Commission probes cross-border pay-TV deals
The European Commission has begun investigating pay-TV licensing agreements between US film studios and European broadcasters.
Regulators are inspecting the cross-border provisions that require broadcasters to show US films exclusively in one EU member state.
BSkyB (UK), Sky Italia (Italy), Canal+ (France), Sky Deutschland (Germany) and DTS (Spain), which operates under the Canal Plus brand, are the broadcasters under investigation. The film studios are Twentieth Century Fox, Warner Bros, Sony, NBCUniversal and Paramount.
US movie studios currently license their films to European broadcasters on a country-by-country basis.
Joaquín Almunia, responsible for competition policy at the commission, said the probe will assess the pay-TV agreements’ provisions on “absolute territorial exclusivity”, which is when, after content is licensed, a broadcaster can show that content only in the member state in which it is licensed.
In a speech announcing the investigation, Almunia explained that the commission is not questioning the ability to grant licences on a country-by-country basis or trying to force studios to sell rights on a pan-European basis.
“Rather, our investigation will focus on restrictions that prevent the selling of the content in response to unsolicited requests from viewers located in other member states – the so-called ‘passive sales’ – or to existing subscribers who move or travel abroad.
“To illustrate: if you subscribe to a pay-TV service in Germany and you go to Italy for holidays, you may not be able to view the films offered by that service from your laptop during your holidays. Similarly, if I live in Belgium and want to subscribe to a Spanish pay-TV service, I may not be able to subscribe at all if there is absolute territorial exclusivity,” he said.
Provisions restricting these practices might breach anti-competition legislation, Almunia stated.
He cited a ruling from the Court of Justice of the EU (CJEU) concerning a dispute between an English pub landlady, Karen Murphy, who used a foreign decoder to broadcast live English matches, and the English Premier League.
The 2011 ruling, Almunia explained, shows that absolute territorial exclusivity given to a football broadcaster may be anti-competitive if it eliminates all competition between broadcasters and leads to a partitioning of the single market along national borders.
But the Murphy ruling has left content owners in a “near impossible” situation, said Ken Daly, partner at Sidley Austin LLP.
“On the one hand the court confirmed that copyright law allows content to be licensed on a territory-by-territory and exclusive basis. On the other it found that any contract creating ‘absolute territorial protection’ – which prevents all sales of that content from one EU territory into another – could violate EU competition law.
“Since then the commission has avoided explaining how it thinks the CJEU’s ruling should be applied. Dragging businesses into a burdensome investigation for a suspected failure to comply fully with a law that the commission itself has difficulty explaining does seem harsh,” he said.
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. If companies are deemed to be in breach of the law, they can be fined up to 10 percent of their global turnover.
Daly added: “We must hope that the results of the investigation will provide welcome clarification of exactly how rights can be sold on a territorial basis, without being ‘absolutely’ territorial. The same result might have been achieved, however, by opening a constructive dialogue with rights holders and then issuing a clarification or guideline.”
