Man Utd rejection signals the start of Government hostilities

The fracas at Manchester United over BSkyB’s bid was never about the business rationale of such a deal. It was all about that rather repellent British inverted snobbery, which says that a football club is a populist institution that has no place in the portfolio of a rich and successful power broker with a post-colonial accent.

The “No to Murdoch” Mancunian cronies that led the group opposed to the 623m takeover offered few reasons for their antagonism beyond some vague and unsubstantiated claim that Rupert Murdoch would “destroy” the club. It was often claimed, too, that he is “only interested in money”.

The latter claim may very well be true. But let’s not forget that Manchester United is the richest football business in the world. It would seem that its chief executive, Martin Edwards, and his board colleagues aren’t that uninterested in making money. As for Murdoch’s intention to destroy the club, that doesn’t stand up even to a moment’s examination. So, Murdoch has a reputation for buying businesses and running their assets into the ground, does he? Pull the other one.

Nor is the Government’s attitude to blocking the bid, on the advice of the Monopolies & Mergers Commission, anything to do with business, though its case is more convincing than that of the fans in the Old Trafford car park. There is talk of other broadcasters being opposed to the deal (well, they would be, wouldn’t they, with BSkyB picking off the tastiest cherry?), the competitive dangers of vertical integration and the unfair advantage that BSkyB would enjoy in the sale of Premier League broadcasting rights.

Leaving aside the whinges of less able broadcasting organisations, vertical integration between broadcasters and football clubs and other sports businesses appears to work perfectly well in continental Europe and in the US.

As to unfair advantage in broadcasting negotiations, the suggestion here is that the football club would keep BSkyB informed on what other broadcasters had bid for the franchise. This is an ethical issue. The assumption is that the business is so bad, so leaky, or even so corrupt, that it cannot operate Chinese Walls that are perfectly acceptable in other industries, most notably in financial services.

No, what this ruling reveals is less about BSkyB, Manchester United, or any relationship between broadcaster and the sport it covers, and rather more about the Government’s attitude to business and competition.

The first thing to observe is that the Government either doesn’t care about, or is actively antagonistic to, the interests of the City. It is hard to find an analyst who can identify a sustainable rationale for blocking the deal, in the light of continental experience. Furthermore, football club shares dived in the wake of the announcement.

There is nothing essentially wrong with puncturing City hubris – it may be driven by nothing more sophisticated than greed – but, in the absence of rationale, the decision looks particularly hard on Newcastle United in the midst of its negotiations with American broadcaster NTL.

It can, of course, be argued with some justification that the Government is demonstrating its enthusiasm for competition. I doubt it but, whatever his motives, it appears that Trade Secretary Stephen Byers is not one who is going to set much store by business diplomacies.

By contrast, his ill-starred predecessor, Peter Mandelson, had an innate sense of the two-way process of government/industry relations. When originally asked about the BSkyB proposal, Mandelson replied, somewhat implausibly, that he loved football and loved watching football. His mortgage arrangements sadly meant that we were never to learn the extent to which this translated into a love for Murdoch.

But it is fair to assume that there has been a culture shift in the Government’s attitude to business since Mandelson’s departure. The BSkyB ruling is dangerously symptomatic of a new antagonism on the front bench to the process of making money.

The supermarket chains are learning this to their cost. Tesco’s results are overshadowed this week by the spectre of the collective referral of the industry to the MMC (now the Competition Commission), over allegations of manipulating prices at the expense of suppliers and customers. Both Asda and Sainsbury’s have had public spats with the regulators on the subject. Asda claims that the Office of Fair Trading had confirmed that it had no problem with its profit margins (which the OFT denies). Sainsbury’s has slammed the OFT’s work as “inadequate and inconclusive”.

Whatever the merits of the case, we can be sure that this is not natural territory for mutual understanding. I’m convinced that positions will become polarised in coming months and that the Government is going to end up stuffing the supermarkets either by Commission or omission.

No wonder that there are reports that the Sainsbury family is considering selling out of its 35 per cent shareholding in the group. The game may be up – and not only with regard to the prices it is allowed to charge and pay. There are other Government-related issues such as out-of-town planning, the price of petrol and the tax regime.

Former chairman David (now Lord) Sainsbury has already quit to become a junior science minister. Fat lot of good it’ll do him to subsidise New Labour with his dosh and then grace its Government with his presence. If the Government doesn’t care about its relationship with the Murdochs, it’s hardly going to bother with the Sainsburys.


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