Out-Law News 2 min. read
21 May 2010, 9:52 am
The OFT said that there were no grounds for it to investigate the joint venture (JV) proposal under the Enterprise Act because none of the companies involved was handing over control of a part of its business to the new organisation.
"The OFT has decided that it does not have jurisdiction to review Project Canvas under the merger provisions of the Enterprise Act 2002, in particular because none of the JV partners (including the BBC) is contributing a pre-existing business ('enterprise') to the Canvas JV," said the OFT in a statement.
Project Canvas involves the BBC, ITV, Channel 4, Five, BT and Talk Talk and involves the creation of an internet television platform based on common technical standards. The BBC is contributing research and development and the other companies will be contributing money, the OFT said.
The Competition Commission blocked a previous version of the plan, called Project Kangaroo, last year. It said that that proposal would damage competition in the market for the supply of VOD material in the UK.
The OFT said that the plan has been sufficiently modified to avoid those concerns.
"Unlike in the Project Kangaroo joint venture which was blocked by the Competition Commission in 2009, it is not proposed that the JV Partners will contribute any video-on-demand content or other business to Canvas, and Canvas will have no role in aggregating, marketing or directly retailing any such television content," said the OFT statement.
The OFT said that it did not have the jurisdiction to investigate the new business under the Enterprise Act's rules governing mergers.
"In the context of a start-up joint venture such as Project Canvas, the merger control provisions are designed to capture arrangements leading to the transfer of a pre-existing business," said Sheldon Mills, OFT director of mergers. "Our investigation has confirmed that the JV partners, including the BBC, do not intend to transfer an existing business into the JV. Therefore, regardless of the potential significance of Project Canvas JV for the future of internet connected television, the notified proposals do not give rise to a merger qualifying for substantive investigation by the OFT."
The OFT also found that none of the companies contributing resources or money to the Project Canvas JV would be in sufficient control of the new business to trigger an investigation.
"In addition to its conclusion that no 'enterprise' is being transferred, the OFT also found that none of the JV partners will have material influence over the Canvas JV," said the OFT's statement.
"Material influence is the ability to materially influence the policy of the transferred business. It is the lowest level of control that may give rise to a relevant merger situation (section 26(3) Enterprise Act 2002). This is a further reason why the OFT does not have the legal power to review substantively Project Canvas under UK merger control laws," it said.
The Competition Commission had stopped the formation of a more integrated VOD service because it believed that such a venture would damage the market for supply of UK programmes on demand.
"Without this venture, BBC Worldwide, ITV and Channel 4 would be close competitors of each other. We thought that viewers would benefit from better VOD services if the parties – possibly in conjunction with other new and/or already established providers of VOD – competed with each other," said Competition Commission chairman Peter Freeman at the time.
Virgin and Sky had filed complaints with the OFT about Project Canvas. A spokesperson for Virgin told news site TechRadar yesterday: "As they stand, the Canvas proposals risk severely restricting competition and innovation in the UK's digital media landscape," a spokesperson for the company said.
The OFT noted that its decision not to intervene "does not preclude the application of other provisions of Competition law and other relevant legislation."
