The Australian Competition and Consumer Commission has commenced market consultation on the proposed undertaking offered by pay-TV platform Foxtel in respect of its proposed acquisition of Austar, dashing the hopes of those who expected the regulator to give its approval of the deal.

“The proposed undertaking has been offered by Foxtel to address the harm to competition which is likely to arise as a result of the proposed acquisition,” ACCC chairman Rod Sims said. “However it is not intended to resolve competition or structural issues that may already exist in the relevant markets and are unrelated to the proposed acquisition.”

The ACCC’s main areas of concern with the proposed acquisition arise in the national market for the retail supply of subscription television services (particularly at the entry level) and a number of regional markets for the supply of fixed broadband and fixed voice telephony products.

“The proposed acquisition would bring together the two main subscription TV industry players in Australia each with a substantial customer base and significant access to key content. This would in turn give Telstra, Foxtel’s largest shareholder, greater market power in fixed broadband and telephony markets,” Sims said.

According to the terms of the undertaking, Foxtel will be prevented from entering into exclusive content agreements to acquire IPTV rights for a range of attractive content to allow that content to be made available to existing and future competitors of Foxtel and Telstra. By reducing content exclusivity, the proposed undertaking aims to lower barriers to entry and promote new and effective competition in telecommunications and subscription television markets.

The ACCC has set a tentative final decision date on the proposed undertakings for March 29th 2012

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