Britain's competition regulator provisionally rejected on Tuesday the proposed $15.5 billion acquisition by 21st Century Fox of the British satellite broadcaster Sky on the grounds that it was "not in the public interest".
The Competition and Markets Authority (CMA) had been assessing whether the deal, announced in December 2016, would negatively affect media plurality in Britain and whether it would affect broadcasting standards in the country, the Guardian reported.
The move raises the biggest hurdle yet in Rupert Murdoch's efforts to consolidate ownership of the broadcaster by buying out the 61 per cent of Sky shares that he doesn't already possess.
While it is preliminary and not binding on the government, which must approve the deal, it could also scramble the calculations in Disney's separate $52 billion deal to buy many of Fox's assets including Sky, Efe news reported.
According to reports, the determination shouldn't affect the terms of the Disney-Fox deal. But Sky was one of the jewels in the portfolio of assets that Disney is buying from Fox.
If the government blocks the Fox-Sky deal, Disney would then have to initiate a new bid for the rest of Sky to take 100 per cent control, assuming the Disney-Fox transaction is approved separately.
The regulator said any eventual Disney move to consolidate ownership could face less scrutiny and be easier to pull off. If Disney succeeded in its bid for the Fox assets, it would "significantly weaken" the link between the Murdoch family and Sky.
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It said the Disney deal to buy the Fox assets would be subject to its own regulatory review.
The regulator also listed possible remedies, such as spinning off Sky News, Sky's news channel. Sky had said it might shutter the business anyway. The likelihood of Fox agreeing to any significant remedies is low, however, given the pending Disney deal.
The UK's CMA said that Murdoch already holds significant influence in the British media landscape through News Corp, which publishes widely-read newspapers, including The Times, The Sunday Times and The Sun.
Murdoch and his family are major shareholders in News Corp, which publishes The Wall Street Journal. They are also major shareholders of Fox.
The regulators said acquiring 100 per cent of Sky would give the Murdoch family "greater influence over public opinion and the political agenda through Sky News, and would add to the already-significant influence over public opinion and the political agenda through its control of the News Corp titles".
In a statement, Fox said that it was "disappointed by the CMA's provisional findings. We will continue to engage with the CMA ahead of the publication of the final report in May".
Fox also said it was pleased it passed the regulator's other test, of whether Fox was committed to British broadcasting standards.
Tuesday's report was preliminary. The authority is set to publish a final report in May. Fox said that it expects the deal to be closed by June.
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