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Virgin lays down case against Sky

While ITV buy-up referred to Competition Commission

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Virgin Media has submitted documents to the High Court accusing Sky of abusing its monopoly position, despite that monopoly only being in Pay-TV - an area not previously considered an industry in its own right.

According to reports in The Guardian the 33-page complaint accuses Sky of engineering the breakdown in negotiations and subsequent withdrawal of Sky channels, just to hurt Virgin customers. The accusation is based on the UK Competition Act 1998, and the case will revolve around whether Pay-TV is an industry in its own right - and thus Sky has a monopolistic position - or if Pay-TV is just an extension of normal TV in which case no monopoly exists.

Two deals between the companies had to be renewed for 2007, and the arrangement for Sky to continue carrying Bravo, Challenge, Living and Trouble, all owned by Virgin, was agreed in time for the beginning of the year. According to Sky, Virgin asked for a 2-month extension on their deal to carry the Sky channels while they continued negotiations, an extension which expired on 1st March with nothing agreed.

Virgin claims that Sky is asking for twice their previous rate: but Sky wants to include High Definition content and some new channels (including the UK's first 24-hour Arts & Crafts channel!), and therefore claims the price is right.

Sky's sudden decision to invest heavily in ITV (to the tune of 17.9 per cent), just as it seemed Virgin Media was going to buy the company, is also mentioned in the submission. Sky claims that the purchase was simply an investment decision, but the timing was deeply suspicious and the move certainly prevented Sky's two major opponents joining forces.

It would be hard to deny that Sky has used its market position to undermine rivals, or that it has attempted to steal their customers and content, but that's only to be expected of a successful and competitive company.

Proving that Sky abused a monopolistic position will require Virgin to prove that Pay-TV is an industry within which it's possible to have a monopoly.

The broader picture of the Murdoch empire's plurality of media ownership; the organisation owns both The Sun and The Times newspapers amongst others, is the subject of enquiries by both the Office of Fair Trading and Ofcom. The latter orgainization has just announced their findings that the purchase of ITV shares should be referred to the Competition Commission, though the final decision remains with the DTI it seems that few in the Sky legal office will be having a relaxing weekend.®

Bootnote

Sky has issued a statement in response to the referral to the Competition Commission, basically saying they have nothing to fear as they've done nothing wrong: "Today's statements reflect the continuation of an existing regulatory process with which we will continue to engage fully", the statement goes on to explain how Sky has introduced more than 400 channels and "...believes in choice and competition and supports an environment that fosters investment and dynamism in today's fast-changing media landscape."

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