Culture Secretary Karen Bradley said she expects to refer the £11.7bn ($15.2bn) takeover of British broadcaster Sky by Rupert Murdoch's US rival 21st Century Fox to the competition authorities for a full enquiry.
She told MPs in the House of Commons that she was "minded" to submit proposed takeover to a further 24-week inquiry by the Competition and Markets Authority (CMA) on grounds of media plurality.
She said: "The proposed entity would have the third largest total reach of any news provider - lower only than the BBC and ITN - and would, uniquely, span news coverage on television, radio, in newspapers and online."
The decision comes after broadcast regulator, Ofcom, and the CMA earlier this month handed over their assessments of the deal to Bradley, which would see 21st Century Fox acquire the 61% of Sky it does not already own.
Culture Secretary added: "Ofcom's report states that the proposed transaction would give the Murdoch Family Trust material influence over news providers with a significant presence across all key platforms.
"This potentially raises public interest concerns because, in Ofcom's view, the transaction may increase members of the Murdoch Family Trust's ability to influence the overall news agenda and their ability to influence the political process and it may also result in the perception of increased influence.
"These are clear grounds whereby a referral to a Phase 2 investigation is warranted - so that is what I am minded-to do."
Fit and proper
However, Bradley said Ofcom found Sky a 'fit and proper' broadcaster, and would not ask regulators to look whether the bid would weakened broadcast standards.
Bradley told MPs that Murdoch's company 21st Century Fox had made a series of formal pledges surrounding a partial spin off of Sky News last week in a late attempt to push the deal through before her announcement.
However, the secretary of state said she was minded not to accept these undertakings.
Bradley will make a final decision about whether to refer the deal to the CMA after the parties involved make their representations on Friday 14 July.
21st Century Fox welcomed the fact that its bid had passed the UK regulator's broadcast standards test, but was "disappointed" there would be a further probe on plurality grounds.
It said it would work "constructively with the UK authorities", adding that if a 24-week investigation went ahead it then expected its deal to buy Sky would complete at the end of June next year.
The deal had previously been cleared by European Commission competition authorities.
Murdoch will control both 21st Century Fox and Sky while also owning The Times and The Sun newspapers if the deal goes through.
Opponents say this will give him too much power in the UK media.
Bradley said her department has received more than 700 representations over the bid by players in the media industry.
The takeover attempt has been condemned by campaigners, and senior politicians - including Ed Miliband and former business secretary Vince Cable - have met Ofcom in a bid to block the deal.
Scandals at Fox
Fox has also been hit by sexual harassment scandals at its flagship Fox News channel in the US.
Lawyers representing several women who have accused staff at Fox News - part of 21st Century Fox - of sexual harassment also recently met Ofcom to warn against the planned deal.
Miliband and Cable's group of MPs warned that there was "clear evidence of the Murdochs' pattern of secrecy and lack of transparency about corporate failure being repeated at Fox News, the subject of ongoing Federal investigations".
Currently the two companies are separate, but if Murdoch is successful, 21st Century Fox would gain access to Sky's 22 million customers in Europe. Sky has pay-TV operations in the UK, Germany, Austria and Italy.
Fox argues that money it invests will benefit the UK's creative industries.
Murdoch made his first bid for Sky in 2010, which resulted in a deal to spin-off Sky News to quell media plurality issues, before the deal eventually was abandoned amid the country's newspaper phone hacking scandal.