Competition fears tie down Kangaroo

ITV boss Michael Grade says Google and Apple are being left to dominate the video-on-demand market

The Office of Fair Trading (OFT) has referred the video-on-demand service Kangaroo to the Competition Commission, causing the launch of the project to be delayed.

Kangaroo, a joint venture between the BBC, ITV and Channel 4, was due to launch this autumn. But the OFT's concerns about the collaboration's effect on market competition means the service will now be subject to delay, while the commission undertakes a 24-week investigation.

The broadcasters behind the scheme now believe that Kangaroo could be delayed until 2009. ITV chairman Michael Grade criticised the OFT's decision, saying that the move would allow Google and Apple to gain stronger footholds in the growing video-on-demand market.

"While I understand that the OFT is carrying out its statutory obligations, there is a serious problem with a regulatory framework that seems unable to take the most important interest into account – that of British viewers," said Grade.

"As digital distribution gathers pace, we want to make our content available for free to online users in the most accessible way through Kangaroo.

"This venture has been delayed by a reference to the Competition Commission, at the very same time that non-UK companies such as Google and Apple are free to build market dominating positions online in the UK without so much as a regulatory murmur," he said.

A statement from Kangaroo expressed disappointment at the referral, but said that the company remained committed to the project. Former BBC executive Ashley Highfield – the man behind the hugely successful iPlayer TV-on-demand service – left the corporation in April to be chief executive of the new venture.