Consultation outcome

Consultation on The Enterprise Act 2002 (Mergers Involving Newspaper Enterprises and Foreign Powers) Regulations 2024 - government response

Updated 15 May 2025

1. Introduction

1.1 Background

On 26 March 2024, at the Third Reading of the Digital Markets, Competition and Consumers (DMCC) Bill, the previous government brought forward amendments to the Bill in order to insert new provisions in the Enterprise Act 2002 creating a foreign state influence (FSI) regime for mergers involving newspapers and periodical news magazines. The new regime came into force on 24 May 2024.

UK newspapers are a unique and essential part of our media landscape and play a critical role in terms of holding government, public agencies and businesses to account. It is therefore necessary to have effective measures in place in order to protect UK news publications from undue influence by foreign states.

The previous government announced on 26 March 2024 that it intended to use regulation-making powers introduced by the DMCC Act to create exceptions to the regime. The exceptions would cover investments by state-owned investment vehicles, such as sovereign wealth funds, pension funds or similar as defined in the regulations.

The scope of these exceptions was explored via consultation, which also outlined exceptions for small shareholdings and/or retail investments made by associated persons in investment funds which hold financial stakes in UK newspaper enterprises. The previous government launched the technical consultation on the drafting of these regulations on 9 May 2024. The consultation closed on 9 July 2024.

This government recognises the important role that news enterprises play in our wider democratic system, and their unique function compared to other sectors. We have carefully considered the consultation responses received, including those made by newspaper groups affected by the new regime. In setting out our response to the issues raised during the consultation, we have balanced the need to ensure strong measures are in place, while acknowledging the legitimate concerns raised by respondents. Our policy intention is to ensure the state-owned investment vehicles, where they do invest, could not have influence over the business of a UK newspaper/ news magazine. The aim here is to ensure that the measure is proportionate, and to limit any potential chilling effect of the policy on wider foreign inward investment.

1.2 What the consultation asked

Alongside asking for broader views regarding exemptions to the FSI regime, the consultation sought views on 4 key topics:

A) Exception for state-owned investment vehicles and definition of state-owned investors

Respondents were asked to comment on a proposed definition of state-owned investor (SOI). The consultation provided 5 proposed conditions, which would constitute a purposive test that would classify an SOI in accordance with the definition in section 70E of the Enterprise Act 2002.

These conditions were as follows:

Condition 1: that the investor is wholly owned or controlled by a foreign power i.e. a foreign power holds 100% of voting rights or shares or has the ability to appoint or remove a majority of officers in the SOI.

Condition 2: that the trustees of a trust or members of a partnership or unincorporated association, which holds 100% of the shares or voting rights in an investor, or which holds the right to appoint or remove the majority of the investor’s officers or to direct or control, or which has the right to direct or control or actually directs or controls, the investor’s activities, are subject to direction or control of a foreign state.

Condition 3: that the principal activity of the investor is to make or manage investments and that this includes making or managing investments in other countries or territories.

Condition 4: that the principal source of funds for the investor’s overseas investments is the foreign power.

Condition 5: that the sole purpose of the investments is to benefit the foreign power or its people, or, in the case of a public pension fund, the fund’s beneficiaries.

Respondents were then asked whether the 5 conditions fully capture the range of organisations that are generally regarded to be sovereign wealth funds or other state-owned investors.

B) The thresholds and their application to diversified businesses

The consultation set out proposals made by the previous government to create a limit for permitted investments by SOIs. SOIs would be permitted to acquire up to 5% of shares or voting rights, directly or indirectly, in a newspaper owner.

The consultation also proposed that where specific conditions are met SOIs would be permitted to take an investment of up to 10% of shares or voting rights in the newspaper owner. The conditions are:

Where the UK newspaper business accounts for 20% or less of the group’s global turnover in the most recent qualifying period of 12 months.

Where the SOI has no shareholding at all in the company that directly operates the UK newspaper business.

Respondents were also asked for views on the drafting and scope of these exceptions.

