• is in breach of Chapter I of the Act because it prevents, restricts or distorts competition;
  
• is in breach of Chapter II of the Act because it confers long-term exclusivity and has the potential to foreclose the market; and
  
• the price prevailing under the contract is predatory in breach of Chapter II of the Act.
  

In July 2005 Ofcom opened a formal investigation into the allegations made and the BBC has responded to various information requests from Ofcom.

In December 2005 Ofcom added the consideration of whether Red Bee's media access services contract with the BBC infringes Chapter I of the Act and/or Article 81 of the EC Treaty into the scope of its investigation.

Ofcom has informed the BBC that it will issue its decision in relation to both issues shortly.

- Complaint to European Commission re Digital Curriculum

The BBC's proposal to launch its Digital Curriculum service was cleared by the European Commission under the state aid rules, subject to conditions, on 1 October 2003.

In previous Bulletins it was reported that in July 2005, the European Commission wrote to the UK Government stating that a complaint had been made to the Commission alleging that the proposed Digital Curriculum service did not comply, in certain respects, with the conditions previously imposed by the European Commission. The letter also alleged that the scheme for the provision of electronic learning credits by the UK Government might be subject to abuse.

The matter remains under consideration by the European Commission.

Fair Trading Complaints to the BBC

The BBC has received no new complaints during the period. A previous complainant, Kent Messenger Group, has written to the BBC Governance Unit appealing against the findings. A summary of the complaint is below.

- Complaint by Kent Messenger Group

BBC Radio Kent County Life Magazine (County Life) is produced and distributed on behalf of BBC Radio Kent by Kent on Sunday Media Publishing Group Ltd (KoS). The magazine is a commercial venture, undertaken by KoS on behalf of BBC Radio Kent.

On 11 August 2006 the Editorial Editor of Kent Messenger Group (KMG) wrote to the BBC's Head of Fair Trading posing a number of questions relating to the business relationship between the BBC and KoS. These were distilled into three key issues: whether there is appropriate separation in terms of operating and accounting between the BBC and Radio Kent; whether KoS pay an appropriate charge for the material it receives from the BBC and the right to use the BBC logo; and whether it is appropriate for the BBC to mention the magazine on air.

On 28 September 2006, the Head of Fair Trading responded to KMG. He concluded that, following an investigation he was satisfied that there is clear separation between the BBC's publicly funded and commercial activities, there is no use of licence fee money in this activity and KOS pays a fair rate for all of the editorial copy it receives from the station, and the costs incurred by Radio Kent in relation to this activity. He also confirmed that Radio Kent is paid a royalty fee for each magazine sold.

On-air references to County Life magazine are deemed to be appropriate in accordance with the BBC's Fair Trading Guidelines and Editorial Guidelines only where they are editorially justified. The Station's Managing Editor, who has full editorial control, confirmed that any references to the magazine are always editorially justified.

The Head of Fair Trading concluded that the publication of County Life magazine did not constitute a breach of the Fair Trading Guidelines or the Fair Trading Commitment.

Kent Messenger Group has written to the BBC Governance Unit appealing against the findings. The appeal is being considered.

Kent Messenger Group has written to the BBC Trust Unit appealing against the findings. The appeal is currently under consideration. The BBC Trust will publish its decision separately.