Bskyb's purchase of a 17.9 per cent stake in ITV restricts competition and is not in the public interest, the country's competition regulator said.
In its provisional findings, the Competition Commission said it would consult on possible remedies, including forcing Bskyb to sell the stake.
The commission said the stake could lead to a substantial lessening of competition by giving Bskyb the ability to influence or weaken ITV's strategy.
"As a pay-TV operator, Bskyb faces competition from the free-to-air TV offer, of which ITV is an important part," the commission said.
Bskyb spent £940 million buying the stake last November in a move that effectively blocked cable group NTL - since relaunched as Virgin Media - from buying ITV.
Shares in BSkyB were down 0.07 per cent at 683.5 pence earlier this morning, while ITV's shares were up 2 per cent at 103.3 pence but well below the 135 pence that Sky paid.
