Culture Secretary Jeremy Hunt kept the door ajar for News Corporation's planned takeover of BSkyB today when he delayed a decision on whether to refer the deal for a full-blown competition inquiry.
In the wake of findings from media regulator Ofcom, Mr Hunt said the proposed takeover might be against the public interest in media plurality and he was minded to refer it to the Competition Commission.
But before he referred the case, Mr Hunt said he was prepared to listen to special "undertakings in lieu" from News Corp as it sought to allay his concerns about the merger.
Recent media reports suggested that News Corp has told the Government it might be prepared to make concessions to avoid a lengthy consultation, with separating Sky News from BSkyB one option said to be under review.
Rupert Murdoch's News Corp, which also owns newspapers including The Sun and The Times, made an £8 billion approach in June to buy the 61% of BSkyB it does not already own.
But a report by media watchdog Ofcom recommended that the proposed deal should be investigated further by the Commission.
Mr Hunt said: "News Corporation says that it wishes me to consider undertakings in lieu which it contends could sufficiently alleviate the concerns I have, such that I should accept the undertakings instead of making a reference."
Mr Hunt said he would ask Ofcom whether any of the measures suggested by News Corp address its concerns over media plurality and requested that the Office of Fair Trading is involved in the process.
If the undertakings are accepted, a 15-day consultation period will commence, when parties will be able to express their views.
There has been a storm of protest from other major media players, as companies behind the Daily Mail, Daily Telegraph, Guardian and Daily Mirror, together with bosses at broadcasters BBC, Channel 4 and BT, voiced fears that a deal would pose a threat to competition and media plurality.
News Corporation said it believed Ofcom's analysis to be deficient in a number of ways and added that the level of plurality in the UK has increased since 2003, when the Communications Act was enacted.
The media group said: "While Ofcom acknowledges that the combination of News Corporation and BSkyB would have a minimal impact on consumers and would not enhance News Corporation's ability to influence the news agenda, it nevertheless concludes that the transaction may be expected to operate against the public interest.
"News Corporation has made a submission to the Department of Culture, Media and Sport setting out a number of issues with the Ofcom report. However, in the interests of progressing to a transaction, News Corporation has submitted an undertaking that we believe addresses Ofcom's concerns.
"We will continue to engage constructively with the regulatory process."
Ofcom defended itself today against News Corp's allegations that its report was flawed.
An Ofcom spokesman said: "News Corporation alleges that Ofcom did not have an open mind when considering the issue of plurality referred to it by the Secretary of State. This allegation is without foundation."
Ofcom's report, which was submitted on December 31 but made public for the first time today, also said there was significant scepticism from stakeholders as to the effectiveness of behavioural remedies as a means of guaranteeing the editorial independence of Sky News from News Corp.
The report said: "This scepticism was based partially on general concerns about the effectiveness of behavioural remedies, but also on the perceived outcome of specific commitments given during previous transactions, in particular following the acquisition by News Corp of the Times and Sunday Times."
It also called for a wide-ranging review of the industry in relation to media plurality.
News Corp's move to take full control of BSkyB began in June when the company unveiled an offer valuing the business at around £12 billion.
The proposal was rejected by Sky's board on valuation grounds but it agreed to work on regulatory issues in order to clear the way for any future merger deal.
In November, Business Secretary Vince Cable ordered Ofcom to carry out a media plurality test on the deal. However, authority for dealing with the case was handed to Mr Hunt in December after Mr Cable's comments to undercover reporters.
Mr Cable told the BBC Radio 4 Today programme today: "The key is that this is a very formal, quite complex, legal process that has to be followed in cases of this kind and the now-responsible minister will be doing that and that is the safeguard of the public interest."
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