The Competition Commission has recommended that BSkyB, the owner of Sky, reduce its stake in rival broadcaster ITV by ten per cent.
The regulator was asked to look into BSkyB's purchase of ITV shares in November 2006, after fears were expressed that the move was an anti-competitive measure.
The watchdog's report has recommended a reduction in the broadcaster's holding in ITV from the existing 17.9 per cent to 7.5 per cent.
Sky's share could enable it to influence its competitor's investment decisions thereby reducing ITV's "strategic options", according to the watchdog's report.
Business secretary John Hutton has been sent the commission's findings and has until January 29th to announce a decision into the matter.
In statements responding to the report, a spokesperson for ITV said it "welcomed" the findings while BSkyB stated it was looking into the investigation.
BSkyB said: "We note the publication of the report and we are considering its contents carefully. The next phase of this process lies with the secretary of state. We will be making representations to him in due course."
The Competition Commission began investigating BSkyB's £940 million investment in ITV over concerns that the transaction had blocked NTL - now known as Virgin Media - from taking over the television network.
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