The media watchdog Ofcom has referred the pay-TV film market to the Competition Commission in response to concerns that BSkyB is too dominant.
The regulator cited the way that first-run Hollywood movies are sold and distributed as creating a situation where Sky has "the incentive and ability to distort competition".
"The end result for consumers is less choice, less innovation and higher prices," Ofcom said.
Alongside concerns over first-run Hollywood films, the referral also covers the wholesale supply of pay-TV packages that include the movie channels that offer them.
The move is the culmination of Ofcom's three-year inquiry into the pay-TV market. In March, the regulator ruled that Sky must cut the wholesale price of its sports packages for its rivals, BT Vision and Virgin. But it held back from a ruling on the premium movie market. Sky has consistently disputed the allegations of market dominance.
The broadcaster maintains that the pay-TV market cannot be considered in isolation but faces ever-increasing competition from traditional rivals such as cinema and free-to-air television, and from a growing range of new platforms including Xbox games consoles and rental services such as LoveFilm.
"Ofcom is yet again seeking to intervene in a sector in which consumers are being well-served," a spokesman for Sky said. "There have never been so many ways to access movies, with innovation stretching across a wide variety of channels and platforms, including multiple ways to access Sky Movies."
The company also warned that the two-year Competition Commission investigation "will only create uncertainty and serve to undermine incentives to invest and innovate, which is bad news for consumers".Reuse content