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British Media Regulator to Examine BSkyB Deal

The British government ordered the country's competition watchdog on Thursday to carry out a full inquiry into British Sky Broadcasting's purchase of a significant stake in commercial broadcaster ITV.

The order for the investigation is the first major test of the influence held over the British media by Rupert Murdoch, BSkyB's chairman and largest stockholder.

Britain's competition and media watchdogs said last month that a full probe was necessary after the government called for preliminary reports to determine whether the deal was against the public interest.

"On the basis of the evidence before me, a fuller investigation by the Competition Commission is justified," said Trade Secretary Alistair Darling.

BSkyB, which is 39% owned by Murdoch's News Corp. , bought the ITV stake in November 2006 for $1.8 billion, a move that most analysts viewed as an attempt to prevent its pay-TV rival NTL from acquiring ITV.

NTL, which is now called Virgin Media after a merger with Richard Branson's Virgin Mobile, had announced shortly before BSkyB's acquisition that it was talking with ITV about an offer.

NTL and Branson, who are also embroiled in a separate dispute with BSkyB over content fees, complained bitterly about BSkyB's acquisition.

The Competition Commission, which rules on antitrust activity in Britain, will scrutinize the impact of the deal on competition and will look at public interest issues relating specifically to control of media companies.

The Office of Fair Trading said in April that it believed BSkyB's share ownership could result in "a substantial lessening of competition" in the markets in which BSkyB and ITV operate.

There is a separate inquiry into the British pay-TV market, which BSkyB dominates, following criticism that the company abuses its position through pricing and other issues.

BSkyB and ITV have both pledged to cooperate with Competition Commission to head a fully inquiry, pledging full cooperation, but declined to comment further.

Shares in BSkyB were 0.9% lower at 634.5 pence ($12.69) while ITV stock dropped 1.6% to 114.6 pence ($2.30).

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