But the Government has proposed an investigation into the extent of local authority newspapers and their impact on commercial publishers.
In today's report, communications minister Stephen Carter said regional newspapers should not be allowed to merge and the existing framework is adequately "robust and flexible".
However, the report added that "modest" changes would be beneficial, citing that any merger could benefit from "pre-notification" discussions.
The recommendations against mergers across regional publishers will come as a blow to publishers such as Trinity Mirror and Johnston Press that have long campaigned for a relaxation to the rules.
In terms of media ownership, the report has stated that the Government has asked Ofcom in this current review to consider "specifically the impact of the current local ownership rules on the longer term sustainability of the local media market."
And it said there was now an arguable case for "greater flexibility in the local radio and cross-media ownership rules to support consolidation of local media groups which taken together would allow for greater economies of scale and a sustainable local voice alongside that of the BBC."
The Digital Britain report also suggested that the Audit Commission should carry out an inquiry into the prevalence and impact of council publications. The commission will make recommendations on whether restraints should be placed on local authorities.
The rise in the number of council-published titles has been a long-standing concern for regional publishers who believe they threaten the declining revenue streams of local newspapers.
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