Summary of Commission Decision

of 7 March 2019

relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement

(Case AT.40023 — Cross-border access to pay-TV)

(notified under document C(2019) 1772)

(Only the English text is authentic)

(2019/C 132/06)

On 7 March 2019, the Commission adopted a decision relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement. In accordance with the provisions of Article 30 of Council Regulation (EC) No 1/2003 (1), the Commission herewith publishes the names of the parties and the main content of the decision, having regard to the legitimate interest of undertakings in the protection of their business secrets.

Introduction

1) The Decision makes legally binding the commitments offered by Universal Studios International B.V., Universal Studios Limited and Comcast Corporation (together ‘NBCUniversal’), CPT Holdings Inc., Colgems Productions Limited and Sony Corporation (together ‘Sony Pictures’), Warner Bros. International Television Distribution Inc. and Warner Media LLC (together ‘Warner Bros.’), The Walt Disney Company, The Walt Disney Company Limited (together ‘Disney’) and Sky UK Limited and Sky Limited (together ‘Sky’) under Article 9 of Council Regulation (EC) No 1/2003 (‘Regulation 1/2003’) in a proceeding under Article 101 of the Treaty on the Functioning of the European Union (‘the Treaty’) and Article 53 of the EEA Agreement.

2) This Decision concerns the film licensing agreements that NBCUniversal, Sony Pictures, Warner Bros. and Disney have each entered into with Sky. NBCUniversal, Sony Pictures, Warner Bros. and Disney are hereinafter referred to as ‘the Studios’.

Procedure

3) On 13 January 2014, the Commission initiated proceedings pursuant to Article 2(1) of Commission Regulation (EC) No 773/2004 against, inter alia , Paramount Pictures International Limited (formerly Viacom Global (Netherlands) B.V.), Viacom Inc. (together ‘Paramount Pictures’), Universal Studios International B.V., CPT Holdings, Inc., Warner Bros. International Television Distribution Inc., British Sky Broadcasting Limited (to date ‘Sky UK Limited’) and British Sky Broadcasting Group Plc. (to date ‘Sky Limited’).

4) On 23 July 2015, the Commission initiated proceedings pursuant to Article 2(1) of Commission Regulation (EC) No 773/2004 against, inter alia , Comcast Corporation, Colgems Productions Limited, Sony Corporation, The Walt Disney Company, The Walt Disney Company Limited and Time Warner, Inc.

5) On the same date, the Commission adopted a Statement of Objections (‘SO’) addressed to the Studios, Sky, Twentieth Century Fox Telecommunications International Inc. (together with Twenty-First Century Fox Inc., ‘Fox’) and Paramount Pictures. The SO set out the Commission’s competition concerns in relation to certain clauses contained in certain film licensing agreements covering the United Kingdom and Ireland that the Studios, Fox and Paramount Pictures each entered into with Sky. The SO constitutes a preliminary assessment for the purposes of Article 9(1) of Regulation 1/2003.

6) From 18 to 20 January 2016, an Oral Hearing took place, during which the Studios, Fox, Paramount Pictures and Sky developed their arguments.

7) On 26 July 2016, the Commission adopted a decision, pursuant to Article 9 of Regulation No 1/2003, rendering binding commitments offered by Paramount Pictures.

8) On 12 January 2018, following changes to NBCUniversal’s corporate structure, the Commission initiated proceedings against Universal Studios Limited and adopted a Supplementary Statement of Objections (‘SSO’).

9) On the same date, the Commission addressed a Letter of Facts to each of the Studios, Fox and Sky informing them about certain internal documents that corroborate the preliminary conclusions reached in the SO and the SSO.

10) On 25 October 2018, Disney offered commitments pursuant to Article 9 of Regulation 1/2003 to meet the Commission’s competition concerns expressed in the SO.

11) On 12 and 13 December 2018, NBCUniversal, Sony, Warner Bros. and Sky, each offered commitments to meet the Commission’s competition concerns expressed in the SO and the SSO.

