Culture secretary Ben Bradshaw launched the consultation into whether to allow product placement on UK television in November, following a major policy U-turn.
Bradshaw's predecessor Andy Burnham originally put government support full square behind upholding the ban.
Recalling Burnham's original argument, the Church has now said the ban is part of "a general convention enshrined in broadcasting history" and that easing regulations would blur the lines between editorial and commercial messages.
The church added: "Given the ongoing uncertainty about the future prospects for advertising revenues, it seems highly unlikely that any large potential-sponsor is currently in a position to make firm claims about the additional expenditure it would be likely to make under a different regulatory regime.
"It goes without saying that simply shifting expenditure from standard advertising to product placement would have no impact on the broadcaster, though it would have the regrettable knock-on effect of reducing income for the advertising creative and media planning industries."
Despite a good end of year for ITV, whose hit shows X Factor and I'm A Celebrity helped ease what has been a painful year, advertising revenues across the industry are suffering and commercial broadcasters would welcome the opportunity to generate new income from product placement.
The eight-week consultation, conducted by the Department for Culture, Media and Sport, will close on 8 January, 2010.