Communication from the Commission published pursuant to Article 27(4) of Council Regulation (EC) No 1/2003 in Case AT.40023 — Cross-border access to pay-TV

(2018/C 460/17)

1. Introduction

(1) According to Article 9 of Council Regulation (EC) No 1/2003 ( 1 ) , the Commission may decide – in cases where it intends to adopt a decision requiring that an infringement is brought to an end and the parties concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment – to make those commitments binding on the undertakings. Such a decision may be adopted for a specified period and shall conclude that there are no longer grounds for action by the Commission.

(2) According to Article 27(4) of the same Regulation, the Commission shall publish a concise summary of the case and the main content of the commitments. Interested parties may submit their observations within the time limit fixed by the Commission.

2. Summary of the Case

(3) On 23 July 2015, the Commission adopted a Statement of Objections (‘SO’) concerning, inter alia, conduct by: (i) Universal Studios International B.V. and Comcast Corporation; (ii) CPT Holdings, Inc., Colgems Productions Limited and Sony Corporation (together ‘Sony Pictures’); and (iii) Warner Bros. International Television Distribution Inc., Warner Media LLC (formerly Time Warner Inc.), (together ‘Warner Bros.’).

(4) On 12 January 2018, the Commission adopted a supplementary Statement of Objections (‘SSO’) addressed to Universal Studios International B.V., Universal Studios Limited and Comcast Corporation (together ‘NBCUniversal’), following changes to NBCUniversal’s corporate structure.

(5) NBCUniversal, Sony Pictures and Warner Bros. are hereinafter individually referred to as a ‘committing Studio’ and together as the ‘committing Studios’.

(6) The SO and SSO constitute preliminary assessments within the meaning of Article 9(1) of Regulation (EC) No 1/2003.

(7) According to the SO and SSO, each of the committing Studios has entered into a licensing agreement with the pay-TV broadcaster, Sky UK Limited (formerly British Sky Broadcasting Limited) (‘Sky’) containing clauses that: — prohibit or limit Sky from making its retail pay-TV services available in response to unsolicited requests from consumers residing or located in the European Economic Area (‘EEA’) but outside of the United Kingdom and Ireland; and — require each committing Studio to prohibit or limit pay-TV broadcasters located within the EEA but outside of the United Kingdom and Ireland from making their retail pay-TV services available in response to unsolicited requests from consumers residing or located in the United Kingdom and Ireland.

(8) Both types of clauses are hereinafter referred to as the ‘Contested Clauses’.

(9) The SO and SSO reach the preliminary conclusion that the Contested Clauses constitute infringements of Article 101 of the TFEU and Article 53 of the Agreement on the European Economic Area (‘EEA Agreement’) by each of the committing Studios because: (i) the Contested Clauses have as their object the restriction of competition within the meaning of Article 101(1) TFEU and Article 53(1) of the EEA Agreement; (ii) there are no circumstances falling within the economic and legal context of the Contested Clauses that would justify the finding that they are not liable to impair competition; and (iii) the Contested Clauses do not satisfy the conditions for an exemption under Article 101(3) TFEU and Article 53(3) of the EEA Agreement.

(10) The SO also concerns licensing agreements between, on the one hand, Sky, and on the other hand, Paramount, Disney and Twentieth Century Fox that contain clauses that: — prohibit or limit Sky from making its retail pay-TV services available in response to unsolicited requests from consumers residing or located in the EEA but outside of the United Kingdom and Ireland; and/or — require Paramount, Disney and Twentieth Century Fox to prohibit or limit pay-TV broadcasters located within the EEA but outside of the United Kingdom and Ireland from making their retail pay-TV services available in response to unsolicited requests from consumers residing or located in the United Kingdom and Ireland.

(11) On 26 July 2016, the European Commission adopted a decision under Article 9(1) of Council Regulation (EC) No 1/2003 making binding commitments offered by Paramount to meet the concerns expressed to it by the Commission in the SO.

(12) On 9 November 2018, the Commission published a communication pursuant to Article 27(4) of Council Regulation (EC) No 1/2003 inviting interested third parties to submit their observations on the commitments offered by Disney to meet the concerns expressed to it by the Commission in the SO.

