In a statement which leaves the launch prospects of Kangaroo in the balance, the CC, publishing its provisional findings today, said that the planned VoD service, backed by BBC Worldwide, ITV and Channel Four, "will restrict competition in the supply of VOD services in the UK". It also concluded that the joint venture is likely to result in a "substantial lessening" of competition in the supply of UK TV VoD content.
However, in a boost to Kangaroo's backers the CC concluded that Kangaroo would not lessen competition in online advertising or content acquisition. The CC also pointed out that "[Kangaroo] clearly has much to offer".
Based on its initial conclusions, the CC is seeking comments on how to address any loss of competition and its adverse effects for viewers. It has outlined for consultation possible remedies to address any loss of competition.
These include putting in place access remedies to control the way that content is offered to rival VoD providers and/or making changes to the operating terms of Kangaroo. For example, the CC said, the terms of content exclusivity between the joint venture and its parents might have to be altered.
"In the event that none of these are effective, prohibition [of Kangaroo] would also be an option," the CC said, adding that "when considering these remedies, the CC will also take into account any relevant customer benefits which arise from the joint venture."
The CC will now hold further hearings with the main interested parties before publishing its final decision by 8 February 2009.
Peter Freeman, CC Chairman and Chairman of the Kangaroo inquiry group, said: "Video on Demand is a relatively new and rapidly expanding medium and [Kangaroo] clearly has much to offer. However, we are concerned that a loss of rivalry between BBC Worldwide, ITV and Channel 4, who are normally regarded as close competitors, could restrict existing and future competition for VOD. Whatever benefits viewers would gain from this rivalry would clearly be lost.
"Of course there are already several other well-established providers of various types of VOD services. However, the evidence that we have seen tells us that domestic content is key to being able to offer strong competition to [Kangaroo]. The parties control most of that content, putting them in a powerful position in relation to competitors and viewers. We think that it would be difficult to obtain content from third parties to match [Kangaroo's] offer in scale or attractiveness."
In a joint statement, BBC Worldwide, ITV and Channel Four, said that they "will continue" to work towards launching the service next year.
"Today's announcement represents the provisional findings from the Competition Commission, at the mid-point in this process. We welcome the Commission's recognition that "[Kangaroo] clearly has much to offer". We will continue to make the case for a service that will be both in vast majority free and non-exclusive, and of great benefit and value to British consumers.
"These suggested remedies are not an exhaustive list. They represent possible options that the Commission has identified as a starting point for discussion. We look forward to the dialogue on these and other potential remedies with the Commission over the coming weeks."