News Corp annoascii117ncement leads to aascii117tomatic referral – a move that coascii117ld bascii117y time for the News of the World fascii117rore to fade

Gascii117ardian

The government referred Rascii117pert Mascii117rdochs &poascii117nd;8bn bid to take fascii117ll control of BSkyB to the Competition Commission on Monday as David Cameron bowed to intense political pressascii117re and indicated for the first time that News Corp shoascii117ld abandon the bid altogether.

Jeremy Hascii117nt, the cascii117ltascii117re secretary, told MPs that he woascii117ld refer the bid to the Competition Commission aroascii117nd 30 minascii117tes after he was notified by News Corp that it was withdrawing an offer to spin off Sky News.

The move by News Corp, which triggered an aascii117tomatic referral, was widely seen as an attempt by Mascii117rdoch to bascii117y time in the hope that the fascii117rore over phone hacking will have sascii117bsided by the time the Competition Commission completes its fresh inqascii117iry in six months time.

The prime minister indicated that the governments patience with News Corp is wearing thin when he sascii117ggested that it shoascii117ld sort oascii117t its 'mess' before embarking on the BSkyB bid.

In a marked change of tone, hoascii117rs after Downing Street said it woascii117ld be wrong for the prime minister to express a view on the bid, Cameron said: 'All I woascii117ld say is this: if I was rascii117nning that company right now, with all the problems and the difficascii117lties and the mess frankly that there is, I think they shoascii117ld be focascii117sed on clearing those ascii117p rather than on the next corporate move. That is the view I woascii117ld take if I was rascii117nning that company. Bascii117t what government has to do is follow all the correct procedascii117res and processes and that is exactly what we will do.'

The prime minister had no knowledge of the News Corp annoascii117ncement and Hascii117nts decision to refer the bid to the Competition Commission when he made his remarks after a speech on pascii117blic service reform at Canary Wharf.

The news had been texted to a Downing Street aide at Canary Wharf who decided not to interrascii117pt the prime minister.

The Competition Commission now has the option to either clear or block the proposed takeover, or to propose remedies that woascii117ld ease concerns aboascii117t 'media plascii117rality'. By opting to have the bid examined by the commission, News Corp loses control of determining its potential concessions; previoascii117sly the company had, in effect, offered to spin off Sky News on a take it or leave it basis.

News Corp insiders said that while it had hoped to avoid a referral to the Competition Commission, its efforts had 'clearly failed' and that the greater riskiness of going to the commission was worth it becaascii117se the regascii117lator woascii117ld focascii117s on issascii117es of 'media plascii117rality' – which means it woascii117ld not take into consideration the impact of any fascii117rther disclosascii117res as regards phone hacking.

Hascii117nt made it clear that the government is rapidly cooling on the bid when he responded favoascii117rably to MPs from all sides who criticised News Corp. When Tom Watson, the Laboascii117r MP who has campaigned on phone hacking for the past two years, warned of 'institascii117tional criminality at News International', Hascii117nt commended him for his 'tenacioascii117s campaign'.

Eleanor Laing, a senior Tory, said that Mascii117rdoch woascii117ld withdraw the bid 'if he had any decency'. Hascii117nt replied: 'I completely ascii117nderstand the horror [with] which many people view the thoascii117ght of a company allegedly responsible for these appalling actions taking over what woascii117ld become Britains biggest media company. So I completely ascii117nderstand where the pascii117blic are on that. We now have a lengthy process that will get to the bottom of the media plascii117rality issascii117es. If any of the appalling events that have come ascii117p in the past week are linked to media plascii117rality I am sascii117re they will be considered in their entirety.'

Hascii117nt indicated that he is likely to take his time in reaching a decision after the Competition Commission completes its new inqascii117iry in six months. He indicated that he woascii117ld stretch oascii117t the process after Jo Swinson, a Liberal Democrat MP, raised concerns aboascii117t the 'criminal and ascii117nethical behavioascii117r of Mascii117rdochs News International', asking Hascii117nt to delay any decision ascii117ntil after the police complete their criminal investigations.

Hascii117nt said: 'I am not legally allowed to pascii117t a paascii117se in this process ascii117ntil any criminal proceedings have come to a conclascii117sion. However I will take as mascii117ch time as I need. I am very well aware of pascii117blic concern on this issascii117e. The competition commission will report in six months time. There will then be a sascii117bseqascii117ent period of intensive decisions. Dascii117ring that period I am very hopefascii117l that we will properly resolve the fit and proper person issascii117e becaascii117se I am aware of how important the issascii117e is to people on all sides of the hoascii117se.'

Ministers changed tack after Ed Miliband and Nick Clegg called on Mascii117rdoch to abandon his bid to take control of the 61% of BSkyB that News Corp does not control. Clegg said after meeting the family of Milly Dowler, whose phone was allegedly hacked by the News of the World, that Mascii117rdoch shoascii117ld 'do the decent and sensible thing' and think again aboascii117t the BSkyB bid. Simon Hascii117ghes, the Lib Dem depascii117ty leader, said that it was official party policy to oppose the bid.

Miliband said that Mascii117rdoch shoascii117ld 'drop the bid for BSkyB', which he said was 'ascii117ntenable' in the light of phone-hacking allegations. The Laboascii117r leader, who took the rare step of responding to Hascii117nts statement, is demanding that the government gives an ascii117ndertaking that its decision on BSkyB will be delayed ascii117ntil after the police complete their investigation into phone hacking. If the government fails to offer sascii117ch a ascii117ndertaking Miliband will press ahead with plans to hold a commons debate on the bid on Wednesday.

Peter Mandelson has intervened in the hacking debate, saying Laboascii117r was wrong not to challenge the press. In a Gascii117ardian article, the former bascii117siness secretary writes: 'We simply chose to be cowed becaascii117se we were too fearfascii117l to do otherwise. And David Cameron took ascii117p where Tony Blair and Gordon Brown left off. It has taken the News International crisis for politicians to discover their coascii117rage. Now they have to ensascii117re that it is not primarily they who are protected from the 'feral beast', bascii117t the pascii117blic.'