3. The Main Content of the Offered Commitments

(13) Each of the committing Studios does not agree with the concerns expressed in the SO and SSO. Each has nevertheless offered commitments pursuant to Article 9 of Regulation (EC) No 1/2003 to meet the Commission’s competition concerns. The commitments concern the committing Studios, theirs successors and any and all of the current and future subsidiaries over which they exercise positive sole control within the meaning of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings. The key elements of the commitments would be as follows: (a) Each committing Studio should not enter into, renew or extend a Pay-TV Output License Agreement (2) that, with respect to any territory in the EEA, (re)introduces any ‘Broadcaster Obligation’ and/or ‘Studio Obligation’. These obligations are defined, respectively, as: — The Relevant Clauses (3) or equivalent clauses to the extent that they prevent or limit a Broadcaster, from responding to unsolicited requests from consumers residing and located in the EEA but outside of such Broadcaster’s licensed territory (‘Broadcaster Obligation’); and — The Relevant Clauses or equivalent clauses to the extent that they require a film Studio to prohibit or limit Broadcasters located within the EEA but outside a Broadcaster’s licensed territory from responding to unsolicited requests from consumers residing and located inside such a Broadcaster’s licensed territory (‘Studio Obligation’). (b) Each committing Studio should not: — 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 — honour any Broadcaster Obligation and/or Studio Obligation, to which they are subject pursuant to any existing Pay-TV Output License Agreement.

(14) The commitments of each committing Studio would cover both linear pay-TV services and, to the extent included in the licence (or separate licence(s)) with a broadcaster, subscription video-on-demand services (for a companion on demand service, if any, included within the customer’s subscription to the relevant pay-TV service operated by such broadcaster, complementary to that Pay-TV service).

(15) The duration of the commitments would be five years from the date on which each committing Studio receives formal notification of the Commission’s decision pursuant to Article 9 of Regulation (EC) No 1/2003.

(16) The commitments are published in full in English on the website of the Directorate-General for Competition at: http://ec.europa.eu/competition/index_en.html

4. Invitation to make Comments

(17) Subject to market testing, the Commission intends to adopt a decision under Article 9(1) of Regulation (EC) No 1/2003 making binding the commitments, summarised above and published on the internet, on the website of the Directorate-General for Competition.

(18) In accordance with Article 27(4) of Regulation (EC) No 1/2003, the Commission invites interested third parties to submit their observations on the proposed commitments. These observations must reach the Commission not later than one month following the date of this publication. Interested third parties are also asked to submit a non-confidential version of their comments, in which any information they claim to be business secrets and other confidential information should be deleted and replaced as required by a non-confidential summary or by the words ‘business secrets’ or ‘confidential’.

(19) Answers and comments should preferably be reasoned and should set out the relevant facts. If you identify a problem with any part of the proposed commitments, the Commission would also invite you to suggest a possible solution.

(20) Observations can be sent to the Commission under reference number AT.40023 — Cross-border access to pay-TV either by email (COMP-GREFFE-ANTITRUST@ec.europa.eu), by fax (+32 22950128) or by post, to the following address: European Commission Directorate-General for Competition Antitrust Registry 1049 Bruxelles/Brussel BELGIQUE/BELGIË

(1) Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ L 1, 4.1.2003, p. 1). With effect from 1 December 2009, Articles 81 and 82 of the EC Treaty have become Articles 101 and, respectively, 102 of the TFEU. The two sets of provisions are in substance identical. For the purposes of this notice, references to Articles 101 and 102 of the TFEU should be understood as references to Articles 81 and 82 of the EC Treaty when applicable.

(2) ‘Pay-TV Output License Agreement’ is defined as an agreement between undertakings that licenses to a Broadcaster (as the licensee) a committing Studio’s entire future output of defined films on an exclusive basis (and may include other audiovisual content) for a limited period of time during which the Broadcaster may exhibit the films on a Pay-TV basis and, to the extent included in the licence (or separate licence(s)) with such Broadcaster, on an SVOD basis (for a companion on demand service, if any, included within the customer’s subscription to the relevant Pay-TV service operated by such Broadcaster, complementary to that Pay-TV service).

(3) ‘Relevant Clauses’ mean clauses in Pay-TV Output License Agreements (even if not included in the agreement at issue in the SO) that (i) with regard to satellite transmission, stipulate that (a) overspill in territories other than the licensed territory will not be deemed a breach of contract by the Broadcaster provided that the Broadcaster does not knowingly authorise reception outside of the licensed territory, and/or (b) overspill in the licensed territory will not be deemed to be a breach of contract by the studio provided that the studio has not authorised the availability of a third party’s descrambling device necessary for reception of content in the licensed territory; and (ii) with regard to internet transmission, (a) impose an obligation on a Broadcaster to prevent the unauthorized downloading and/or streaming of films (and, if included, other audiovisual content) outside the licensed territory by means of geo-filtering and/or equivalent technology, and/or (b) stipulate that internet ‘overspill’ in a Broadcaster’s licensed territory is not a breach of contract by the studio provided that the studio has required other Broadcaster(s) to use geo-filtering and/or equivalent technology.