C) Exception for retail investment products

The consultation outlined the need to consider exceptions covering products such as Individual Saving Accounts (ISA) and Self Invested Personal Pensions (SIPPs) through the introduction of an exception for investments held in a UK or an overseas investment fund by an associated person, within the meaning of sections 127(a) to (c) of the Enterprise Act 2002. Respondents were asked for comments on the scope of this exception, and whether there is a case to broaden the exception further, excluding all investments in UK newspaper enterprises by UK and international investment funds where there is a genuine diversity of ownership.

Finally, the consultation sought views on the current drafting of the regulations, and whether they met our policy intention to exempt investments made in investment funds holding shares in UK newspaper enterprises.

D) Exception for small shareholdings (up to 0.1%) by an associated person

The consultation set out the need to consider including a de minimis threshold whereby an associated person, within the meaning of sections 127(a) to (c) of the Enterprise Act 2002, could own a shareholding in a UK newspaper of up to 0.1%. We asked for feedback on the structure and drafting of the de minimis limit, and its appropriateness in achieving our policy intentions.

2. Responses to the consultation

Four responses were received to the consultation. These focused on the following key themes:

2.1 Definition of State-Owned Investor (SOI)

Most respondents commented on the definition of SOIs, primarily to question whether it was effective in capturing all the different types of SOIs operating internationally. Concerns were raised that any uncertainty/variation in the application of the definition could deter investment by SOIs, and that, as the definition was drafted, some state-linked investors would qualify while others would not, despite operating in a similar manner. Respondents argued that due to the wide variety of structures and approaches to investment taken by SOIs, further clarification to the definition of SOI is needed.

2.2 Aggregation of SOIs investments where the SOIs are based in a single country

One respondent pointed out that, as currently drafted, 1 or more foreign powers of the same country or territory are to be treated as if they were a single state-owned investor, which assumes investments by SOIs based in the same country somehow aggregate their influence in a common manner, which they thought unlikely.

A different respondent asked for the regulations to make explicit that foreign powers from different countries or territories may each hold separate interests, each up to the relevant threshold, and these investments should not be aggregated, as several investments from several countries, in their view, does not translate into increased likelihood of influence for any one of them.

2.3 Treatment of debt and non-voting shares

Two respondents suggested that non-voting shares and/or debt instruments should be formally excepted from the regime. The justification provided by respondents was that debt instruments do not typically feature any rights that would give rise to control or influence. Respondents also suggested that debt instruments are an inherently passive means of investing, and therefore exempting these transactions would pose no substantial risk of active foreign influence.

The respondents suggested that the regulations should make specific provision to exclude debt instruments to put the issue beyond doubt.

2.4 Thresholds

Multiple respondents were of the view that the proposed exceptions for SOIs were too restrictive and should be increased to 15%, citing the lack of tangible influence under this threshold. One respondent compared the 10% threshold to the 25% threshold at which a transaction becomes eligible for a mandatory notification under the National Security and Investment Act 2021 (“NSI Act”), suggesting disproportionality and discrepancy in the approach taken in developing the FSI regime.

There were also comments that attempting to assess control and risk of foreign influence by reference to specified shareholding thresholds is an ineffective approach and will deter investment in UK newspapers and magazines noting that the level of influence depends on the overall context of the transaction, the identity of the investor and its investment strategy. The solution proposed by one respondent was to replace the FSI regime** with a more flexible regime that provides the Secretary of State discretion to consider each proposed investment individually, or failing this, that the shareholding thresholds should be set at a higher level to allow for these nuances.

2.5 Turnover test applied under the FSI regime

There was also concern expressed that the turnover test for determining whether a relevant merger situation has been created in connection with the FSI regime will be lowered from £70 million (the level for the ordinary media merger control regime) to £2 million. It was questioned whether this is operationally feasible given that it would capture a large number of small publishers, raising the government’s enforcement responsibilities. Some respondents argued that the “target turnover threshold” should be increased to £100m per annum to align with that which will apply under the UK’s merger control regime once the provisions within the DMCC Act come fully into force.

