An attempt by the BBC, ITV and Channel 4 to sew up the video-on-demand market has been thrown out by competition regulators.

In a shock decision, the Competition Commission said the proposed joint venture between the big three of the terrestrial television industry, codenamed Project Kangaroo, had to be stopped in its tracks.

The three channels are hopping mad over the decision. The Beeb's commercial arm BBC Worldwide along with ITV and C4 have for the past two years been developing plans to pool their extensive back catalogues and offer them to the British public by video download.

The service would also have included catch-up content of recently broadcast ITV and C4 programmes, though not those of the BBC that would have remained on its highly successful iPlayer platform.

However, the project, which was likely to have actually been named SeeSaw, was called in by the Competition Commission after the Office of Fair Trading warned the three could be attempting to build an unfair commercial advantage by teaming together.

Rivals like the pay-tv group Sky and Virgin Media and existing video-on-demand sites feared that the BBC, ITV and C4 acting together would force up prices in the wholesale market for already broadcast programmes.

The commission signalled in December it had reservations but many in the industry believed they were not insurmountable.

In a statement commission chairman Peter Freeman, who led the investigation, said: “This joint venture would be too much of a threat to competition in this developing market and has to be stopped…BBC Worldwide, ITV and Channel 4 together [would be] in a very strong position as wholesalers of TV content to restrict competition.” ITV chief Michael Grade, who had been pinning his hopes on the project, said: “We are surprised by this decision because we believed the Kangaroo joint venture was an attractive UK consumer proposition, free at the point of use.” 

A statement from a Project Kangaroo executive said: “We are disappointed by the decision to prohibit this joint venture. While this is an unwelcome finding for the shareholders, the real losers... are British consumers.”