From Colin Mann in London

The UK's trading watchdog, the Office of Fair Trading has referred the proposed video on demand (VOD) joint venture between BBC Worldwide Limited, ITV plc and Channel 4 – also known as Project ‘Kangaroo’ – to the Competition Commission (CC) for further inquiry. The CC now has 24 weeks to consider the issues, and collect evidence on the key issues.

The proposed JV is intended to combine the parties’ retail activities, creating a common website of UK TV content accessible on demand to consumers. It will also bring together the parties’ wholesale activities, which consist of syndicating the content rights to third parties that offer VOD services.

According to the OFT, concerns arise because the concentration of important and competing libraries of UK TV programming included in the project may give distorting market power to the joint venture, enabling it to charge higher prices in syndicating content to wholesale customers, and potentially raise download-to-rent (DTR) and download-to-own (DTO) prices paid by VOD consumers, or limit the range of ways in which viewers can watch the parties’ content on demand.

The OFT said it had “carefully considered all evidence as to whether the joint venture would face enough competition from other sources,” such as one or more ways of watching the same UK TV content elsewhere (say, by video recording off the TV, or DVD rental or purchase), watching competing content (such as hit U.S. TV series, Hollywood and other films), or a combination of watching different content in a different way.

In order to try and avoid the reference, the parties did offer remedies, but the OFT did not consider their scope sufficient to resolve its concerns in a clear-cut fashion.

In response, the project partners said they were “naturally disappointed by the decision from the OFT and are frustrated that it will delay the launch of Kangaroo, however all parties remain committed to what the venture offers.” They remained confident that when properly subject to more detailed scrutiny by the Competition Commission, it would conclude that the joint venture will provide wider choice for consumers and be seen as a pro-competitive force in the market place. “Our aspiration is that Kangaroo will offer a wealth of British content and provide an example of UK innovation and collaboration for the benefit of consumers and advertisers alike,” they claimed.

ITV said the referral to the UK Competition Commission of a new video-on-demand service was likely lead to a delay in its launch. “The reference process is likely to take several months and the service is therefore unlikely to launch on the previously anticipated timetable.”

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