The Australian Competition and Consumer Commission (ACCC) has called into question the proposed Foxtel and Austar merger, saying it could negatively impact competition in Australia.
The ACCC's issues relate to a reduction in competition in the national supply of pay TV services, the national market for the acquisition of audion visual content, and the number of markets for the supply of telecommunications products.
On the issue of subscription television marketins, the ACCC has argued the proposed merger would "effectively create a near monopoly subscription television provider across Australia".
The ACCC also argued that with the rollout of the NBN, industry changes would see an increase in the ability and incentive for Foxtel and Austar to compete with each other, outside their current distribution regions.
It also said that other television providers such as free-to-air television would not provide sufficient competition, and that the merger would block competing entities from entering the market.
In relation to the acquisition of audio visual content, the ACCC said: "The (ACCC's) preliminary view is that the proposed acquisition is likely to result in a substantial lessening of competition in the national market for the acquisition of audio visual content.
"Any lessening of competition in the national market for the supply of subscription television services is likely to have flow on effects in the market for the acquisition of audio visual content. Fewer subscription television providers will directly lead to fewer buyers of content."
The ACCC's final concern related to a reduction of competition in telecommunications markets. The watchdog said that, through its 50% stake in Foxtel, the merger would enable Telstra to leverage its relationship with Foxtel by bundling services, which would reduce competition.
In response to the ACCC's remarks, Austar released the following statement: "The Statement of Issues follows an initial round of market inquiries and provides the ACCC's preliminary views but is not a final decision by the ACCC. Austar will continue to work with the ACCC to resolve issues identified as a result of market inquiries.
"Austar remains committed to effecting the transaction and will continue to cooperate fully with all relevant government authorities and regulators."
The ACCC expects to hand down its findings on September 8.
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