Competition Commission to probe Kangaroo

Ashley Highfield

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Project Kangaroo's launch could be delayed until 2009 after the Office of Fair Trading called in the Competition Commission to investigate the planned video-on-demand service.

The OFT has called in the commission after its initial study raised concerns that the concentration of the programming libraries of BBC Worldwide, ITV and Channel 4 could the joint venture  excessive market power, enabling it to charge higher prices to other parties who want to carry the content.

In turn, this could potentially raise download-to-rent and download-to-own prices paid by VoD consumers, or limit the range of ways in which viewers can watch the parties' content on demand.

Kangaroo will bring together the parties' wholesale activities, which consist of syndicating the content rights to third parties that offer VoD services such as iTunes and BT Vision.

The OFT has given the Commission until 12 December to publish its findings and the three partners will wait until the review is concluded before seeking final approval from their governing bodies.

The OFT said it could not make a robust judgment as to whether Kangaroo's future pricing and non-price offer would be constrained by competition from other sources, such as DVD rental or sales or other VoD providers.

The OFT said that remedies offered by BBCW, ITV and C4 to allay its concerns were of "limited scope" and did not consider them sufficient.

The OFT recently cleared a merger between LoveFilm and Amazon's online DVD rental services, which had raised similar concerns.

Simon Pritchard, senior director of mergers at the OFT, said: "Video on demand is a new and fast-growing consumer sector, and we should judge the issues on evidence, rather than speculate about consumer behaviour.

"We were in a position to clear the recent LoveFilm/Amazon merger, but that outcome would have been unsafe in this case because we lacked the evidence to make the right judgement. The Competition Commission, however, can start with our roadmap of the issues and ultimately decide what remedies, if any, are in fact required."