Ofcom announced in yesterday�s Competition Bulletin that it had opened an investigation following allegations of market foreclosure and predatory pricing by the BBC. The complaint centres on BBC Broadcast�s winning of contracts in 2004 to provide �media access services�, such as subtitling, to Channel 4 and Five. BBC Broadcast is a subsidiary of the BBC (which is set for sale to an Australian bank, subject to approval by the DCMS). Independent Media Support Group Plc (IMS), also a supplier of media access services, alleges that BBC Broadcast has infringed Chapters I and II of the Competition Act 1998.

One might feel that there could well be something fishy about the BBC�s success in winning the contracts to provide access services to Channel 4 and Five, apparently at low prices, in the face of competition from private-sector suppliers.

But to establish that BBC Broadcast had engaged in illegal predatory behaviour, for instance, it would be necessary for Ofcom to find evidence that BBC Broadcast had a dominant position in a relevant market and, almost certainly, that it had deliberately engaged in a course of conduct designed to eliminate a competitor. This does not seem particularly likely to be the case, let alone likely to be possible to prove.

The more plausible form of fishiness is that the BBC has used its (state) resources to enable its subsidiary to �buy� its successful position in the relevant markets for media access services. That, per se, would not be a breach of the Competition Act 1998; but it could be an illegal State aid. Yet State aid is outside the scope of Ofcom�s investigation; the European Commission has exclusive powers in this area.

This dispute seems to have been going on for a while. According to the BBC�s Fair Trading bulletins, IMS and others have previously complained that the BBC had infringed State aid law as well as competition law (the BBC found that it had not). So even if the Ofcom case goes nowhere, the BBC might not be off the hook because the European Commission could take an interest.

Were a potential State aid case to be pursued, the key question is probably whether a �hypothetical market investor� would have made the same investment in developing BBC Broadcast as the BBC actually did. This could prove rather more testing for the BBC than merely showing that there is no evidence of anti-competitive conduct on the part of its subsidiary.