Draft Enterprise Act 2002 (Mergers Involving Newspaper Enterprises and Foreign Powers) Regulations 2025

The Committee consisted of the following Members:

Chair: Sir Roger Gale

† Bhatti, Saqib (Meriden and Solihull East) (Con)

† Blake, Rachel (Cities of London and Westminster) (Lab/Co-op)

† Charters, Mr Luke (York Outer) (Lab)

† Cocking, Lewis (Broxbourne) (Con)

† Coleman, Ben (Chelsea and Fulham) (Lab)

† Eccles, Cat (Stourbridge) (Lab)

† Gilbert, Tracy (Edinburgh North and Leith) (Lab)

† Goldsborough, Ben (South Norfolk) (Lab)

Jarvis, Liz (Eastleigh) (LD)

† Patrick, Matthew (Wirral West) (Lab)

† Peacock, Stephanie (Parliamentary Under-Secretary of State for Culture, Media and Sport)

Pitcher, Lee (Doncaster East and the Isle of Axholme) (Lab)

† Richards, Jake (Rother Valley) (Lab)

† Robertson, Joe (Isle of Wight East) (Con)

† Simmonds, David (Ruislip, Northwood and Pinner) (Con)

† Smith, Jeff (Lord Commissioner of His Majesty's Treasury)

† Wilkinson, Max (Cheltenham) (LD)

Jack Edwards, Committee Clerk

† attended the Committee

Third Delegated Legislation Committee

[Sir Roger Gale in the Chair]

Draft Enterprise Act 2002 (Mergers Involving Newspaper Enterprises and Foreign Powers) Regulations 2025

14:30:00

Before we start, I take this opportunity to wish my hon. Friend the Member for Meriden and Solihull East a happy birthday—I can think of no finer way of celebrating. Members, including those on the Front Bench, may remove their jackets, if they wish to do so.

