The Australian government has called for a police inquiry into corporate hacking by the media group, after a newspaper released more than 14,000 emails allegedly showing that the company used a secret unit to sabotage competitors.
The office of Stephen Conroy, Australia's communications minister, said the allegations were "serious" and "should be referred to the Australian Federal Police for investigation".
Experts said a police inquiry would be likely to derail the $2bn bid by Foxtel - the Australian pay-TV operation 25pc owned by News Corp - for rival network Austar.
Claims have been made that NDS, a technology company that was part-owned by News Corp, had a secret unit which encouraged the widespread hacking of competitors. The practice reportedly cost rivals $AUS50m (£33m) a year and helped put at least one out of business.
The Australian Financial Review made the claims this week, as it published thousands of emails from an archive held by Ray Adams, European chief of the unit called "Operational Security" between 1996 and 2002. Pay-TV operators worldwide, including ITV Digital in the UK and Austar in Australia, were subject to a major wave of piracy during the period. On Monday, a Panorama documentary on BBC1 alleged that NDS hired a man who ran a piracy website and tasked him with publishing "cheat" codes on the internet, allowing viewers to "crack" their ITV Digital boxes and use the services for free.
News Corp and NDS have vigorously denied the claims.
However, The furore is expected to throw Foxtel's bid for Austar into turmoil, at a crucial point in the regulatory process.
Austar, which is 54pc owned by media giant Liberty Global and 46pc listed in Australia, would be a key asset for Foxtel because it has unrivalled reach in rural and regional areas. The two companies share a valuable pay-TV joint venture, XYZ Networks.
Foxtel's proposed bid appeared to be on course for regulatory approval before the News of the World phone hacking row erupted last summer, but it has been repeatedly delayed amid concerns over Mr Murdoch's growing media influence.
The Australian Competition & Consumer Commision was due to deliver its final verdict on the Austar takeover, but said on Wednesday that it would now delay the decision.
Meanwhile, it emerged on Wednesday night that NDS paid £2,000 to the Surrey Police for “assistance”.
In the batch of emails published by The Australian Financial Review, Len Withall, who helped run NDS’s security unit, wrote to a colleague, Joan, saying “over the last six months I have been doing some work with the Surrey Police” and “there is an amount of money set aside for payment to Police/Informants for assistance given to us in our work”.
Mr Withell added: “With Ray’s authority could you please make out a cheque in the sum of £2000 ... payable to the Surrey office and forward it to my office.”
A spokesperson for NDS said: “NDS made a one off charitable donation of £2000 to Surrey Police in August 2000. NDS’s support and donation was acknowledged with a thank you from Surrey Police.”