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EU probing film, pay-TV licence deals

Watching films through pay-TV services broadcast by satellite or streaming is becoming increasingly common. The system of pay-TV services in the world of movies operates via licensing arrangements entered into between US film studios and broadcasters in the EU. Such licensing occurs on a territorial basis. Typically a licence for a film is granted to a single broadcaster in each member state.

The Premier League judgment delivered by the Court of Justice of the European Union in October 2011 addressed the issue of licensing restrictions of sports events. The restrictions dealt with by the Court in that case granted broadcasters an exclusive live broadcasting right on a territorial basis, corresponding to the territory of a member state.

The European Court, in the Premier League judgment, ruled that selling TV rights on a country-by-country basis goes against the spirit of the single European market. This meant that there was nothing to stop viewers from paying for cheaper pay-TV sports channels anywhere in Europe. Restricting rights geographically was thus deemed to be in restraint of trade in the single market.

Following this ruling, in 2012 the Commission carried out an investigation to examine whether licensing agreements for premium pay-TV content contain absolute territorial protection clauses which may restrict competition and prevent consumers from cross-border access to premium film content. The Commission’s investigation was concerned with films that are licensed by US film studios to pay-TV European broadcasters on an exclusive and territorial basis. From the investigation, it resulted that typically, these licences are restricted to a single pay-TV broadcaster in each member state, granting the latter absolute territorial protection. This type of provision ensures that the licensed films are shown exclusively in the member state where the licensed broadcaster operates via satellite or the internet.

Companies found to have broken EU antitrust rules can be fined up to 10 per cent of their global revenues

As a result of this fact-finding exercise, the Commission has now opened formal antitrust proceedings to examine provisions in licensing agreements for broadcasting by satellite or through online streaming between US film studios such as Twentieth Century Fox and Warner Bros, and European pay-TV broadcasters such as BSkyB of the UK and Sky Italia of Italy.

The Commission will in particular investigate whether these provisions infringe EU competition law by preventing broadcasters from providing their services across borders, for example by refusing potential subscribers from other member states or blocking cross-border access to their services.

The Commission has informed the companies and the competition authorities of the member states that it has opened proceedings in this case. In announcing the opening of this investigation, the Commission has made it clear that it is not calling into question the possibility to grant licences on a territorial basis. The investigation instead will focus on restrictions that prevent passive sales or sales to existing subscribers who move or travel abroad. Therefore, the Commission will investigate restrictions preventing pay-TV broadcasters from selling content to viewers in EU member states outside their home market, or to subscribers who travel abroad.

The Commission’s inspection will be from a competition law viewpoint. It will investigate whether these restrictions constitute an infringement of EU competition law and whether the principles enunciated by the Luxembourg Court in the Premier League judgment are applicable in the context of US film licensing arrangements with European broadcasters.

Investigators are likely to send questionnaires to broadcasters and film studios asking them to provide their contracts, before assessing whether the documents comply with EU law.

Companies found to have broken EU antitrust rules can be fined up to 10 per cent of their global revenues.

Josette Grech is adviser on EU law at Guido de Marco & Associates.

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