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Sky TV let off on alleged past breaches of competition law

Tuesday 8th October 2013

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Sky Network Television has been let off with a warning for allegedly anti-competitive clauses in its contracts with resellers of its broadcast content because the Commerce Commission says it would cost too much to prosecute for breaches that are not relevant to future behaviour.

However, Sky TV will face no prohibition on including the same clauses in future contracts, as long as it continues to grant exemptions of the kind that allowed Telecom to strike a deal for content from an alternative broadcaster, Coliseum, to screen English Premier League football.

"A case like this could take several years to conclude, costing several million dollars and finish in an era that is likely to be vastly different to the one we lived in when this breach occurred," said Mark Berry, the chairman of the competition watchdog agency, the Commerce Commission.

Instead, the near monopoly pay TV provider has been issued with a warning that the commission "believes certain provisions in Sky's contracts with telecommunications retail service providers (RSP's) are likely to have previously breached" anti-competition provisions of the Commerce Act.

"The commission issued Sky with a warning after its investigation found that currently those provisions are unlikely to have the effect of substantially lessening competition and are unlikely to cause harm in the future," said Berry in a statement.

"For example, the new sports pay TV product from Coliseum and the recent exemption granted by Sky TV to Telecom to market this product" demonstrated that Sky was able to choose not to enforce the potentially anti-competitive "key commitments" provisions in its contracts.

Berry told BusinessDesk he had discussed with Sky TV chief executive John Fellet whether Sky might remove the offending clauses from its contracts in future, but accepted the company had the right to strike its contracts as it saw fit.

As long as applications for exemptions from the provisions were granted, the commission would not move against Sky.

"We would expect exemptions to be granted, but they have to realise if they don't grant an exemption and it gives rise to a substantial lessening of competition, they will be at risk of a prosecution," Berry said.

He defended the decision not to prosecute on the basis that it would have been inefficient resource use by the commission, which he said had a "lively" record of successful anti-competition court actions which had netted a total of $245 million in penalties, compensation and court cost awards since July 2009.

The commission's warning letter to Sky also noted the entry of the Quickflix pay TV service to New Zealand, and potential entrants including FetchTV, Apple, and Netflix.

The commission also investigated whether Sky had an anti-competitive stranglehold on pay TV broadcast programming, but concluded "there appears to be sufficient content of all types available outside of Sky's exclusive contracts to put together an appealing pay TV package."

Sky TV shares were down 0.8 percent to $6.15 as trading opened on the NZX this morning.

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