The CMA said proposals to allay concerns did not go far enough
The Competition and Markets Authority (CMA) in Britain has said a takeover of broacaster Sky by 21st Century Fox "may be expected" to act against the public interest.
The competition regulator said, in its provisional findings, that the deal would not operate against the public interest in terms of either Fox or Sky having a genuine commitment to UK broadcasting standards.
But it warned that, in terms of the need to maintain plurality in the UK media, the takeover could potentially act against the public interest.
It said this is because the Murdoch Family Trust - the vehicle through which Rupert Murdoch, the executive chairman of 21st Century Fox, owns shares in that business - is also a major shareholder in News Corporation, owner of The Sun, the UK's top-selling national newspaper, as well as The Times and The Sunday Times.
It went on: "We have provisionally found that the transaction will significantly increase the extent of control the MFT is able to exercise over Sky and Sky News."
The CMA report said that proposals tabled by both companies to allay such concerns, such as putting place measures to strengthen the editorial independence of Sky News, did not go far enough.
It went on: "Given their extensive experience of the UK market and direct current and historic involvement with the Sky business, Rupert and James Murdoch [the current chief executive of 21st century Fox and chairman of Sky plc] would be likely to have considerable opportunity to influence the recommendation for any new head of Sky News."
And it added: "Our view is that although the MFT will not have full ownership of Sky following the transaction, the significantly increased control it will be able to exercise over Sky and Sky News is sufficient to give rise to concerns that, as a result of the transaction, there could be increased editorial alignment of Sky News and the newspapers owned by News Corp."
The CMA said there were a number of remedies that the parties could offer to address its concerns.
The first is that the deal be called off. The second is a potential sale or divestiture of Sky News.
The third would be 'behavioural remedies' to insulate Sky News from the influence of the MFT.
The regulator's findings will raise fresh questions over the future of Sky News.
In its submission to the CMA, made as part of the regulator's investigation, Sky told the watchdog it should not assume Sky News would continue broadcasting if the takeover were to be blocked.
The CMA's findings decision comes six weeks after 21st Century Fox agreed to sell its entertainment assets to Walk Disney Co for US$52.4bn (€42.7bn).
That deal will bring together the 21st Century Fox film studio behind hits such as Avatar, X-Men and Ice Age together with Disney's film assets, which include Pixar, Marvel and the Star Wars maker LucasFilm.
The sale includes Fox's stake in Sky.
The CMA also extended the timetable for its investigation by a further eight weeks. It will now make its final decision by May 1st.
Both parties will now be invited to respond to the CMA's provisional findings by March.
Responding to the CMA's report, 21st Century Fox said: "We welcome the CMA's provisional finding that the company has a genuine commitment to broadcasting standards and the transaction would not be against the public interest in this respect.
"Regarding plurality, we are disappointed by the CMA's provisional findings. We continue to engage with the CMA ahead of the publication of the final report in May."
It said it expected "regulatory approval" of the deal by the end of June.
Sky said it had noted the CMA's provisional findings and would make further comment "as and when appropriate".
A separate review by the European Commission had already given the deal the green light.
The takeover was also cleared by individual regulators in all of the other countries - Ireland, Germany, Austria and Italy - in which Sky broadcasts.