Kangaroo snared by competition enquiry

The Kangaroo video-on-demand system has been referred to the Competition Commission by the Office of Fair Trading.

Kangaroo is a joint venture by BBC Worldwide, ITV and Channel 4 to offer media over the internet, and eventually to make it available to television users as well.

But the plan has been put on hold after the OFT questioned its effect on market competition.

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 judgment.

"The Competition Commission, however, can start with our roadmap of the issues and ultimately decide what remedies, if any, are in fact required."

Kangaroo is headed up by Ashley Highfield, the former director of future media and technology at the BBC who was responsible for the iPlayer.

"We are naturally disappointed by the OFT decision and are frustrated that it will delay the launch of Kangaroo, but all parties remain committed to what the venture offers," said Kangaroo in a statement.

"The decision shows that the assessment of the proposed joint venture involves some very complicated issues.

"The parties are confident that, after more detailed scrutiny, the Competition Commission will conclude that the venture will provide wider choice for consumers and be seen as a pro-competitive force in the marketplace."

The Competition Commission will now have 24 weeks to examine the pros and cons of the case, and to suggest possible alternatives that would make the new service more competitive.

"While I understand that the OFT 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," said ITV executive chairman Michael Grade.

"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.

"There must be a level playing field for those of us whose investment sustains UK production."