Staff at the Justice Department have said that the deal would be anti-competitive, restricting the choices of some in the US market to a single satellite operator where no cable service is available.
It has been a year since EchoStar clinched the deal, but very little progress has been made as the proposed merger has run into heavy regulatory opposition.
EchoStar CEO Charles Ergen is set to meet with Federal Communications Commission chief Michael Powell tomorrow to try to find a way through the gathering regulatory storm.
However, if the Justice Department's decision is backed it would prove a major victory for Rupert Murdoch, chairman of News Corporation.
A decision to forbid EchoStar to buy its only rival would also reflect a rare instance of opposition to a corporate merger by the Bush administration, The Times reported.
The satellite firms have argued that the deal should be allowed to go ahead on the basis that an enlarged satellite TV company was the only way to compete with the powerful cable companies, which control almost 80% of the market.
The EchoStar victory was a serious blow to Murdoch, who already owns satellite TV businesses in the UK, Latin America, Australia, India and Japan. The US was the missing piece to his global empire.
It has been reported that Murdoch's team has been lobbying hard behind the screens to have the deal nixed.
If the EchoStar bid does fall, Murdoch will be ready to step in and it is thought that he still has plans to see BSkyB chief executive Tony Ball, who yesterday hired Channel 5's Dawn Airey to run Sky, take on the role of heading up Sky Global Networks.
If EchoStar is stopped from taking over DirecTV, it is expected that Murdoch could pick it up for around 25% lower than EchoStar's offer.
Possibly the only thing that could save the EchoStar merger now is a last last-ditch effort by Cablevision Systems, the US seventh-largest cable company, which has proposed buying some EchoStar assets to start its own satellite television company. The proposal may delay any final decision by the Justice Department's antitrust division, The Times reported.
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