I beg to move, That the Committee has considered the draft Enterprise Act 2002 (Mergers Involving Newspaper Enterprises and Foreign Powers) Regulations 2025. It is a pleasure to serve under your chairship, Sir Roger. I also begin by wishing the Opposition spokesperson, the hon. Member for Meriden and Solihull East, happy birthday. These regulations were laid before the House, in draft, on 15 May. This Government are clear in our commitment to a free and pluralistic media where all citizens, in all parts of the UK, can access high-quality news and other information from a range of sources, enabling them to form their own opinions. The public’s continued access to diverse news, views and information is fundamental to the health of our democracy and wellbeing as a nation. It is therefore vital that the UK has in place strong measures ensuring that foreign states, whether allies or foes, cannot control or influence UK newspapers or news periodicals. The Digital Markets, Competition and Consumers Act 2024 amended the Enterprise Act 2002, creating a new foreign state influence merger control regime for UK newspapers and news periodicals. The changes were introduced by the previous Government in response to concerns raised by Parliament about gaps in the UK’s media merger regime. There was wide cross-party support for the principle that all foreign states, including long-standing allies, should not be able to control or influence the policy of UK newspapers or news periodicals. The question on the level of acceptable thresholds for investments made by state-owned investors was not settled, which is of course why we are here today, and these regulations will address that issue. State-owned investors include sovereign wealth funds and public pension or social security schemes that make long-term investments on behalf of states. In many cases, these are operated at arm’s length. They are global investors, holding interests in a wide range of UK and international companies and businesses. The previous Government consulted on proposals to create exceptions for passive investments made by state-owned investors using powers contained in the amendments to the 2002 Act. These included a complex cap on investments held by state-owned investors, which was set at 5% of shareholdings, but at 10% if the state-owned investor held shares in a UK newspaper indirectly as part of a diverse business. We have looked carefully at the responses to the consultation. In particular, we have paid close regard to the views of UK newspaper groups. They are concerned that the level of threshold settled on by the previous Government was drawn too tightly and could have a detrimental impact on their ability to raise investment funding that they may need to support future sustainability. In coming to a final view, we have had to carefully weigh up a number of things. First, there is the need for strong measures, which is what Parliament intended when, with Labour party support, it passed the amendments, creating the foreign state influence regime. Secondly, there are the concerns about the unintended effects of the exception regulations, such as risking a chilling effect on investment in the UK newspaper industry. Having considered that, we have decided to set the threshold for state-owned investment at 15% of shares or voting rights in a newspaper or news magazine, where this is a passive investment. In our view, this is an effective, simple and proportionate approach. The 15% threshold is below the level where the Competition and Markets Authority typically believes that material influence may arise. It is also well below the 25% level, which is the lowest trigger point for mandatory notifications under the National Security and Investment Act 2021. The changes we have made to the thresholds carefully balance the need for strong protections from foreign state influence, with the need for UK newspapers and news magazines to have access to a range of investment. The changes will also avoid the need for the Secretary of State to refer low levels of investment by state-owned investors to the Competition and Markets Authority where there is no likelihood at all of foreign state influence, such as where state-owned investors acquire shares in newspaper groups that are part of listed companies. The regulations will, as the previous Government proposed and as permitted by the 2002 Act, come into force with retrospective effect on 13 March 2024. There are three important considerations that relate to the 15% threshold that are relevant to the Committee’s deliberations. First, state-owned investors acting on behalf of foreign powers can benefit from the exception only if the investment is a passive one. The legislation will not permit state-owned investors to acquire rights to directly, or indirectly, appoint directors or other officers of the company, or any rights to direct, control or influence the policy or activities of a UK newspaper. If the Secretary of State has grounds for suspecting that a state-owned investor has secured, or will secure, the right to direct, control or influence a UK newspaper, they must ask the Competition and Markets Authority to review the case. If the Competition and Markets Authority concludes that the transaction has resulted, or will result, in a foreign state acquiring control or influence, the Secretary of State must take action to unwind the transaction or block such a transaction. The four-month time limit for the Secretary of State to intervene in a completed merger will start running from the point at which facts about whether there is foreign state influence come to light. This means that action can be taken years after the transaction is completed, if relevant information was concealed beforehand, which will act as an important deterrent. Finally, the legislation includes specific provisions for joint arrangements. These state that if a foreign power and other entities—potentially other foreign powers—own shares in a UK newspaper as part of a joint arrangement, each party is considered to hold the combined shares or voting rights of all. If these provisions applied to a joint arrangement between state-owned investors from different countries, and the total of the state-owned investors’ combined shares or voting rights in a newspaper exceeds 15%, the Secretary of State would again be required to take action. Our policy intention has always been to prevent any foreign state influence over the affairs and policies of UK newspapers and news periodicals. Although a remote risk, we acknowledge that, in some circumstances, different state-owned investors from different states could, in theory, each acquire up to 15% of a UK newspaper enterprise. They would then be able to organise arrangements so that each was treated as a passive investor with no ability, at least on paper, to influence a newspaper in any way, but still collectively own the majority of the enterprise. As explained, there are measures in the legislation that mean that the Secretary of State must refer a merger to the Competition and Markets Authority if they suspect that there is a joint arrangement of this kind, and the combined holding of shares or voting rights of the parties to the arrangement exceeds the 15% limit. The Secretary of State is also able to consider the range of relevant public interest considerations in the core media merger regime provided by the 2002 Act. We also recognise the strong views expressed by Members, and in the other place, that the issue should be put beyond doubt. I can therefore confirm to the Committee that the Government intend to lay, in draft, a second statutory instrument in the autumn to amend the foreign state investment exemptions to put the issue beyond doubt. We have chosen not to withdraw the regulations before us today due to the pressing need to have the main foreign state investment exemptions in place as soon as possible. It is important in order to give UK newspapers and potential investors greater certainty about the overall regime. We will, however, publish a draft of the secondary statutory instrument for consultation by 16 July. This approach will allow time for the detailed provisions to be considered and ensure that the drafting does not create unintended consequences. The second statutory instrument would also be subject to the affirmative procedure, requiring review and approval by Parliament. I stress that the UK has a strong track record for encouraging investment critical to growth within the media industry. These regulations ensure that the foreign state influence regime operates in a way that minimises the burden for UK newspapers while strengthening the robust regulatory framework that protects press freedom and free speech. Accordingly, I commend the draft regulations to the Committee.

