Rupert Murdoch's $15.7 billion takeover of Sky is not in the public interest and should be blocked unless a way is found to prevent the media tycoon from influencing the network's news output, Britain's regulator said.
The initial ruling complicates a separate plan by Walt Disney Co to buy the majority of Murdoch's assets, including Sky. Disney had hoped Murdoch would own 100 percent of the European broadcaster by the time it completed its takeover.
Murdoch's Twenty-First Century Fox agreed to buy the 61 percent of Sky it did not already own in December 2016, re-igniting a political row in Britain about the influence he wields through his ownership of newspapers the Sun and the Times and his stake in Sky, the biggest pay-TV platform.
Critics of the deal argue that Murdoch could hold sway over the editorial output of Sky News, a loss making but award-winning 24-hour channel. Sky warned that were the deal to be rejected because of Sky News, it could shut the channel itself.
The British government, which will take the final decision on the deal, asked the Competition and Markets Authority (CMA) to judge if Murdoch had too much influence in Britain and would uphold broadcasting standards.
It would result in the Murdoch family having too much control over news providers in the UK, and too much influence over public opinion and the political agenda.
"We have provisionally found that if the Fox/Sky merger went ahead as proposed, it would be against the public interest," the CMA's Anne Lambert said on Tuesday.
"It would result in the Murdoch family having too much control over news providers in the UK, and too much influence over public opinion and the political agenda."
Murdoch's news outlets are watched, read or heard by nearly a third of Britons and have a combined share of public news consumption that is significantly greater than all other news providers, except the BBC and commercial news provider ITN.
Fox has already offered up remedies to protect the independence of Sky News including the establishment of a Sky News Editorial Board.
But the CMA said media regulator Ofcom had received complaints suggesting that previous attempts by Murdoch to guarantee the editorial independence of the Times newspapers in Britain and the Dow Jones company had proved ineffective.
The CMA said a "comprehensive solution" to the questions posed by the deal would be simply to block it.
Fox said it was disappointed about the provisional judgment, although it welcomed the decision that it had a genuine commitment to broadcasting standards.
It said it would continue to engage with the CMA ahead of the final report in May, and it anticipated approval of the deal by June 30.
If Fox is eventually blocked, Disney could buy the rest of Sky itself at a later date, and it would face fewer regulatory objections than the Murdochs.