The Competition and Markets Authority (CMA) has ruled that 21st Century Fox's proposed takeover of Sky raises plurality concerns and is therefore not in the public interest.
The CMA’s provisional findings come a year after Fox, which already owns 39% of Sky, agreed a deal to take over the remainder of the company.
The proposed takeover of Sky values the entire business at £18.5bn.
The CMA has been investigating the Fox/Sky deal in relation to media plurality and commitment to broadcasting standards. It has cleared the takeover on broadcasting standards grounds.
However, in a statement the CMA said: "The media plurality concerns identified mean that, overall, the CMA provisionally concludes that the proposed transaction is not in the public interest."
The watchdog suggested three possible ways of dealing with these concerns. Stopping the deal altogether; finding "structural remedies" such as spinning off Sky News; or by insulating Sky News from the influence of the Murdoch Family Trust.