Following Advocate General Kokott's opinion on the extent to which the Premier League can require its licensed broadcasters in the EU to prevent their broadcasts from being viewed outside their licensed area, the European Court of Justice has now delivered its judgment on the compatibility of such territorial exclusivity agreements with EU law.
The final judgment upheld the initial opinion, deeming the measures adopted by the Premier League as having the effect of partitioning the EU into separate national markets and thereby constituting a serious infringement of the EU rules on the freedom to provide services and the EU competition rules.
Background
The Football Association Premier League Ltd (FAPL) is responsible for the marketing of the English football premier league (EPL). The FAPL's practice has been to grant broadcasters in the EU the exclusive right to broadcast live games within their own country, accompanied by a contractual requirement that they should prevent such broadcasts from being shown outside their allocated territory, in order to protect the exclusivity granted to other broadcasters. The effects of these contractual restrictions are reinforced by the UK Copyright, Designs and Patents Acts 1988 (the 'national legislation') which provides for civil law and pecuniary sanctions for non-compliance.
Actions were raised in the UK High Court in respect of two cases involving UK publicans that purchased cheap foreign decoder equipment and cards for use in screening live football matches, thus circumventing the higher fees charged by BSkyB, the UK rights-holder. These cases alleged that the publicans had infringed FAPL's copyright, in breach of the provisions of the UK Copyright, Designs and Patents Act 1988. The High Court referred a number of questions to the European Court of Justice (ECJ) as regards the compatibility of the national legislation and the FAPL's licensing arrangements with EU law.
In particular, it asked whether Article 56 of the Treaty on the Functioning of the European Union (TFEU) precluded national legislation which prohibits the import, sale and use of foreign decoding devices that give access to satellite broadcasting services from another member state. Article 56 TFEU prohibits restrictions on the freedom to provide services with the EU.
Furthermore, it questioned whether the clauses of an exclusive licence agreement between an IP rights holder and a broadcaster, imposing contractual obligations requiring the broadcaster to prevent the use of its decoding equipment outside the territory for which it has been granted the licence, is an infringement of Article 101(1) TFEU. Article 101(1) TFEU prohibits anticompetitive agreements. The ECJ delivered its judgment on 4 October 2011.
Freedom to Provide Services
The ECJ held that whilst it is the contractual restrictions themselves in FAPL's licence agreements which constitute an obstacle to the freedom to provide services, in this case the national legislation serves to restrict the freedom to provide services by reinforcing these restrictions.
Thus, the ECJ held that the national legislation effectively prevents persons in the UK from gaining access to satellite transmission services from another member state and therefore constitutes a restriction on the freedom to provide services, contrary to Article 56 TFEU, unless objectively justified. The ECJ confirmed that any restriction of a fundamental freedom can only be justified if it pursues a legitimate objective or is justified by overriding reasons of public interest, and does not go beyond what is necessary to achieve the objective or interest in question.
The FAPL claimed that the restrictions in place were justified by an objective of protecting the rights of holders of intellectual property rights, because it is necessary to ensure that such holders remain appropriately remunerated. The ECJ held that although intellectual property rights are intended to protect the holder's right to exploit the IP in return for remuneration, only appropriate and reasonable remuneration is protected. Whilst broadcasters may be prepared to pay a premium for territorial exclusivity, such exclusivity has the effect of partitioning markets nationally and creating artificial price differences between member states. This feature of the licensing system was held to be starkly at odds with the single market objectives of the TFEU.
By way of alternative justification, the FAPL had submitted the restrictions in place were necessary to ensure the protection of 'closed periods', when EPL matches cannot be shown live, in order to encourage attendance at matches. Whilst recognising that this was a legitimate justification, the ECJ considered that it could be achieved by less stringent measures, such as through a contractual provision in the licences under which a broadcaster would be prevented from broadcasting EPL matches during closed periods.
Competition Law
In respect of competition law, the ECJ recognised that the grant of exclusive licences for the broadcasting of EPL matches is not of itself contrary to competition law. However, additional obligations designed to ensure compliance with territorial limitations imposed on exploitation of those licences, namely the obligation on the broadcaster not to supply decoding devices outside of the territory covered by the licence agreement, would be contrary to competition law. This was on the basis that those obligations prevent broadcasters from effecting any cross-border provision of services, granting each broadcaster absolute territorial protection and eliminating all competition between them.
The ECJ held that:
"...an agreement which might tend to restore 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. Thus, agreements which are aimed at partitioning national markets according to national borders or make the interpenetration of national markets more difficult must be regarded, in principle, as agreements whose object is to restrict competition within the meaning of Article 101(1) TFEU."
Conclusion
The ECJ concluded that national legislation having the effect of prohibiting the import, sale or use of foreign decoder cards is contrary to the principle of the freedom to provide services and cannot be objectively justified by reference to either the protection of intellectual property rights, nor the protection of closed-periods. Furthermore, contractual provisions in exclusive licence agreements which prevent a broadcaster from supplying viewers outside of its exclusive territory with decoder equipment constitutes an infringement of Article 101(1) TFEU.
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