The Department for Culture, Media and Sport has opened a consultation into what proportion of a British newspaper foreign, state-linked entities and individuals should be allowed to own.
Under the Digital Markets, Competition and Consumers Act (DMCC) which received royal assent last month “foreign powers” may own no shares whatsoever in a UK newspaper. An amendment which would have allowed passive investment of up to 5% from sovereign wealth funds and state pension funds was dropped in the pre-election legislative ‘wash up’.
The new legislation rules out ownership by or investments from government-linked entities like Redbird IMI, the Abu Dhabi-backed investment vehicle that this year attempted to acquire The Telegraph.
Redbird IMI’s bid for the paper, fronted by former CNN president Jeff Zucker, prompted an outcry from many politicians and media leaders who feared it would undermine The Telegraph’s independence. Those concerns caused the government to “pause” the sale process and ultimately scupper the bid with the new foreign ownership rules.
The DCMS said the current definition of foreign powers in the bill also covers “state-owned investors such as sovereign wealth funds and public pension reserve funds”.
Because of this, on Thursday DCMS announced it is seeking views from “newspapers businesses and other interested stakeholders” on a draft amendment to the Enterprise Act 2002 that would, as proposed, permit “state-owned investors” to own up to 5% of a newspaper.
DCMS proposes 5% cap on foreign state ownership could be raised to 10% for some businesses
Under the existing version of the DMCC Act, a foreign power is deemed able to control or influence a newspaper if it holds, directly or indirectly, any shares or voting rights in the paper or any ability to “influence to any extent” its activities.
A foreign power, in turn, can include anyone from a head of state to “senior members of an agency or authority of a foreign government” — which is why sovereign wealth or state pension funds may be swept up under the current definitions.
The DCMS says it wants to distinguish “foreign powers” from “state-owned investors” in legislation. Under a proposed five-part definition, on which the department is also seeking feedback, a state-owned investor must for example be wholly-owned by a foreign government, have as its main activity the managing of investments and exist to either benefit that government or, in the case of a pension fund, its beneficiaries.
Another portion of the legislation up for consultation is a proposed relaxation of the 5% threshold when a UK newspaper is part of a “diversified business”.
DCMS proposes the foreign investment cap may be increased to 10% when the company that is the subject of the investment makes 20% or less of its global revenue from UK newspapers — as long as the state-owned investor holds no shares in the company that directly operates the newspaper part of the business.
The department is also seeking views on changes that would allow for small shareholdings up to 0.1% of a newspaper for a person “associated” with a foreign power (“to avoid the need to review numerous and low-level transactions”) and to allow people associated with a foreign power to hold investments in UK papers through retail investment products such as ISAs or SIPPs.
The consultation is open until 11:59pm on 9 July 2024 — five days after the general election — and comments may be submitted by email to foreign-state-news@dcms.gov.uk.
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