December 12, 2018
The long-awaited judgment of the General Court (GC) in the pay-TV saga (case AT.40023 Cross-border access to pay-TV) has finally been delivered, two years after the annulment action was brought. It was worth waiting for: The General Court has gone well beyond simply endorsing the Commission’s decision on the adequacy of the commitments, and has carried out a competitive analysis of the contractual restrictions that are under scrutiny in the pay-TV case (for which a final decision has not yet been adopted).
The pay-TV case concerns certain clauses contained in the licensing agreements for films between the six Hollywood studios (Paramount, Disney, Fox, Warner, Sony and NBCUniversal) and the British pay-TV broadcaster, Sky UK. According to the Commission’s preliminary findings in the Statement of Objections (adopted in July 2015), such clauses prevented Sky UK from serving EU consumers who requested, from territories other than the U.K. and Ireland, access to pay-TV services available in those countries via satellite or online.
One year after the Statement of Objections, in July 2016, the Commission made binding the commitments offered by Paramount according to which: 1) it would neither act upon nor enforce these clauses in existing film licensing contracts for pay-TV with any broadcaster in the European Economic Area (EEA); 2) it would refrain from (re)introducing such clauses in film licensing contracts for pay-TV with any broadcaster in the EEA.
Canal +, a broadcaster not directly involved in the pay-TV case, had challenged such commitments, which are now the subject matter of the GC’s judgment.
The action brought by Canal + focused on two sets of pleas: first, the Commission’s preliminary findings that the clauses “by object” restrictions are incorrect; second, the commitments offered are not suitable to address the Commission’s concerns.
On the first set of arguments, while pointing out that the appeal should concern exclusively the suitability of the commitments to address the Commission’s concerns, the GC made it clear that:
With regard to the second set of arguments, the GC noted that the commitments were not disproportionate, nor did they affect the right of third parties (such as those of Canal +). Indeed, one of the main points of Canal + was that the commitments would also affect their own interests, as they would modify substantially their licensing contracts with Paramount, containing the same type of restrictions.
According to the Court, however, removing, or not enforcing, the restrictive clauses is a commercial decision of Paramount, not of the Commission.
Also, the commitments offered by Paramount are in line with concerns expressed by the Commission, which cover the entire EEA, with the result that the Commission did not have to examine the effects of the commitments on each individual national market.
In addressing the possible anti-competitive nature of the clauses, the GC has somehow anticipated the findings that we may expect from the final Commission decision (which has yet to be adopted) and has given prima facie confirmation of the soundness of their analysis so far. The judgment is also likely to have spill-over effects on the commitments recently offered by Disney (and its controlled entities, including Fox), which are in substance similar to the Paramount ones, or may possibly prompt the remaining studios (Warner, Sony and NBCUniversal) to make similar offers.
Provided that the Commission’s final decision on the existence of an infringement confirms the findings of the Statement of Objections, parties that have not offered commitments may challenge it before the GC. The judgment on the Paramount commitments, however, suggests that any such challenge is likely to be an uphill battle.