News Corporation withdrew its offer Monday to spin off Sky News pending the successful takeover of BSkyB.
In response, Culture Secretary Jeremy Hunt announced in the Commons that the takeover bid will now be referred to the Competition Commission.
Speaking in the Commons Hunt said: "On January 25 I said I was minded to refer News Corporation's proposed merger to BSkyB to the Competition Commission in absence of any specific undertakings in lieu." As a result of News Corp's withdrawal of the Sky News deal, Hunt said: "I am going to refer this to the Competition Commission with immediate effect."
Hunt also said that the law on media plurality "had to be reviewed" and said it would be addressed in a bill in the second half of this parliament. He also said he was worried email hacking would become "the next big scandal".
Labour leader Ed Miliband responded by accusing the government of "chaos and confusion" adding that it was "wrong" for the Prime Minister to have discussed phone hacking in a press conference, not in the Commons.
Miliband said that the culture secretary had been left to answer questions that the prime minister could not. Miliband said: "The culture secretary has no direct responsibility for the judicial inquiry that he talked about. He has no direct responsibility for the police and the relationship with the media. But he has been left to carry the can by a prime minister who knows there are too many difficult questions for him to answer. It is an insult to the House and to the British public."
The move by News Corp to withdraw its offer to spin off Sky News has been seen as an attempt to take the politics out of the BSkyB takeover.
News Corp said in its statement that they are "ready to engage with the Competition Commission on substance".
The statement said: "News Corporation today announces that it is withdrawing its proposed undertakings in lieu of reference to the Competition Commission with respect to its proposed acquisition of BSkyB."
"Should the Secretary of State for Culture, Olympics, Media and Sport decide on this basis to refer the proposed transaction to the Competition Commission for a detailed review, News Corporation is ready to engage with the Competition Commission on substance."
"News Corporation continues to believe that, taking into account the only relevant legal test, its proposed acquisition will not lead to there being insufficient plurality in news provision in the UK."