Government orders full inquiry into Murdoch's UK empire

Alistair Darling, the Secretary of State for Trade & Industry, has ordered an unprecedented investigation into Rupert Murdoch's influence over the UK media sector, after telling the Competition Commission to review Sky's controversial purchase of a large stake in ITV.

The Competition Commission will report its findings in November and could force Sky to sell its stake in the terrestrial broadcaster if it finds that the investment lessens competition in the media sector and works against the public interest. It could also decide to take less severe action or rule that the deal does not reduce competition.

Ofcom said last month that Sky's near-18 per cent stake in ITV was anti-competitive and could potentially reduce the plurality of news coverage in the UK. Its findings followed the OFT's ruling that the stake was large enough to qualify for a merger and threatened the independence of the terrestrial broadcaster. The two rulings gave Mr Darling little option but to refer the matter to the Competition Commission, lawyers said.

Mr Darling said: "My decision reflects consideration of the reports I have received from both the Office of Fair Trading and Ofcom and of other representations I have received about this matter. On the basis of the evidence before me, a fuller investigation by the Competition Commission is justified."

The Department of Trade & Industry said in a statement: "The Secretary of State has decided that, as a result of the merger situation, there may not be a sufficient plurality of persons with control of the media enterprises serving the UK cross-media audience for national news and the UK TV audience for national news."

Sky shocked the market last November when it spent £940m purchasing a 17.9 per cent stake in ITV soon after news leaked that the cable company NTL:Telewest, now rebranded as Virgin Media, was set to make an offer for the terrestrial broadcaster. Sky's move scuppered NTL's plans and kicked off a bitter feud between the two companies.

James Murdoch, the chief executive of Sky, has maintained that the stake purchase was a strategic investment based on the view that ITV shares were undervalued. ITV has said that its competitor has thus far remained an entirely passive investor in the company but has noted that its satellite rival could potentially block shareholder resolutions.

But the move raised fears that Rupert Murdoch's News International, which owns a 39 per cent stake in Sky, wields too much power across the UK media sector as Sky could wield material influence over ITV in areas such as sports rights and the provision of news coverage. News International controls 36 per cent of the UK newspaper market, while a combined Sky-ITV controls 30 per cent of the national television news market, according to the DTI. News International owns The Times, The Sunday Times, The Sun and the News of the World. Mr Murdoch is Sky's chairman.

Sir Richard Branson, the largest shareholder in Virgin Media, described Sky's move as "a threat to democracy" and called on regulators to block the deal last November. A Virgin Media spokesman said: "Virgin Media has consistently maintained that BSkyB's acquisition of a stake in ITV is harmful to fair competition." A spokesman for Sky said: "We look forward to engaging with the Competition Commission as the ongoing regulatory process enters its next phase."

Bancroft speaks out against NewsCorp bid for 'WSJ'

Rupert Murdoch's hopes of getting his hands on the Wall Street Journal took another blow after one of the leading members of the paper's controlling family said he didn't trust the media mogul to uphold the Journal's editorial independence.

Making his first public comment on Mr Murdoch's $5bn bid for Dow Jones - the Journal's parent company - Christopher Bancroft said he opposed a takeover.

Mr Bancroft, a member of the Dow Jones board, aligned himself with journalists and family members who have warned that News Corp, Mr Murdoch's conglomerate, could curtail the Journal's editorial freedom in order to protect his political allies and business interests in countries such as China.

"Why would I risk that?" Mr Bancroft said. "I'm open to any situation that benefits the Journal and Dow Jones and its shareholders. At the moment, I don't see anything that would do that."

His comments came after an inconclusive family meeting on Tuesday. Some of the Bancroft family appear keen to continue debating the bid, but a clear majority of the family shareholders - who control 64 per cent of voting shares at Dow Jones - is believed to oppose a deal.

In an interview with the Journal, Mr Bancroft said he has a strong emotional connection to the paper, feels personally responsible to the staff and didn't want to "pull the rug out" on them.

Stephen Foley