14:38:00

It is a pleasure to serve under your chairmanship, Sir Roger—I can confirm that there is no place I would rather be today. I thank the Minister for bringing forward this instrument and for her continued engagement on this issue. I will pose some questions, and I request that the Minister takes them in the context of not just this SI but the further SI that she will be putting forward for consultation. The freedom of the press is the cornerstone of our democracy. It is an essential necessity in our democratic process. It allows the public to remain informed of current events, it questions and challenges those in power, and it keeps national debate balanced and accountable. Put very simply, if the freedom of the press is undermined the integrity of democracy is under threat. The previous Conservative Government took decisive action to prevent majority control of a British newspaper by foreign states. These were vital measures to help protect the strength of our democracy. While His Majesty’s official Opposition support the changes, which will help to ensure the continued survival of our world-leading press industry, we would like the Minister to provide some reassurances on the foreign state influence regime. We have some serious concerns about the potential for the growing risk of state interference in British news media. We want cast-iron guarantees that the Government are taking the necessary steps to make changes to existing security provisions that must not jeopardise the UK’s freedom of the press. The draft statutory instrument rightly sets a threshold for state-owned investment in a newspaper or news magazine at 15% of shares or voting rights. However, we have alerted the Government to the fact that, should various state-owned investors each purchase a 15% share, that could expose the UK’s freedom of the press to significant risk—a risk that the Minister acknowledges. Were multiple states to purchase 15% of shares, in particular when they have shared aims or purposes, that could have a chilling effect on the UK’s freedom of the press. Will the Minister reconfirm that any measures, including in secondary legislation, will also cover arm’s length bodies such as pension funds and other bodies controlled by states that might have influence? The Minister is aware of the risk and, if I am not mistaken, has already given assurances that the Government will take action to prevent that from happening to relevant stakeholders. Can the Minister provide any further details on what form that action will take, when it will come into effect and whether the Government have considered other potential risks that might be coming down the road? I put on the record my special thanks to Baroness Stowell, who has been highlighting the risk with the Government and raising awareness of the dangers posed by allowing the loophole to come into force. The previous Government had a proud record of taking decisive action in strengthening national security, in particular with the National Security and Investment Act 2021 and the National Security Act 2023, which showed that the Government must be alive to the risk posed by foreign states and be aware that the threats are ever-changing due to technological advances. Last week, as the Minister may be aware, the shadow Secretary of State wrote to the Department seeking assurances. We have not yet received a response. I am sure it will be forthcoming, but I ask the Minister directly: are existing powers under the 2021 Act sufficient? Will they be used to help protect press freedoms against foreign interference, including cases involving minority shareholdings or instances of editorial pressure? Equally, the Government have suggested that the Secretary of State will have new powers to act when the independence of the press is under threat. Can the Minister give any further details on that, if possible at this time? If not, is she open to writing to us? We, the Conservatives, of course welcome foreign investment, but we will never compromise on the integrity of our democracy. Many private foreign investors are interested in investing in a whole swathe of our industry, subject to our national security limitations or concerns. To that end, what consideration have the Government made about interpreting investment from certain states? Certain states work together, for example, and I name two that we always have to be conscious of: China and Iran. They almost always have institutions or investors that interlink with the state. What are the Government doing to ensure that our democratic principles are not undermined by foreign investment from bodies or private individuals in those particular countries? I hope we can all agree on the importance of the freedom of the press and on the benefits that foreign investment brings to the UK economy. However, freedom of the press is one of the cornerstones of our society, and the Government must ensure that newspapers are given the opportunity to attract investment, while not threatening the principle of the freedom of the press. I hope that the Minister agrees with that principle. Any legislation must do more than gesture towards foreign state-backed shareholders and the risks that they pose to our democracy; it must be robust, have credible safeguards and protect our journalists, and it must ensure our fully independent free press and, ultimately, the integrity of our democracy.