12) On 9 November and 21 December 2018, the Commission published a notice in the Official Journal of the European Union pursuant to Article 27(4) of Regulation 1/2003 summarising the case and the commitments offered by Disney, NBCUniversal, Sony Pictures, Warner Bros. and Sky, and inviting interested third parties to submit their observations on those commitments.

13) On 5 February 2019, Disney clarified certain aspects of its commitments (‘Disney’s revised commitments’) in light of the commitments offered by NBCUniversal, Sony Pictures, Warner Bros. and Sky.

14) The Commission received observations from ten interested parties on the commitments offered by the Studios and Sky.

15) On 21 February 2019, the Commission consulted the Advisory Committee on Restrictive Practices and Dominant Positions.

16) On 26 February 2019, the Hearing Officer issued his final report.

The Commission’s competition concerns

17) Each of the Studios, Fox and Paramount Pictures has entered into licensing agreements with Sky, whereby the Studios, Fox and Paramount Pictures grant Sky exclusive pay-TV and subscription video-on-demand (‘SVOD’) rights with regard to certain films in the United Kingdom and Ireland.

18) In addition to granting Sky an exclusive right to exhibit the licensed content to subscribers in the United Kingdom and Ireland, each agreement contains clauses that prohibit or limit Sky from making available via internet and/or satellite transmission its retail pay-TV services in response to unsolicited requests from consumers located in European Economic Area (‘EEA’) but outside the United Kingdom and Ireland.

19) Moreover, certain agreements contain clauses that require the relevant studio to prohibit or limit pay-TV broadcasters located in the EEA but outside the United Kingdom and Ireland from responding to unsolicited requests from consumers residing or located in the United Kingdom and Ireland.

20) These clauses are hereinafter referred to as the ‘Contested Clauses’.

21) In the SO and the SSO, the Commission reached the preliminary conclusion that the Contested Clauses are liable to impair competition and have an anticompetitive object because they are designed to prohibit or limit cross-border passive sales of retail pay-TV services and grant absolute territorial exclusivity in relation to the content of the Studios, Fox and Paramount Pictures.

22) In the SO and the SSO, the Commission also reached the preliminary conclusion that there are no circumstances falling within the economic and legal context of the Contested Clauses, including the nature of the services affected and the conditions of the functioning and structure of the markets in question, that would justify the finding that the clauses are not liable to impair competition and therefore do not have an anticompetitive object.

23) In the SO and the SSO, the Commission examined arguments put forward by each of the Studios, Fox, Paramount Pictures and Sky, claiming, inter alia , that the Contested Clauses: (i) bring about cost and qualitative efficiencies; (ii) ensure that consumers can enjoy a culturally targeted, local language product, with greater choice and variety of content; (iii) maintain the incentives of the Studios, Fox, Paramount Pictures and pay-TV broadcasters, such as Sky, and distributors to invest in local content; and (iv) do not eliminate a substantial part of competition between pay-TV broadcasters in the EEA. The Commission reached the preliminary conclusion that the Contested Clauses do not meet any of the cumulative conditions for exemption under Article 101(3) of the Treaty and Article 53(3) of the EEA Agreement.

The Commitments

24) The main aspects of the commitments offered by NBCUniversal, Sony Pictures, Warner Bros. and the revised commitments offered by Disney are as follows.

25) First, the Studios will not enter into, renew or extend a pay-TV output license agreement that, with respect to any territory in the EEA, (re)introduces any: a) clauses that prevent or limit pay-TV broadcasters located in the EEA from responding to unsolicited requests from consumers residing and located in the EEA but outside of the licensed territory of such pay-TV broadcasters (Broadcaster Obligation); and b) clauses that require the Studios to prohibit or limit other pay-TV broadcasters located in the EEA but outside a given pay-TV broadcaster’s licensed territory from responding to unsolicited requests from consumers residing and located in that pay-TV broadcaster’s licensed territory (Studio Obligation).

26) Second the Studios will not: a) seek to enforce or initiate proceedings before a court or tribunal for the violation of a Broadcaster Obligation and/or Studio Obligation, as applicable, in an existing pay-TV output license agreement; and b) honour any Broadcaster Obligation and/or Studio Obligation, as applicable, to which it is subject pursuant to any existing pay-TV output license agreement.

