The government was defeated in the House of Lords on Monday night by 121 votes to 93, as several Labour peers made good on their promise to see an end to the newspaper price war between the London Times (which is owned by Mr Rupert Murdoch's News Corporation), the Daily Telegraph, and the London Independent.
But the government came back fighting yesterday, when the prime minister's official spokesman rebutted suggestions that Labour had "gone soft" on tackling the price wars, which have seen a huge increase in the Times circulation.
Mr Blair's spokesman said: "What you can be sure of is this amendment will not become law. The issue of predatory pricing is addressed in the Bill. There is a game in most of the media to suggest that Murdoch is this great evil figure . . . as far as the government is concerned, newspaper owners are all motivated by pretty much the same things."
A spokesman for the Department of Trade and Industry said the government believed the amendment was unnecessary. "The government will consider the implications of the vote and how to advise the House of Commons," the spokesman said.
When in opposition, Labour promised to address predatory pricing, but since the tabloid Sun's conversion to "New Labour" shortly before last year's general election, Mr Blair has faced sustained criticism that his relationship with Mr Murdoch, who owns the Sun, might have clouded his judgement.
However, amid suggestions that the government could face a back-bench revolt in the Commons if it refuses to accept the amendment, Lord McNally, the Liberal Democrat peer who proposed it, has said he believes his proposal "immeasurably strengthened" the bill. He told the Lords that the price wars, funded in part by Mr Murdoch's profits from his stake in the satellite channel, BSkyB, had seen the London Times cut its price to 35 pence in a bid to clear the field of its rivals, principally the Telegraph and Independent.
In the debate Lord McNally said: "We believe that newspapers are different from tins of beans. They are essential ingredients of a healthy democracy."
Lord Borrie, a non-executive director of the Independent, said the Times had been running a "persistent policy of predatory pricing" for the past four years. Lord Borrie was director-general of the Office of Fair Trading between 1979 and 1992.
In its editorial yesterday, the Times pulled no punches in its condemnation of the Lords' vote, accusing the rebel peers of "lacking the slightest sign of understanding why newspapers must adapt to survive".