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 460/18)

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 Sky UK Limited and Sky plc. (together ‘Sky’). The SO also constitutes a preliminary assessment within the meaning of Article 9(1) of Regulation (EC) No 1/2003.

(4) According to the SO, Sky UK Limited has entered into licensing agreements with: (i) Viacom Global (Netherlands) B.V. (which later merged into Paramount Pictures International Limited); (ii) The Walt Disney Company Limited; (iii) Twentieth Century Fox Telecommunications International Inc.; (iv) Universal Studios International B.V. (which later assigned the licensing agreement to Universal Studios Limited); (v) CPT Holdings, Inc. and Colgems Productions Limited; and (vi) Warner Bros. International Television Distribution Inc.

(5) Each of: (i) Paramount Pictures International Limited and its parent, Viacom Inc. (together ‘Paramount’); (ii) The Walt Disney Company Limited and its parent, The Walt Disney Company (together ‘Disney’); (iii) Twentieth Century Fox Telecommunications International Inc. and its parent, Twenty-First Century Fox, Inc. (together ‘Fox’); (iv) Universal Studios Limited, Universal Studios International B.V. and their parent, Comcast Corporation (together ‘NBCUniversal’); (v) CPT Holdings, Inc., Colgems Productions Limited and their parent, Sony Corporation (together ‘Sony’); and (vi) Warner Bros. International Television Distribution Inc. and its parent, Warner Media LLC (formerly Time Warner Inc.) (together ‘Warner Bros.’) are hereinafter referred to as a ‘Studio’. They are also hereinafter referred to together as the ‘Studios’.

(6) According to the SO, Sky has entered into licensing agreements with each of the Studios 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/or — require a 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.

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

(8) The SO reaches 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 Sky because: (i) the Contested Clauses have as its 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.

(9) 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.

(10) 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

(11) Sky does not agree with the concerns expressed in the SO. It has nevertheless offered commitments pursuant to Article 9 of Regulation (EC) No 1/2003 to meet the Commission’s competition concerns. The commitments concern Sky, its successors and any and all of the current and future subsidiaries over which it exercises 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) Sky 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’ or ‘Studio Obligation’. These obligations are defined, respectively, as: — The Relevant Clauses (3) or equivalent clauses to the extent that they 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 — The Relevant Clauses or equivalent clauses to the extent that they require a Studio to prohibit or limit a Broadcaster located within the EEA but outside a Broadcaster’s licensed territory from responding to unsolicited requests from consumers residing and located inside such Broadcaster’s licensed territory (‘Studio Obligation’). (b) Sky should not: — seek to enforce or initiate proceedings before a court or tribunal for the violation of a Studio Obligation in an existing Pay-TV Output License Agreement; and — honour any Broadcaster Obligation to which it is subject pursuant to any existing Pay-TV Output License Agreement.

(12) Sky’s commitments would cover both linear pay-TV services and, to the extent included in the licence (or separate licence(s)) with a Studio, 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 Sky, complementary to that Pay-TV service).

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

(14) 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

(15) 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.

(16) 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’.

(17) 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.

(18) 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 Sky (as the licensee) a 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 Sky may exhibit the films on a Pay-TV basis and, to the extent included in the licence (or separate licence(s)) with Sky, 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 Sky, complementary to that Pay-TV service).

(3) ‘Relevant Clauses’ mean clauses in Pay-TV Output License Agreements (even if not included in the agreements 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 Sky provided that Sky 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 Sky 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 Sky’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.