Rupert Murdoch is facing a government review of his UK media assets, after ministers decided to intervene in last year's acquisition by BSkyB, the satellite group he chairs, of a stake in ITV, the country's largest commercial broadcaster.
Alastair Darling, the UK trade and industry secretary, called yesterday for a review of whether the £940m ($1.84bn, €1.4bn) investment, "raises public interest concerns about the number of different owners of media enterprises" in Britain.
The decision creates a political headache for Gordon Brown, the chancellor of the exchequer, who is expected to succeed Tony Blair as prime minister this year, as it risks antagonising the influential Murdoch media empire, which includes newspapers such as the Sun and The Times.
Ministers were adamant the referral - the first time the public interest test has been used in a UK media deal - had been decided on legal, rather than political, grounds. Mr Brown has "kept well out of it", a Treasury insider said yesterday.
Mr Darling emphasised that his decision to ask for an "initial investigation" by Ofcom, the communications regulator, was "without prejudice to any decisions I take subsequently on whether a fuller investigation by the Competition Commission may be necessary".
Some competition lawyers said they were unsurprised that the government had asked independent regulators to advise on the issue. But the decision still involved negotiating a "legal minefield", according to a Department of Trade and Industry insider, with officials wary of the potential for any eventual ruling to be challenged in the courts.
Backbench MPs who had lobbied for a referral welcomed the decision. John Grogan, a member of the ruling Labour party who led a parliamentary motion calling for a referral, which was signed by 67 MPs, hailed a "pivotal moment in British broadcasting when finally a government minister has had the courage to stand up to Mr Murdoch".
The intervention elicited an angry response from BSkyB. "I think this is very negative in terms of the investment climate for this business," said Jeremy Darroch, chief financial officer, who argued that the ruling went against the government's own guidelines.
"It is reasonable to expect as a business that you should be able to rely when making decisions on government guidance," he said.
However, it was welcomed by Sir Richard Branson's Virgin Group, the largest shareholder in Virgin Media, the UK cable company that was forced to withdraw a bid for ITV after BSkyB made its investment in November.
"The politics were against it but the morality was for it," said Will Whitehorn, corporate affairs director for Virgin Group. Sir Richard had lobbied hard for an investigation, claiming the investment threatened media plurality in the UK.
Ofcom must advise Mr Darling by April 27, when the Office of Fair Trading is due to report on its separate examination of the deal. The OFT provisionally found in January that BSkyB may have acquired "material influence" over ITV.
