The culture secretary Jeremy Hunt told the House of Commons on Monday afternoon that he had referred News Corporation's proposal to take full control of BSkyB to the Competition Commission.
Hunt's referral - which takes effect immediately - was triggered by News Corp's decision to withdraw its undertaking to "spin off" Sky News into a separate company as part of the takeover.
The conglomerate announced the change just 45 minutes before the culture secretary was due to deliver an update on the Government's decision-making process. The Competition Commission now has at least 24 weeks to make a decision on the proposal.
News Corp's decision to withdraw the Sky News "spin off" offer can be seen as a least-worst option for the corporation, which is determined to acquire BSkyB and the substantial profitability that comes with it.
The Competition Commission will be constrained to rule on issues of media plurality, meaning that phone-hacking allegations concerning the News of the World and News International's other newspapers will not directly influence its decision.
The development also staves off a potential embarrassment for the Conservatives, given that Labour was preparing a motion for Wednesday that would have called on the Government to delay the takeover. Senior Liberal Democrats had warmed to Labour's proposal.
Sir Menzies Campbell, a former Liberal Democrat leader, told the BBC that the development did not obviate the possibility that News Corp's Sky deal might collapse due to the hacking scandal, which has now extended to the whole News International publishing stable. Ofcom has the power to determine whether individuals are "fit and proper" persons to own a broadcasting licence.
"Ofcom could still independently and in parallel exercise that duty," he said.
Labour's Ed Miliband and the Liberal Democrats' Nick Clegg have both called on Rupert Murdoch to end News Corp's attempt to take control of BSkyB.
After the announcement, Hunt was interrogated by MPs over the Government's handling of the phone-hacking scandal and the News Corp-BSkyB deal. The culture secretary was repeatedly asked why Prime Minister David Cameron was not present in the Parliament to answer questions.
Cameron's next appearance before the Commons will be on Wednesday at the latest, when he is due to face Prime Minister's Questions.
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