In a landmark decision that sent shock waves through the broadcasting industry, the High Court yesterday gave Virgin TV leave to seek judicial review of the controversial Channel 5 award.
The ruling will be acutely embarassing to the Independent Television Commission, which last month awarded the 10-year licence to a consortium backed by the media companies Pearson and MAI.
Depending on how quickly the full hearing is completed, the legal challenge could delay introduction of the Channel 5 service, scheduled for 1997.
The High Court ruled that Virgin TV, backed by Richard Branson's Virgin Group, had an "arguable case" that the decision was flawed by illegality, irrationality and procedural impropriety.
The Virgin consortium claimed the ITC's decision had been irrational and wrong on several specific counts, including criticisms of the group's news service, the number of independent programme suppliers it had lined up and its management structure. It also complained that the winning consortium, Pearson/MAI, had been allowed to change the terms of its bid after the applications were sent in.
Pearson had no comment last night. In the past, the company has said it had been asked to clarify its bid, and that there had been no alteration of its terms.
The ITC said last night it was "confident that it awarded the Channel 5 licence in a fair and proper manner."
Richard Branson has battled publicly in the past with ITC chairman George Russell, who is also chairman of Camelot, the national lottery operator. Mr Branson's not-for-profit bid for the lottery was rejected in favour of Camelot's offer.
Commenting on the High Court decision, Mr Branson said: "Perhaps the ITC chairman should now concentrate his efforts on his other role in life, that of chairman of Camelot."
Virgin TV's partners include Associated Newspapers and Paramount Television. Two other members, HTV - the Welsh ITV company - and Philips, the Dutch electronics giant, said yesterday they would sell their shares in the group to the remaining partners, raising speculation that they did not want to continue the legal challenge.
Virgin TV bid pounds 22m for the licence, but both it and UKTV, the Canadian- backed consortium that offered the highest bid at pounds 36m, were rejected on quality grounds.The winner, Channel 5 Broadcasting, bid exactly the same as Virgin TV. The ITC awarded the licence to the highest bidder it said passed the quality threshold.