Competition In The Television Sector

Originally published in Lawrence Graham's 'SmartLaw' newsletter, March 2007

© Lawrence Graham LLP

The rapid pace of change in communications technology means that soon it may no longer be appropriate to look at television programming in isolation. This is making the regulators' lives a lot more challenging, as the fall-out from the conjoining of BSkyB and ITV has highlighted. Convergence is no longer just a theory. Anyone who wants to watch programmes traditionally found only on the telly can now turn to their computer instead, or reach for their mobile. On the PC desktop there has been a burst of new offerings, from the near-legendary YouTube to the extensive Internet content uploaded by television networks like the BBC, whose iPlayer, for example, offers ondemand access to a wide range of downloadable television and radio. In the mobile telephone sector 2005 saw a range of channel operators trying out TV on mobile handsets. Deals between some of the biggest names in both industries were the result.

Better than soap

Against this background of technological change, recent corporate developments in the sector have been particularly striking. At the end of November 2006 BSkyB announced that it had acquired a 17.9% stake in ITV Plc for £940 million (equivalent to 135 pence per share). ITV announced simultaneously that it was rejecting a takeover bid by NTL at 120 pence per share, saying that the offer was too low to merit consideration.

Richard Branson, holder of an 11% stake in NTL, promptly complained that the acquisition by BSkyB of a stake in ITV was anti-competitive, arguing that it should be considered by the Office of Fair Trading (OFT) under the UK merger control rules. Following Branson's comments, communications regulator Ofcom announced that it was considering whether or not there had been a change of control over one or more of ITV's licences and invited ITV and BSkyB to comment on this. NTL's subsequent submission to the OFT also argued that the OFT should examine the BSkyB acquisition. On 6 December 2006 NTL confirmed that it would not make another bid for ITV as long as BSkyB retained a blocking stake.

He's got previous

The story of these competing bids for ITV raises a number of interesting issues. By way of background, it should be noted that BSkyB, ITV and NTL have already got 'form' with the OFT. In December 2002 the OFT investigated whether BSkyB had breached the Competition Act 1998 by abusing a dominant...