Making the Digital Single Market a Reality: the limits of EU competition law; absolute territorial exclusivity clauses in media licensing agreements

1. Making the Digital Single
Market a Reality: the limits
of “regulatory antitrust”
Prof. Dr. Ben Van Rompuy
Private Television in Europe: Competition Rules ?! – 3 June 2015

2. 1.FAPL v QC Leisure: practical
impact so far

3. Premier League (1)
•Before FAPL v QC Leisure:
•Broadcaster (licensee) required to undertake that it shall:
“procure that no device (including but not limited to any “smart card” and any
decoding equipment which is necessary to decode or decrypt any such
Transmission) shall be knowingly authorized or enabled by or with the
authority of the Licensee and/or Permitted Sub-Licensee … so as to permit any
person to view any such Transmission outside the Territory in an intelligible form”

4. Premier League (2)
•After FAPL v QC Leisure:
•Contractual amendments in overseas licensing agreements:
• Licensees no longer allowed to offer an optional English language feed to its
customers (only language of the country)
• Non-UK licensees no longer allowed to transmit more than one live PL game
on Saturday afternoon (3-5 pm) ~ “closed period” (blackout) rule
•Little has changed, but consumers everywhere in EU worse off

5. Other sports properties?

7. European Commission (DG COMP)
•Antitrust investigation into pay TV services (2014-)
• Scope: premium pay-TV content (first-run movies of major US studios)
• “Not calling into question exclusive territorial licensing or trying to oblige the
sale of pan-European rights”
• Focus on “restrictions preventing the selling of the content in response to
unsolicited requests from viewers located in other Member States or from
existing subscribers who move or travel abroad”
• Passive sales
• Portability
•E-commerce sector inquiry (2015-2016)
European Commission, “Statement on opening of investigation into Pay TV services”, 13 January 2014

8. 2.Absolute territorial exclusivity
and Article 101 TFEU

9. Article 101(1) TFEU (1)
The following shall be prohibited as incompatible with internal market:
•All agreements between undertakings, decisions by associations of
undertakings and concerted practices;
•which may affect trade between Member States; and
•which have as their object or effect the prevention, restriction or
distortion of competition within the internal market

10. Article 101(1) TFEU (2)
Restriction of competition by object?
•An agreement which might tend to restore the divisions between national markets is
liable to frustrate the Treaty’s objective of achieving the integration of those markets
through the establishment of a single market.
•That case law is fully applicable to the field of cross-border provision of broadcasting
services.
Joined cases 56 and 58-64 Consten and Grundig v Commission [1996] ECR 299
Joined Cases C-403/08 and C-492/08 FAPL v QC Leisure and Karen Murphy v Media Protection Services
[2011] ECR I-9083, para. 140.

11. Article 101(1) TFEU (3)
Restriction of competition by object?
•The mere fact that the right holder has granted to a sole licensee the exclusive right
to broadcast protected subject-matter from a Member State, and consequently to
prohibit its transmission by others, during a specified period is not sufficient to
justify the finding of an anti-competitive object.
• >< Licence was open, not closed
• >< Territorial limitations upon the exercise of the rights (cf. “additional obligations
designed to ensure compliance with the territorial limitations”)
Case 262/81 Coditel and Others (‘Coditel II’) [1982] ECR 3381, par. 15.
Case 258/78 LC Nungesser KG and Kurt Eisele v Commission [1982] ECR 2015.

12. Article 101(1) TFEU (4)
Restriction of competition by object?
•Regard must be had to the content of the agreement’s provisions, its objectives, and
the economic and legal context of which it forms part.
•When determining that context, it is also appropriate to take into consideration the
nature of the goods or services affected, as well as the real conditions of the
functioning and structure of the market or markets in question.
Case C 226/11‑ Expedia Inc. v Autorité de la concurrence and Others, 13 December 2012; Case-67/13 P
Groupement des cartes bancaires v Commission and others, 11 September 2014.
Joined Cases C-501/06 P, 513/06 P, 515/06 P and 519/06 P GlaxoSmithKline Services and Others v
Commission and Others [2009] ECR I-9291, para. 58.

13. Article 101(1) TFEU (5)
Restriction of competition by object?
• Not “inherent” to the essential function of copyright
• Quid real functioning and structure of the market in question?
Joined Cases C-403/08 and C-492/08 FAPL v QC Leisure and Karen Murphy v Media Protection Services
[2011] ECR I-9083, paras. 105-117; Case T-451/08 Stim v Commission [2013] para. 92.
T-442/08, CISAC v Commission [2013] 12 April 2013

14. Article 101(1) TFEU (6)
Restriction of competition by effect?
•Commission needs to demonstrate that absolute territorial exclusivity clauses have
likely anti-competitive effects on the market
•Quid counterfactual?

15. Article 101(3) TFEU
Scope for an efficiency defense?
1.The agreement must contribute to improving the production or distribution of
goods or to promoting technical or economic progress.
2.Consumers must receive a fair share of the benefits.
3.Restrictions are indispensable.
4.No elimination of competition.

16. 3.The remedial potential of EU
competition law

17. Scenarios
SCENARIO
Developing cross-border competition between pay TV operators
SCENARIO
Legalizing the grey market and catering for mobility of EU citizens

18. Scenario (1)
•= develop cross-border competition between pay TV operators
• Absence of cross-border competition ≠ the result of the restraints (or
downstream rights clearance as such)
• Prevailing market dynamics - no viable business case
• E.g. Case M.7332 BSkyB/Sky Deutschland/Sky Italia, Commission decision of 11
September 2014, on multi-territory licensing:
1. Practical obstacles, such as different timelines for negotiations
2. Rights holders would not deviate from current preferred model of licensing
unless it is in their interest in terms of maximising revenues

19. Scenario (2)
•Altering rather than protecting the prevailing market structure: remedial potential is
limited
•Cf. remedy package designed in the context of joint selling of football media rights
1. Segmentation of rights in different packages
2. Reduction in exclusive right to sell (fallback option)
3. Offering of all media rights
4. Reduction in hold back for internet & mobile services
5. Contractual period max. 3 years
6. No single buyer obligation
Pablo Ibanez Colomo, “The Commission investigation into pay TV services: open questions” (2014)
Journal of European Competition law & Practice

20. Scenario (2)
•Challenging existing market dynamics?
Ligue 1 (FR) Bundesliga
(GER)
Serie A (IT) Premier League
(UK)
Contract duration
4 years
(2008-12)
4 years
(2009-13)
2 years
(2010-12)
3 years
(2010-13)
Number of matches 380 / 380 306 / 306 380 / 380 138 / 380
Configuration of rights
packages
Platform neutral Per platform Per platform Platform neutral
Number of live rights
packages
8 7+2 5 (4) 6
Number of operators (live
rights)
2 (Canal Plus,
Orange)
2 (Sky D, DT) +
ARD (6 matches)
2 (Sky, RTI)
+ Vodafone
2 (BskyB, ESPN)

21. Scenario XS
•= legalizing the grey market & cater for mobility of European citizens
• Accept territorial licensing only to the extent that it protects the licensees against active
sales (cf. traditional active/passive distinction in vertical agreements) + allow cross-
border portability
•Contractual practices do function as the main obstacle
• Satellite versus online (geo-blocking, credit card, …)
•Unlikely to have major practical impact (price)

22. Thank you for your attention
Prof. Dr. Ben Van Rompuy
T.M.C. Asser Institute, The Hague / iMinds-SMIT, VUB, Brussels
b.van.rompuy@asser.nl