OFT calls for limit to BBC commercial activities

The Office of Fair Trading has weighed in on the side of commercial rivals to the BBC, who are demanding greater control over the corporation's output. And it has raised the possibility that the BBC could be stripped of all its commercial activities.

The Office of Fair Trading has weighed in on the side of commercial rivals to the BBC, who are demanding greater control over the corporation's output. And it has raised the possibility that the BBC could be stripped of all its commercial activities.

The OFT warned that it could refer the whole issue of the BBC's activities for a full investigation by the Competition Commission. In a letter to officials at the Department of Culture, Media and Sport, it set out its view that the Government's planned new regulatory system for the BBC is inadequate to meet the legitimate grievances of private-sector rivals.

The watchdog's concerns cover the BBC's "public service" offerings and those activities that the corporation admits are commercial.

The comments will be warmly welcomed by media companies, which have consistently and loudly complained - to little effect - that the BBC is using public money to provide services in areas well served by the private sector - ranging from radio and online to television and magazines. The OFT said the BBC can "produce outcomes that are uniquely damaging to effective competition and to commercially funded innovation on media markets, due to the BBC's unique scale, scope, status and ambition".

The competition watchdog said the BBC, which is funded through the licence fee, has tended to respond to similar incentives to commercial organisations, "for example to increase its output, and thus market share, at the expense of rivals and to develop new products to expand its presence into new and emerging markets".

When the corporation launched its BBC3 youth-oriented digital entertainment TV station, there was widespread complaint that such services were already provided by the likes of Channel 5 and Sky One. In the radio sector, commercial operators have long argued that BBC Radio One's pop music offering is well provided by dozens of commercial stations.

The OFT letter was in response to the Government's publication, earlier this year, of a Green Paper on the renewal of the BBC's charter, due next year. The competition authority made clear that it considered the Government's proposal for a Trust to replace the governors as regulator of the BBC, was too "ambiguous". It is unclear whether the new organisation would be sufficiently independent to hold the BBC to account, the OFT said.

It also said that the Trust, which would decide whether to allow any new service proposed by the BBC, would be answerable only to licence fee payers - a constituency so diffuse it "could amount to no real accountability at all".

Turning to the BBC's avowedly commercial activities, the OFT found the BBC's behaviour and the Government's response failed to address competition concerns. "The BBC's commercial services raise the... issue of whether the BBC should be engaging in such activities at all, given that, by definition, they do not arise from the BBC's exercise of its public service mission and could often be provided equally well by the commercial sector."

Arguing that such activities should be very limited, the OFT said that "when assessing whether such commercial services should be provided by the BBC at all, it cannot be sufficient justification that the activity concerned generates money for the BBC".

The BBC has just announced that its biggest commercial arm, BBC Worldwide, saw a 50 per cent jump in profits last year to £55m, on sales of £706m.