BSkyB, the UK's largest satellite broadcaster, faces having to sell or freeze its stake in the television group ITV after the competition watchdog ruled that the near-18 per cent shareholding would cause a "substantial lessening of competition" and, therefore, acted against the public interest.

BSkyB acquired the 17.9 per cent stake in Britain's biggest independent broadcaster last year, thwarting Sir Richard Branson's plan to merge ITV with his Virgin Media.

Peter Freeman, the Competition Commission chairman, who led the inquiry, said today: "The acquisition has made BSkyB ITV’s largest shareholder by some margin and, whilst our provisional view is that this would not necessarily affect day-to-day operations, BSkyB would be able to influence ITV’s key strategic decisions, particularly relating to investment, whether in content, capacity or new technology.

"As a pay-TV operator, BSkyB faces competition from the free-to-air TV offer, of which ITV is an important part.

BSkyB would, therefore, have both the ability and incentive to take advantage of opportunities to weaken ITV or prevent it from taking actions that would threaten BSkyB’s interests."

But Mr Freeman added that BSkyB, 39.1 per cent owned by News Corporation, parent company of The Times and Times Online, did not provide a threat to competition in advertising or in providing news.

The commission will now consider remedies, including a forced sale of the shares, before John Hutton, the Business Secretary, decides on the full report.

Sky now have until October 15 to comment on the ruling and until October 23 to comment on the proposed remedies.

As well as a divestment of shares, Mr Hutton could prevent BSkyB from seeking seats on the ITV board or rule that it not vote against the majority of ITV shareholders.

Sky paid £940 million for the stake last year and faces a huge loss if it is forced to sell. If it sold at this morning's price of 102.5p, the satellite broadcaster would lose around £226 million on the transaction.

Sky’s share acquisition was investigated by the Office of Fair Trading and Ofcom, the communications regulator, which concluded that the stake raised “significant” competition and public interest concerns, leading to the Competition Commission inquiry in May.

Sky has maintained that it has not broken any merger rules and can take its stake up to 19.9 per cent under the Communications Act. The Enterprise Act 2002 prevents companies prevents shareholders who own more than 15 per cent of a company having material influence over the commercial operations of another firm in the same sector.

ITV said in a statement: "We will be reviewing the commission's notice of possible remedies in detail and look forward to working with the commission so that the issues arising from BSkyB's stake can be addressed."

A BSkyB spokesman said: "We note the Competition Commission's announcement of its provisional findings and possible remedies. We will continue to engage with the commission during the remainder of this process."

The Competition Commission's finding was welcomed by Virgin Media, who were vying for a stake in ITV last year, and Bectu, the broadcasting workers' union.

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