TV

Commission finds Igloo joint venture unlikely to lessen competition in pay TV market

Wednesday 16 May 2012, 9:37AM
By Commerce Commission
145 views


The Commerce Commission has completed its investigation into the joint venture between Television New Zealand Limited (TVNZ) and Sky Network Television Limited (Sky) finding the pay TV market will not be less competitive as a result of the venture.

In November 2011, TVNZ entered into a joint venture agreement with Sky to launch a new low-cost subscription TV service, known as Igloo.

The Commission received a number of complaints that the joint venture had the potential to substantially lessen competition. It opened an investigation to determine whether there was any likely breach of sections 47 or 27 of the Commerce Act. Today, the Commission advised TVNZ and Sky that it had found no likely breach.

Chair Dr Mark Berry said the Commission had done a full investigation and found that the joint venture would make little difference to the level of competition in the pay TV market.
“Our role in this investigation was not to judge the level of competition in the market, but whether the joint venture would change the level of competition. When we looked at two possible future scenarios, one with TVNZ’s involvement in the joint venture, and one without, we found the level of competition was essentially unchanged.”

Dr Berry said the contractual restrictions on TVNZ in the joint venture agreement are relatively narrow, relating only to the service that Igloo will offer – linear pay TV via digital terrestrial television. This leaves scope for TVNZ and Sky to compete across a range of other pay TV services, including video on demand and pay TV over the internet.

“We also found that a number of other potential competitors may enter the market.”

Dr Berry said that the Commission’s investigation did, however, highlight potential difficulties that any entrant would face in entering the pay TV market.

“While this was not part of this investigation, we are aware of concerns that access to content and Sky’s contracts with internet service providers may be hindering competition. As a result, we have now opened a separate investigation under sections 27 and 36 of the Commerce Act.”

The Commission will advise the outcome of this investigation when it is finished. A public version of the investigation report released today is available at www.comcom.govt.nz/investigation-reports/

Background
The Commerce Act prohibits anti-competitive behaviour and structures in markets.

Section 27 prohibits anyone from entering into, or implementing arrangements with the purpose, effect or likely effect of substantially lessening competition. Arrangements can include contracts, agreements or understandings.

Section 36 makes it illegal for any business with a substantial degree of market power to take advantage of that power to deter or prevent rival businesses from competing effectively.

Section 47 makes it illegal for a business to acquire assets of a business or shares if the acquisition would have, or would be likely to have, the effect of substantially lessening competition in a market.

Linear pay TV via digital terrestrial television: A linear service is one where the television service provider determines the schedule of programmes (in contrast to video on demand where the viewer chooses what and when they watch). Digital terrestrial television is the broadcast of television signals in digital form rather than analogue. Other forms of transmission include satellite and over the internet.