27) The main aspects of the commitments offered by Sky are as follows.

28) First, Sky will not enter into, renew or extend a pay-TV output license agreement with the Studios, Fox or Paramount Pictures that, with respect to any territory in the EEA, (re)introduces any: a) clauses that prevent or limit Sky from responding to unsolicited requests from consumers residing and located in the EEA but outside of Sky’s licensed territory (Broadcaster Obligation); and b) clauses that require the Studios, Fox or Paramount Pictures to prohibit or limit other pay-TV broadcasters located in the EEA but outside a given pay-TV broadcaster’s licensed territory from responding to unsolicited requests from consumers residing and located in that pay-TV broadcaster’s licensed territory (Studio Obligation).

29) Second, Sky will not: a) seek to enforce or initiate proceedings before a court or tribunal for the violation of Studio Obligation in an existing pay-TV output license agreement; and b) honour any Broadcaster Obligation, to which it is subject pursuant to any existing pay-TV output license agreement.

30) The commitments offered by the Studios and Sky cover both linear pay-TV services and, to the extent included in the licence(s) with a broadcaster, companion SVOD services.

31) The commitments cover current and future subsidiaries of the committing parties.

32) The commitments contain also clauses on non-circumvention, review and the monitoring trustee.

33) The commitments are expressly without prejudice to rights conferred on the Studios under Regulation (EU) 2017/1128 (‘Portability Regulation’) or under copyright law. Neither do the commitments affect the rights of the Studios or a pay-TV broadcaster to decide unilaterally to employ geo-filtering technology.

34) The commitments will be valid for five years.

Conclusion

35) The commitments adequately address the concerns expressed in the SO and the SSO.

36) First, the commitments will apply to all retail pay-TV services and lead to the removal of all clauses in any new pay-TV output license agreement, extension or renewal between the Studios or their future subsidiaries and pay-TV broadcasters located in the EEA that prohibit or limit pay-TV broadcasters from making their retail pay-TV services available in response to unsolicited requests from consumers residing and located in the EEA but outside the United Kingdom and Ireland.

37) Second, the commitments will lead to the removal of all clauses in any new pay-TV output license agreement, extension or renewal between the Studios or their future subsidiaries and pay-TV broadcasters located in the EEA that require the Studios or their future subsidiaries to prohibit or limit other pay-TV broadcasters located in the EEA but outside a given pay-TV broadcaster’s licensed territory from making their retail pay-TV services available in response to unsolicited requests from consumers residing and located in that pay-TV broadcaster’s licensed territory.

38) Third, the commitments will lead to the Studios or their future subsidiaries not seeking to enforce, or honour, similar clauses in existing pay-TV output license agreements in force with pay-TV broadcasters located in the EEA.

39) Fourth, the commitments will lead to the removal of all clauses in any new pay-TV output license agreement, extension or renewal between Sky and the Studios, Fox or Paramount Pictures that prohibit or limit Sky from making its retail pay-TV services available in response to unsolicited requests from consumers residing and located in the EEA but outside the licensed territory of Sky.

40) Fifth, the commitments will lead to the removal of all clauses in any new pay-TV output license agreement, extension or renewal between Sky and the Studios, Fox or Paramount Pictures that require Studios, Fox or Paramount Pictures to prohibit or limit other pay-TV broadcasters located in the EEA but outside Sky’s licensed territory from making their retail pay-TV services available in response to unsolicited requests from consumers residing and located in Sky’s licensed territory.

41) Sixth, the commitments will lead to Sky not seeking to enforce, or honour, similar clauses in existing pay-TV output license agreements in force with the Studios, Fox or Paramount Pictures.

42) The Decision makes the commitments offered by the Studios and Sky legally binding. The non-confidential version of the Decision will be made available on the website of the Directorate General for Competition.

43) In the light of the commitments, the Commission considers that there are no longer grounds for action against the Studios and Sky, without prejudice to Article 9(2) of Regulation 1/2003, the proceedings against the Studios and Sky should therefore be brought to an end.

(1) OJ L 1, 4.1.2003, p. 1.