Project Kangaroo to be investigated

Project Kangaroo is to be investigated after the Office of Fair Trading (OFT) referred the plans to the Competition Commission (CC).

The investigation is expected to take six months and in that time the CC will be aiming to collect evidence allowing it to make a judgement on whether the joint project between the BBC, ITV and Channel 4 will have a detrimental effect on the video-on-demand market.

According to the OFT, the project raises concerns because "the concentration of these important and competing libraries of UK TV programming may give market power to the joint venture, enabling it to charge higher prices".

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."

Pritchard said that Project Kangaroo was an entirely different case to that of LoveFilm.com and Amazon, who recently merged their DVD rental operations.

"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," he said.

Sir Michael Grade, ITV's executive chairman, expressed his dissatisfaction at the OFT's actions.

"While I understand that the Office of Fair Trading is carrying out its statutory obligations, there is a serious problem with a regulatory framework that seems unable to take the most important interest into account - that of British viewers," he said.

Grade questioned why companies such as Apple and Google didn't attract attention from the OFT.

"This venture has been delayed by a reference to the Competition Commission, at the very same time that non-UK companies like Google and Apple are free to build market-dominating positions online in the UK without so much as a regulatory murmur," Grade said.

Project Kangaroo was first announced last November and when it launches aims to offer content to buy or rent as well as free programming.

The project was pencilled in for a launch sometime this year but the investigation could see it pushed back to 2009.

Ashley Highfield is the chief executive of the project and as the man behind the BBC iPlayer he has plenty of experience in the video-on-demand market already.

www.oft.gov.uk