News Corporation has withdrawn its offer to hive off Sky News as a separate company as part of its proposed bid to take full control of BSkyB.
British Culture Secretary Jeremy Hunt told the House of Commons today that he was referring the bid to the Competition Commission with immediate effect.
He said the Competition Commission would be able to consider 'all relevant recent developments' in evaluating the proposed merger - a reference to the phone-hacking and payments to police scandals.
This came as reports said a News International publication sought to access phone, bank and medical records belonging to former British prime minister Gordon Brown.
News Corp had previously promised to spin off the Sky News channel as an independent company to guarantee its editorial freedom, although the US firm would have retained its 39% stake in the news provider.
The latest set of revelations on the phone hacking controversy, and the doubts raised around News Corp's Sky bid as a result, sent shares in the British satellite company down further.
Deputy Prime Minister Nick Clegg added to the pressure on News Corp by urging its chief executive Rupert Murdoch to 'do the decent thing' and reconsider the bid for BSkyB.
The Department of Culture, Media and Sport has also written to Ofcom to ask whether its original submissions around the deal should change following the phone hacking scandal that has damaged Mr Murdoch's company.
