The government and Rupert Murdoch have referred the bid to buy broadcaster BSkyB to the competition watchdog, opening a lengthy review to sideline it from the political and public backlash from the phone-hacking scandal.
Fresh allegations of more widespread hacking and theft of data from figures including former prime minister and chancellor Gordon Brown have hit headlines today, intensifying the pressure on both Murdoch and prime minister David Cameron.
News Corp withdrew its offer to hive off or separate BSkyB's Sky News from a combined group - an undertaking it had made to get the deal approved.
That freed up the government - under intense political pressure to block the deal altogether - to refer the matter to the Competition Commission and avoid facing a judicial review.
Ian Whittaker, media analyst at Liberum Capital, said Murdoch's retraction of the Sky News undertaking was "a smart tactical move" that freed the government from a politically unacceptable but apparently unavoidable decision to approve the deal in the current climate.
Murdoch's decision was his second bold gamble in the space of five days to regain the initiative from politicians opposed to the deal, who had linked the multi-billion-dollar BSkyB bid to a phone-hacking scandal at the News of the World tabloid.
Murdoch took a shock decision last Thursday to shut down the newspaper, which was revealed a week ago to have hacked into the voicemails of murder victim Milly Dowler and bereaved relatives of war dead.
But new revelations include allegations that other News International titles had been involved in stealing personal data, this time from Brown.
Cameron said Murdoch needed to focus on "clearing up this mess" before thinking about the next corporate move. Deputy prime minister Nick Clegg also earlier urged Murdoch to reconsider the bid.
Other reports included allegations that the News of the World had bought contact details of members of the royal family from Scotland Yard officers, and tried to buy private phone records of victims of the Sept. 11, 2001, attacks on the US.