Twenty-First Century Fox 2014 Annual Report Download - page 36

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Changes in U.S. or Foreign Regulations May Have an Adverse Effect on the Company’s Business.
The Company is subject to a variety of U.S. and foreign regulations in the jurisdictions in which its businesses
operate. In general, the television broadcasting and multichannel video programming and distribution industries in
the United States are highly regulated by federal laws and regulations issued and administered by various federal
agencies, including the FCC. The FCC generally regulates, among other things, the ownership of media, broadcast
and multichannel video programming and technical operations of broadcast licensees. Our program services and
online properties are subject to a variety of laws and regulations, including those relating to issues such as content
regulation, user privacy and data protection, and consumer protection, among others. Further, the United States
Congress, the FCC and state legislatures currently have under consideration, and may in the future adopt, new laws,
regulations and policies regarding a wide variety of matters, including technological changes and measures relating
to privacy and data security, which could, directly or indirectly, affect the operations and ownership of the
Company’s U.S. media properties. Similarly, new laws or regulations or changes in interpretations of law or in
regulations imposed by governments in other jurisdictions in which the Company, or entities in which the Company
has an interest, operate could require changes in the operations or ownership of these international media properties.
In addition, laws in non-U.S. jurisdictions which regulate, among other things, licensing arrangements, local content
requirements, carriage requirements regarding pricing and distribution, and limitations on advertising time, may
impact the operations and results of our international businesses.
In addition, changes in tax laws, regulations or the interpretations thereof in the U.S. and other jurisdictions in
which the Company has operations could affect the Company’s results of operations.
U.S. Citizenship Requirements May Limit Common Stock Ownership and Voting Rights.
The Company owns broadcast station licensees in connection with its ownership and operation of U.S.
television stations. Under U.S. law, no broadcast station licensee may be owned by a corporation if more than 25%
of its stock is owned or voted by non-U.S. persons, their representatives, or by any other corporation organized
under the laws of a foreign country. The Company’s Restated Certificate of Incorporation authorizes the Board of
Directors to prevent, cure or mitigate the effect of stock ownership above the applicable foreign ownership threshold
by taking any action including: refusing to permit any transfer of common stock to or ownership of common stock
by a non-U.S. stockholder; voiding a transfer of common stock to a non-U.S. stockholder; suspending rights of stock
ownership if held by a non-U.S. stockholder; or redeeming common stock held by a non-U.S. stockholder. In order
to maintain compliance with U.S. law, as of October 2013, the suspension of voting rights of the Class B Common
Stock held by non-U.S. stockholders was 35%. This suspension will remain in place for as long as the Company
deems it necessary to maintain compliance with applicable U.S. law, and may be adjusted by the Audit Committee
as it deems appropriate. The Company is not able to predict whether it will need to adjust the suspension or whether
additional action pursuant to its Restated Certificate of Incorporation may be necessary. The FCC could review the
Company’s compliance with applicable U.S. law in connection with its consideration of the Company’s renewal
applications for licenses to operate the broadcast stations the Company owns.
The Company and News Corp Face Investigations Regarding Allegations of Phone Hacking, Illegal Data Access,
Inappropriate Payments to Public Officials and Other Related Matters and Related Civil Lawsuits.
U.S. regulators and governmental authorities are conducting investigations relating to the U.K. Newspaper
Matters. The Company is cooperating with these investigations. It is not possible at this time to estimate the liability,
if any, of the Company relating to these investigations.
In connection with the Separation, the Company and News Corp agreed in the Separation and Distribution
Agreement that the Company will indemnify News Corp, on an after-tax basis, for payments made after the
Separation arising out of civil claims and investigations relating to the U.K. Newspaper Matters, as well as legal and
professional fees and expenses paid in connection with the related criminal matters, other than fees, expenses and
costs relating to employees who are not (i) directors, officers or certain designated employees or (ii) with respect to
civil matters, co-defendants with News Corp.
It is possible that these proceedings and any adverse resolution thereof, including any fines or other penalties
associated with any plea, judgment or similar result could damage the Company’s reputation, impair its ability to
conduct its business and adversely affect its results of operations and financial condition.