Leading article: The delusion and arrogance of a stumbling media tycoon

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Only seven days ago, Rupert Murdoch was the most powerful figure in the British media. Today the Australian-born tycoon finds himself with a fight on his hands to ensure the very survival of his empire.

There was barely time to catch breath between developments yesterday. Fresh claims of illegal behaviour by News of the World journalists tumbled out, among them allegations that the newspaper paid corrupt royal protection police officers for the contact details of members of the Royal Family. This was followed by the revelation that journalists from across Mr Murdoch's UK operation used illegal methods to get their hands on private information relating to Gordon Brown and his family.

This latter twist represents a nightmare scenario for Mr Murdoch. The allegation means that the hacking scandal moves beyond the News of the World and casts the spotlight of suspicion on the other newspapers in his British press stable. Evidence had already emerged last weekend of a cover-up by senior News International executives. As the crusading Labour MP Tom Watson put it yesterday, this looks increasingly like a case not of one rogue newspaper, but "institutional criminality" on the part of News International.

Mr Murdoch's bid to extend his empire by acquiring full ownership of the broadcaster BSkyB now hangs by a thread. The Culture Secretary, Jeremy Hunt, has now referred the bid to the Competition Commission for a full inquiry. Yet Mr Murdoch had already indicated he would prefer this, by dramatically withdrawing his undertaking to dispose of Sky News (which effectively made a referral inevitable).

In spite of everything that has emerged over the past week, Mr Murdoch seems to imagine that some way of salvaging the deal will present itself. Rather than abandoning the bid – a course urged on him by Nick Clegg and Ed Miliband yesterday – Mr Murdoch seems to believe that a referral to the Competition Commission will keep the deal alive. Mr Murdoch has also insisted on maintaining Rebekah Brooks as chief executive of News International, despite the fact that some of the most appalling hacking abuses are alleged to have taken place when she was editor of the News of the World.

These management decisions point to either vast delusion or supreme arrogance. If it is arrogance, it is grossly misplaced. It is hard to see how a Competition Commission referral benefits Mr Murdoch. No matter what the Commission finds, the media regulator, Ofcom, must still examine whether Mr Murdoch is a "fit and proper" person to own a broadcasting licence. The era of favours from politicians to override regulatory decisions is over. Parliament has located its backbone and will not tolerate any more sweetheart deals.

And the pressure over phone hacking will not abate either, with the Metropolitan police finally investigating properly. Mr Murdoch needs to look over his shoulder in the US too. A group of shareholders yesterday announced that they will sue News Corp over its response to the hacking affair. Though Mr Murdoch might behave as if he still has trump cards to play, all the signs indicate that his capacity to control events is finally over.

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