2.6 Scope concerns

Some respondents demonstrated concern that the regulations only applied to news magazines and newspapers. Supporting this, one respondent argued that to prevent the new regime from unfairly biassing investment against newspapers, all news service providers, including non-print news media services such as digital, TV and radio services, should be subject to the FSI regime.

2.7 Exception expansion

The majority of respondents thought that the qualifications for exception from the regime should be expanded in some way. Suggestions included exceptions for investment via independent third-party investors and small minority stakes in publicly listed companies.

2.8 Indirect holdings

Respondents also identified a technical issue about the possible effects of the “indirect holdings test rule” and its interaction with the exceptions for SOIs set out in the draft regulations. Current drafting would allow an SOI to indirectly hold up to 100% of a stake in a newspaper owner up to the threshold (i.e 100% of 5%) but it would not allow an SOI to hold a much smaller stake (e.g. 2%) indirectly, if the investment vehicle in the chain, which directly holds the stake in a newspaper enterprise, does so at a level which slightly exceeds the permitted threshold (e.g 11%). This is despite - in this example - the SOI not being able to exercise any tangible control or influence by virtue of the diluted nature of its shareholding.

3. Government response

The government has taken the consultation responses carefully into consideration, and intends to move forward with the drafting of the regulations as outlined in the original consultation but with one significant change reflecting the views received from newspaper groups who responded to the consultation. The government is intent on ensuring there is no weakening but wants to simplify the regime and increase the flexibility available to newspaper enterprises.

The government has therefore decided to remove the different threshold for diversified businesses. Now, in all cases, the government intends to limit the level of shares or voting rights that an SOI can hold to up to 15% of total available shares or voting rights in the newspaper owner. This section of the Consultation Response will contain our rationale for proceeding with the regulations as drafted, albeit with this change incorporated.

The government also intends to proceed with the exceptions for retail investments and small shareholdings which were outlined in the consultation.

3.1 Definition of State-Owned Investor (SOI)

The government is content that the definition of SOI in the draft regulations is sufficiently robust and clear but will keep the definition under review.

3.2 Aggregation of SOIs’ investments where the SOIs are based in a single country

The government believes these provisions are necessary to prevent malign actors investing in newspapers or news magazines via multiple SOIs to increase their level of influence. To remove these provisions could open up the regime to potential manipulation. For this reason, the government believes it is essential that SOIs are treated cumulatively, where they are based in a single country. We are therefore maintaining these provisions as set out in the draft regulations.

3.3 Treatment of debt and non-voting shares

The government does not consider that debt instruments would be normally caught by the FSI regime.

The FSI regime applies where a foreign power is able to control or influence a newspaper or a periodical news magazine. This requirement is satisfied where a foreign power owns shares or has voting rights in the newspaper enterprise. This requirement is also satisfied where a foreign power has the right to appoint an officer of the newspaper enterprise or the right or ability to control or influence the newspaper enterprise’s policy or activities.

In looking at whether a foreign state newspaper merger situation has arisen or may arise in a given case involving debt instruments, the Secretary of State will need to consider the specific facts of the case. In particular, whether the loan agreement enables the lender to exert the requisite degree of influence on the newspaper enterprise.

Ordinarily, debt instruments, made at arm’s length, would not result in control or influence over a newspaper or periodical.

Loan agreements can include an option for the lender to acquire ownership or control in the event of default. The policy intention is that the mere presence of such a control option would not satisfy the control or influence requirement set out above as the potential exercise of the option is too hypothetical. However, where such an option is exercised resulting in a foreign power holding shares, voting or appointment rights then the requirement is likely to be satisfied resulting in the Secretary of State issuing a foreign state intervention notice.

The government, therefore, does not think it necessary to add specific legislative provisions to exempt debt financing from the regime. We do, however, intend to make clear this position in updated guidance on the operation of the media merger regime including the new FSI measures.

The government has also considered representations made by consultees that non-voting shares should be excluded or treated differently. However, this would be a significant policy change and could open a potential loophole. For example, where a significant non-voting shareholding allowed the owners to leverage the views of other shareholders or had rights or influence that could be exercisable through other shareholders. The government therefore believes that non-voting shares should be subject to the same regime as voting shares but subject to the wider 15% threshold.

