The Commerce Commission is investigating whether merger rules have been broken in the creation of the new pay TV service Igloo.
The company, a joint venture between Sky Television and TVNZ, is due to start transmission in June with 11 channels.
The Commission says that, following complaints, it is investigating whether the partners have complied with Section 47 of the Commerce Act which prohibits the acquisition of a business or shares if it lessens competition in the market.
Igloo expects to attract 7000 users in the June financial year and 50,000 the year after.
Sky has invested $12.75 million and TVNZ $12.25 million.
Analysts have heralded Igloo as long overdue, offering an affordable product to households that don't want a monthly premium pay TV subscription.
Deal likely to go through - Forsyth Barr
Investment specialist Forsyth Barr says TVNZ and Sky Television's joint ownership of Igloo, will enhance and not hinder competition.
Head of research Rob Mercer says the 11 channels to be offered by Igloo in June, will expand the broadcast market and competition for viewers.
Mr Mercer says he believes the Commerce Commission will approve the ownership structure of Igloo as it will find the service is positive for consumers.
He says the Commerce Commission would have to decide that TVNZ's 49% ownership of Igloo would lead to substantially lessening competition.
Mr Mercer says he doesn't believe that's possible given that it expands competition.
He says competition is already expanding through Apple TV, Google and the telco companies looking at ways they can start to provide services through ultra-fast broadband in the future.
Mr Mercer says there is nothing to stop anyone else producing a competing service that blends a pay TV model with Freeview.
