Rupert Murdoch's attempt to land one of the crown jewels of European media has been dealt a major setback after the UK government said 21st Century Fox's STG11.7 billion ($A19.8 billion) takeover of Sky needed to be scrutinised.
Britain's Competition and Markets Authority will now conduct an in-depth investigation into the proposed takeover, which could mean a delay that will force Fox to pay a special dividend for failing to get the deal done in the allotted time.
Culture Secretary Karen Bradley told the Commons that regulator's report into the deal risked the Murdoch family having "increased influence" over the UK's news agenda and the political process.
"On the basis of (regulator) Ofcom's assessment, I confirm that I am minded to refer to a phase two investigation on the grounds of media plurality," she said.
"The reasoning and evidence on which Ofcom's recommendation is based are persuasive - the proposed entity would have the third largest total reach of any news provider, lower only than the BBC and ITN and would uniquely span news coverage on television, radio, in newspapers and online."
Murdoch, his sons James and Lachlan, and Fox have tried to make the Sky takeover more palatable to UK authorities since their last attempt foundered amid Britain's phone-hacking scandal in 2011.
In 2013, News Corp separated its newspaper and publishing and TV assets, with the TV assets mostly contained in 21st Century Fox.
Fox lobbyists have also reportedly met with MPs from Britain's two major parties to thwart any political opposition to the deal. But the Labour Party's deputy leader, Tom Watson, had called for the merger to be scrutinised by British competition authorities.
The deal would allow Fox to buy out the nearly 61 per cent it does not already own of Sky, Europe's biggest pay-TV provider, which operates in the UK, Ireland, Germany, Austria, and Italy. Murdoch has been seeking full control of Sky for years.