3.4 Thresholds

In response to stakeholder feedback, the government has decided to modify the threshold for SOI investment to 15% of shares or voting rights in a newspaper or news magazine. This is an increase from the previous proposal of 5% (or 10% in diversified businesses). The change will maintain strong protections against the risk of foreign state interference but will balance this by giving more flexibility for newspaper groups seeking investment from SOIs where control or influence over the policy of the newspaper is not at risk. It will also significantly simplify the regime, with 1 threshold for SOI investment, rather than a different threshold for general investment, compared to investment in diversified businesses.

This change will maintain a hard cap on SOI investment in newspapers and news magazines, and for that reason, the government does not believe it will weaken the overall effect of the regime because the threshold will still be set at a level below the level at which investors would generally be deemed to obtain material influence in other areas of the merger control regime.

Overall, the government believes that an increase to the threshold to 15% is a proportionate approach which recognises the issues raised by the newspaper groups who responded, balancing the need for investment in the sector with ensuring the UK has strong and effective legislation in place to protect the UK’s newspaper and news magazine sector from the risk of undue influence from foreign states.

3.5 Turnover test

The government acknowledges that the reduction of the turnover test to £2m means a larger number of enterprises are caught by the FSI regime, in comparison with the media mergers public interest regime in the Enterprise Act 2002. However this is the policy intent: this new regime applies to periodic news magazines, as well as newspapers. News magazines tend to be smaller entities than newspapers, and as such are likely to have a smaller turnover. The media mergers regime already has a lower turnover threshold (£70m) than the ordinary merger control regime (£100m), which reflects the unique role that media companies play within our society. Therefore, it is right to apply a lower turnover test given the importance of restricting foreign state influence. The government will keep the turnover threshold under review, should the impact on smaller news magazine businesses prove disproportionate.

3.6 Scope concerns

Newspapers and news magazines play a unique role in contributing to the health of our democracy by providing accurate news and information, helping to shape opinions, and contributing to political debate. It is therefore right that the UK has a robust regime which prevents foreign state ownership, control or influence, in such a crucial sector. However, the government must also balance this with ensuring a proportionate impact on business, and consideration of the wider investment landscape. Broadcast media is subject to an existing statutory regulatory framework that includes Ofcom regulation of content through the Broadcasting Code, and for this reason, the government does not intend to expand the regime beyond newspapers and news magazines at this time.

3.7 Exception expansion

The government is content that the exceptions which will be introduced via these regulations, for SOI investment, and for minority shareholdings and retail investments by associated persons, are necessary to ensure the effective operation of the FSI regime. It is important to balance the need for a strong regime, with supporting investment in the sector, and are confident that the regime as set out in this consultation response does so.

3.8 Indirect holdings

The 15% threshold will also apply to indirect holdings. The government looked carefully at this issue raised during the consultation, but we think that introducing a separate and different threshold for indirect holdings adds undesirable complexity to the regime given that indirect arrangements may be used as a means to circumvent the effect of the FSI regime.

Annex: consultation questions

Respondents were asked to answer specific questions, with responses by email. There was no word limit.

1. We would welcome comments on the proposed definition of state-owned investor and whether the 5 conditions, which do overlap, capture the full range of organisations that are generally regarded to be sovereign wealth funds or other state-owned investors.

2. We would welcome views on the diversified business exception and whether the current drafting achieves our stated aims.

3. We would welcome views on the scope of this exception [retail investments] and whether there is a case to go further and exclude all investments in UK newspaper enterprises by UK and international investment funds where there is a genuine diversity of ownership, including where a foreign power has invested directly in the fund.

4. We would welcome views on whether the current drafting of the regulations meets our policy intention to exempt investments made in investment funds holding shares in UK newspaper enterprises and through which an associated person may invest.

5. We would welcome views on the structure of the de minimis limit and whether the drafting fully captures the policy intention.

6. We would also welcome broader views regarding exemptions to the Foreign State Intervention (FSI) regime, is there anything else that the current proposals should consider?