB is being forced to sell up is because the regulator thinks it will be able to exert undue influence on ITV. But under the 2003 Communications Act, broadcasters were allowed to take a stake of up to 20% in rivals (a clause that was implicitly directed at Rupert Murdoch). And BSkyB has already offered to abandon all its voting rights it would normally get with a stake this size. So its day-to-day influence will be actually be minimal, according to BSkyB, making the punishment ‘unreasonable and disproportionate’.

Of course, the legal case is not quite as cut and dried as this – if it was, who’d keep the lawyers in clover? But BSkyB has a strong enough case that there should be some fireworks involved – particularly if they manage to get the Murdochs in the same room as the regulators...

And at the very least it should delay the compulsory share sale by a few months - which might give ITV's share price a chance to climb out of the doldrums. Or perhaps not.

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