The casino mogul and his childhood friend David Gyngell, who had been his best man, traded punches and wrestled on the ground on Sunday afternoon at Bondi Beach, with the incident captured by a paparazzi photographer.
Rupert Murdoch's News Corp bought the pictures and video clips for a reported USD 232,000 with the tabloid Sydney Daily Telegraph devoting nine pages to the scandal, including a front page splash headlined "Packer Whacker".
Gyngell accepted responsibility for the brawl in a statement broadcast on the Nine Network.
"He fully accepts that he was the instigator of the incident. Clearly had he not turned up at Packer's premises in an angry mood, then the confrontation would never have occurred."
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The images taken by a photographer who was in the area hoping to snap Packer with his rumoured new love interest, supermodel Miranda Kerr, sparked a bidding war.
The Telegraph and other media said Packer and Gyngell, who have been friends for 35 years, fell out after the casino magnate split with wife Erica six months ago. Gyngell reportedly told Packer he had made a mistake, which the 46-year-old did not appreciate.
Gyngell reportedly assured him in a testy phone call it was a coincidence, but personally went to investigate. He was there when Packer arrived and the verbal abuse quickly escalated into a fight that a witness described as "like two mad dogs going at each other's throats".
New South Wales Police Minister Stuart Ayres criticised them for brawling in public.
"What we've seen in the papers today is clearly a group of people that are doing something that wouldn't be accepted by anyone within the community," he told reporters.
Since his father's death in 2005, Packer has moved the business away from its traditional media operations and focused on creating Crown, a worldwide gambling empire.