The Australian arm of Rupert Murdoch's News Corp on Wednesday denied allegations it tried to influence a politician to vote against media law changes in the latest challenge for Murdoch's media empire.

The Australian Federal Police began an investigation on November 4 after receiving a referral related to the allegations made against the executive at News Ltd, the Australian unit of News Corp, a police spokeswoman said.

The probe in Australia comes as some investors in News Corp have been pressing for Murdoch and his son James to step back from the business after the phone hacking scandal in Britain.

Murdoch's rival news group in Australia, Fairfax Media, on Wednesday reported that former National party Senator Bill O'Chee said he was told by a News Ltd executive at a lunch in 1998 that he would be taken care of if he opposed proposed legislation creating digital television in Australia.

News Limited chairman and chief executive John Hartigan categorically denied allegations of improper conduct by the company which were published in the Fairfax press today, News Ltd said in a statement.

The executive referred to in today's report, Malcolm Colless, has confirmed that no improper conversation took place during the 1998 lunch with former Nationals senator, Mr O'Chee, it said.

It added that neither News Ltd nor Colless had been contacted by police.

O'Chee issued a nine-page statement to police last month after he was approached by a federal police agent, The Age newspaper said.

I believed that (he) was clearly implying that News Corporation would run news stories or editorial content concerning any issue I wanted if I was to cross the floor (vote on non-party lines) and oppose the digital conversion legislation, The Age newspaper quoted O'Chee as saying.

O'Chee could not be reached for comment.

Some media companies, including News Ltd, were opposed to the digital conversion legislation as incumbent broadcasters received six new TV channels each for free, and it protected existing operators by banning new TV stations for 10 years.

O'Chee said News Ltd was concerned about the effect the digital conversion legislation would cause to its Foxtel pay TV business venture, as it would reduce subscriptions, The Age article said.

Earlier this year, the government accused a Murdoch tabloid paper of campaigning for regime change, and lawmakers have set up an independent media inquiry in a move seen as a veiled attack on Murdoch's newspapers following the British phone-hacking scandal.

News Ltd. controls 70 percent of Australia's newspaper readership market.

News Corp has said an internal investigation in Australia found no evidence that its local unit had illegally tapped phones or made payments to public officials, after a three-month review of expenses at its major newspapers.

Prime Minister Julia Gillard declined to comment when asked about O'Chee's claims, but Greens Senator Bob Brown said the incident was serious and needed to be investigated.

It does point further to the justification for having an inquiry into areas of public importance like the media, which is essential to a functioning democracy, Brown said.

Information is the currency of democracy, but it must be done without fear or favour. If there is fear or favour brought into it, then that needs to be on the public record.

(Additional reporting by Sonali Paul and Rob Taylor)