According to a press release issued on 7 March 2019, the European Commission ("Commission") has formally accepted the commitments offered by Disney, NBC Universal, Sony Pictures, Warner Bros. and Sky in Case 40.023, Cross-border access to pay-TV, under Article 9 of Regulation 1/2003. The commitments address the Commission's concerns over clauses in the film licensing contracts for pay-TV concluded by the above four U.S. studios with Sky UK.
According to the Commission's statement of objections issued in July 2015 to the above companies as well as to Paramount Pictures, certain clauses in these film licensing contracts constituted territorial restrictions eliminating cross-border competition between pay-TV broadcasters. Specifically, the clauses in question required (i) Sky UK to block access by consumers situated outside its licensed territory (UK and Ireland) to the studios' films through its pay-TV services and (ii) some of the studios to ensure that broadcasters outside the UK and Ireland would be prevented from making their pay-TV services available in the UK and Ireland. In so doing, these clauses restricted the ability of broadcasters to accept unsolicited requests for pay-TV services from consumers situated outside their licensed territory.
The Commission had already accepted and made binding commitments offered by Paramount Pictures in July 2016. These commitments were fully upheld by the General Court in Groupe Canal+ on 12 December 2018 (see VBB on Competition Law, Volume 2018, No. 12, available at www.vbb.com). In that case, the General Court also confirmed the Commission's concerns that the contractual obligations contained in Paramount's film licensing contract with Sky UK infringed Article 101 by eliminating cross-border competition between pay-TV broadcasters, regardless of whether the content was covered by copyright.
Following consultation with market participants to assess the commitments offered by Disney, NBCUniversal, Sony Pictures and Warner Bros., the Commission has now made the following obligations legally binding:
- When licensing films for pay-TV to an EEA-based broadcaster, each studio commits not to apply or (re-)introduce contractual obligations preventing broadcasters from providing cross-border passive sales to consumers located in the EEA but outside the broadcasters' licensed territory.
- When licensing films for pay-TV to an EEA-based broadcaster, each studio commits not to apply or (re-)introduce contractual obligations requiring studios to prevent other EEA-based broadcasters from providing passive sales to consumers located in the licensed territory.
Sky has also committed to no longer apply the clauses in question and not to (re-)introduce such contractual obligations in film licensing contracts for pay-TV with Disney, Fox, NBCUniversal, Sony Pictures and Warner Bros.
The commitments are set to apply throughout the EEA for a five-year period, covering both online and satellite pay-TV services. In addition, the commitments are without prejudice to the rights enjoyed by the relevant studios under Regulation 2017/1128 on cross-border portability of online content services in the internal market and under copyright law. All current and future subsidiaries of the committing parties are covered by the commitments (such that Fox will also be bound following its acquisition by Disney).
The Commission emphasises that the concerns identified in the proceedings are specific to the case, and therefore the Commission's assessment cannot be extended to similar clauses forming part of a different legal and economic context.
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