WRITTEN QUESTION E-2371/00

by Glyn Ford (PSE) to the Commission

(13 July 2000)

Subject: DVD discs and competition

In response to my questions E-1509/00 and E-1510/00(1) on 14 June, Commissioner Monti justified the anti-competitive behaviour of producers of DVD players and discs by arguing that the encoding of new releases according to the region of the world enables the producers of motion pictures to protect their copyrighted intellectual property and the traditional pattern of releasing their films at different times in different parts of the world.

I think this is a convenient excuse by the producers of motion pictures to justify sharp differential pricing around the world. Even if this were to be the case it still provides no justification ONCE the films have been globally released for not producing them in an all regions version, because at this stage there is no longer the justification of regional coding being used by film producers to exercise their rights under copyright law. This leaves the suspicion that the main purpose is profit maximisation by the abuse of a dominant position.

Will the Commission therefore undertake to contact the producers of DVD discs to say that subsequent edition, after release in all regions, should not be regionally encoded? If not, would the Commission care to specify its reason?

(1) OJ C 53 E, 20.2.2001.

Answer given by Mr Monti on behalf of the Commission

(28 September 2000)

In its reply of 14 June 2000 to written questions E-1509/00 and E-1510/00(1) by the Honourable Member, the Commission explained that regional coding of digital versatile discs (DVDs) and DVD players enables film production companies to protect their copyrighted intellectual property and the traditional pattern of releasing their films at different times in different parts of the world.

With regard to the Honourable Member's present question, the Commission notes firstly that the capability for regional coding is a technological feature built into DVDs and DVD players. It is part of the standard specifications for DVD technology. However, it is not the DVDs and DVD players that decide whether or not a particular film should be regionally encoded. This is decided unilaterally by each film production company. The Commission therefore interprets the question of the Honourable Member as requesting it to examine the behaviour of film production companies and not producers of DVD discs.

The Commission also recalls that film producers have the option of coding new releases according to six geographical regions, of which the European Economic Area (EEA) constitutes one. Thus, a DVD movie released in one Member State could be played in another Member State, a feature enhanced by the multiple-language capacity of DVDs. Accordingly, the regional coding does not restrict trade between Member States. However, the regional coding might discourage imports into the EEA of DVD discs released in one of the other regions and thereby have an effect on trade.

In this context, the antitrust rules only offer limited possibilities for imposing restrictions on the use of intellectual property rights against imports or parallel imports.

Article 81 (ex Article 85) of the EC Treaty requires the existence of an agreement or concerted practice. However, in the present case, the film producers decide unilaterally whether or not to regionally encode a title.

Article 82 (ex Article 86) of the EC Treaty requires abuse of a dominant position. Film production companies do not enjoy a dominant position in the meaning of Article 82 merely because they are in a position to prevent third parties from putting into circulation products that infringe upon their rights. At this stage, there are no other indications that any of the film production companies would enjoy a dominant position on the relevant market of feature films.

The Honourable Member suggests that the back catalogue of films (films already released) should not be regional encoded. The Commission would like to point out that regional coding on back catalogue of films amounts to enforce film production companies' rights under copyright. Only under limited and exceptional circumstances, e.g. if a dominant film producer were to engage in abusive pricing practices, could the Commission intervene under the competition rules(2).

Accordingly, as stated in its previous reply(3), the Commission has already investigated these issues (in an ex-officio proceeding opened in 1996) and has not found any behaviour infringing Article 81 or 82 of the EC Treaty. In the absence of any new information enabling the Commission to change its view, the Commission currently has no intention to investigate the matter further.

(1) OJ C 53 E, 20.2.2001.

(2) See, inter alia, the judgement of 16 December 1999 in Case T-198/98 Micro Leader Business v. Commission, not yet published.

(3) OJ C 53 E, 20.2.2001.