Plans by three television companies to launch a joint "video on demand" scheme would restrict competition in the UK, a Government watchdog said today.

The Competition Commission published provisional findings into its examination of "Project Kangaroo" - a venture by BBC Worldwide (BBCW), ITV and Channel 4 (C4C).

It found the scheme would result in a "substantial lessening" of competition in video on demand (VOD) services in the UK.

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But the project would not have a negative effect on online advertising or content acquisition, the Commission found.

UKVOD would create a "one-stop shop" for programmes on demand, giving viewers the chance to view recently-aired material as well as archive broadcasts.

The same "catch-up" services would remain in place via the individual broadcasters' websites, so a key new element will be viewing archived programmes.

Competition Commission chairman Peter Freeman said: "Video on Demand is a relatively new and rapidly-expanding medium and UKVOD clearly has much to offer.

"However, we are concerned that a loss of rivalry between BBCW, ITV and C4C, who are normally regarded as close competitors, could restrict existing and future competition for VOD. Whatever benefits viewers would gain from this rivalry would clearly be lost."

The Commission said there could also be issues when the three broadcasters, which own most of the archived content in the UK, came to grant licences to use the material to third parties.

It is now inviting comments on how the loss of competition could be overcome.