14:43:00

It is a pleasure to serve under your chairship, Sir Roger. Without the free press, democracy cannot function, as the Opposition spokesperson just said. We therefore cannot allow foreign states to use their wealth and influence to hold stakes that threaten the independence and integrity of British journalism. The Government-proposed 15% non-cumulative threshold opens the door to exactly that kind of foreign influence that the draft regulations were initially meant to prevent. In the Secretary of State’s statement on this matter, she said that the policy intention was that the Government wanted to ensure that state-owned investment vehicles, where they do invest, could not have influence over the business of a UK newspaper. Given the struggles of many traditional media outlets, however, I ask the Minister, why do the Government think that a foreign state might want to invest in UK media? Many organisations are well known to be struggling to turn significant profits, so is it perhaps because those foreign states might wish to exercise some other kind of influence over our public debate? Important lines must be drawn here, and we are interested in what the Government think about those lines. Would the Government be comfortable with a company owned by the Chinese Government, directly accountable to President Xi, buying 15% of a UK newspaper? What about a consortium involving the Chinese Government and another state, perhaps Iran or any other hostile state, owning 30% or more of a British media brand? We can imagine the Government might not welcome investment by a future North Korean company reporting to Kim Jong Un, but will the Minister confirm whether the proposed legislation will explicitly bar that? Will any other bits of legislation bar it? As the legislation stands, British newspapers could be fully owned by foreign Governments, opening our press to foreign interference, and interference in journalism and journalists as individuals that would go against the interests of the British people and the liberal democratic values that we hold dear. The Liberal Democrats therefore urge the Culture Secretary to revise the draft statutory instrument immediately, and to remove the right of foreign states to own any part of the British news media ecosystem.

14:45:00

This has been an important and interesting debate and I am grateful for the contributions by the Conservative party and the Liberal Democrats. The debate has shown the wide support across the House for stronger measures to protect UK newspapers and news periodicals. It also highlights the challenge in setting exceptions in a way that balances Parliament’s desires against the legitimate concerns about the ability of UK newspapers to raise investment if restrictions are set too tightly. Government need to balance the importance of creating certainty and sustainability for our newspaper industry with the need to protect against the risk of foreign state influence by setting a clear threshold for exceptions within the regime at 15%. We believe that we have done that effectively. Safeguards in the legislation will prevent multiple states each investing up to 15% via state-owned investors from acquiring control or influence over the policy of a newspaper enterprise, whether acting alone or in a joint arrangement. We have listened to the concerns, however, and have committed—I commit to this again now—to further legislation to put this beyond any doubt. To respond to the points made, we have reached a final position on thresholds due to the concerns expressed by newspaper groups about the unintended effects of the strict threshold proposed by the previous Government. We have considered those points, and we agree with the concerns to reset the level of the threshold, which is still below the level at which material influence generally arises in merger cases. The change balances the need to protect our press from foreign state influence against sufficient flexibility to support inward investment by newspaper groups that poses no risk of foreign influence or control. I will endeavour to follow up on that letter from the shadow Secretary of State. On the question on new powers from the hon. Member for Meriden and Solihull East, there is now a duty for the Secretary of State to report to the Competition and Markets Authority if there are any concerns or uncertainty. Also, the “state-owned investor” definition will include public pension funds if they satisfy the conditions for eligibility in the legislation. I am happy to continue the conversation with Members from across the House. Question put and agreed to.

14:48:00

Committee rose.