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Last Updated: Friday, 27 April 2007, 16:08 GMT 17:08 UK
BSkyB's ITV move 'needs probing'
ITV logo at the London Television Studios
ITV is the UK's largest commercial broadcaster
BSkyB's purchase of a 17.9% stake in ITV should be referred to the Competition Commission, the Office of Fair Trading has recommended.

The OFT said it was concerned that BSkyB's purchase may "materially influence the policy" of ITV.

The OFT had been asked to investigate BSkyB's purchase of the stake in ITV by rival broadcaster Virgin Media.

Virgin has claimed that the purchase was an attempt to derail an attempted merger between the two companies.

BSkyB said: "Today's statements reflect the continuation of an existing regulatory process with which we will continue to engage fully."

"Sky believes in choice and competition and supports an environment that fosters investment and dynamism in today's fast changing media landscape"

'Serious concerns'

The satellite TV company founded by Rupert Murdoch bought the stake in ITV for 940m in November at a time when NTL - which later changed its name to Virgin Media - was considering a merger with the broadcaster.

NTL later abandoned this plan after it was snubbed by ITV.

The final decision on whether to refer the deal to the competition watchdog will be made by the Secretary of State for Trade and Industry by 26 May.

ITV said that it awaits the Secretary of State's decision.

Separately, media regulator Ofcom said the stake raised public interest issues relating to the "plurality" of provision of TV news.

The OFT said it believed BSkyB's financial interest in ITV posed "serious competition concerns".

Sky's shareholding means that ITV is no longer fully independent
John Fingleton, OFT chief executive

The current situation could result in a substantial reduction in competition in the broadcasting market, it said, while noting that BSkyB had not offered sufficient remedies to assuage its concerns about an erosion of competition.

'High stakes'

"Sky's shareholding means that ITV is no longer fully independent," said John Fingleton, the OFT's chief executive.

"This may alter the future competitive landscape, especially as we approach digital switchover."

"Given the high stakes for tens of millions of UK consumers, we believe these risks to competition merit further examination."

Becket McGrath, partner from law firm Berwin Leighton Paisner, said it was "significant that both OFT and Ofcom have published their advice on the day that they have given it to the secretary of state when they were not under an obligation to do so".

"It is going to be practically impossible for the secretary of state not to refer this to the Competition Commission unless he can get undertakings from BSkyB before then."

Should it asked to be asked to examine the matter, the Competition Commission could potentially recommend that BSkyB be forced to divest its stake.

Other options BSkyB may chose to pursue include selling down its ITV stake or relinquishing its voting rights.

BSkyB has argued that its stake is purely a commercial investment in an undervalued business and that it gives it no influence over ITV whatsoever.

Since BSkyB acquired its ITV stake, the broadcaster has lured Michael Grade from the BBC to become chief executive and pulled off a coup by securing the rights to cover the FA Cup.

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