After more than two years of investigations, the Office Of Fair Trading (OFT) has concluded that BSkyB, whilst holding a dominant market position, has not been operating in breach of the competition law (see OFT Proposes Ruling Against BSkyB).
Margin squeeze The OFT has been investigating complaints from rival pay-TV operators that Sky abuses its dominant position as a channel wholesaler by selling the channels at such a cost that it squeezes all but the thinnest of margins from the groups purchasing them.
This ‘margin squeeze’ comes into play when the purchaser’s efficiency is the same as the seller’s and so should allow it to achieve the same margins, if the sell price were not set too high.
The results of the investigation were close to the borderline: For the period examined the operators were shown to have experienced a temporary and relatively small loss, followed by a return to profit. This, says the OFT, is not sufficient grounds to conclude that the competition law has been broken.
Mixed bundling The OFT also looked at claims that BSkyB had practised ‘mixed bundling’, a process where discounts are offered on each additional premium channel taken by customers. The result of this is that it restricts the potential of new channels entering the market as they will be comparatively expensive to customers who will then be deterred from subscription.
Again, the OFT did not find sufficient evidence that Sky has broken the competition law in relation to mixed bundling sales.
Responding to the findings, a BSkyB spokesman said: “After an investigation lasting nearly three years, BSkyB welcomes confirmation that its conduct has not infringed the Competition Act.”
