1999/242/EC: Commission Decision of 3 March 1999 relating to a proceeding pursuant to Article 85 of the EC Treaty (Case No IV/36.237 - TPS) (notified under document number C(1999) 387)
Date: 1999-03-03
Institutions: European Commission
Subjects: France, economic concentration, merger control, pay television, restriction on competition, television

L 90/6

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Official Journal of the European Communities

2. 4. 1999

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 3 March 1999

relating to a proceeding pursuant to Article 85 of the EC Treaty

(Case No IV/36.237 (cid:190) TPS)

(notified under document number C(1999) 387)

(Only the French text is authentic)

(1999/242/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Whereas:

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation No 17 of 6 February
1962, First Regulation implementing Articles 85 and 86
of the Treaty (1), as last amended by the Act of Accession
of Austria, Finland and Sweden, and in particular Articles
2, 6 and 8 thereof,

Having regard to the application for negative clearance
and the notification for exemption submitted, pursuant to
Articles 2 and 4 of Regulation No 17, on 18 October
1996, by T(cid:130)l(cid:130)vision Fran(cid:135)aise 1, France T(cid:130)l(cid:130)vision
Entreprises, France T(cid:130)l(cid:130)com, Compagnie Luxembour-
geoise de T(cid:130)l(cid:130)diffusion, M(cid:130)tropole T(cid:130)l(cid:130)vision and Lyon-
naise des Eaux, concerning the agreements creating the
company T(cid:130)l(cid:130)vision par satellite,

Having regard to the summaries of the application and
notification published (2) pursuant
to Article 19(3) of
Regulation No 17,

After consulting the Advisory Committee on restrictive
practices and dominant positions,

I. THE FACTS

A. Introduction

(1)

(2)

The parties first contacted the Commission in
connection with this operation in the summer of
1996, with a view to notification under Council
Regulation (EEC) No 4064/89 of 21 December
1989 on the control of concentrations between
undertakings (3), as last amended by Regulation
(EC) No 1310/97 (4). However, having been
informed by the Commission that T(cid:130)l(cid:130)vision par
satellite (hereinafter referred to as ‘TPS') was not a
joint venture in the sense of an undertaking under
the joint control of its members, on 18 October
1996 they notified the operation to the Commis-
sion and requested negative clearance and/or
exemption pursuant to Regulation No 17.

The agreements creating the company were noti-
fied to the Commission by the abovementioned
parties, namely T(cid:130)l(cid:130)vision Fran(cid:135)aise 1 (hereinafter
referred to as ‘TF1'), France T(cid:130)l(cid:130)vision Enterprises,
France T(cid:130)l(cid:130)com, M(cid:130)tropole T(cid:130)l(cid:130)vision (hereinafter
referred to as ‘M6'), Compagnie Luxembourgeoise
de T(cid:130)l(cid:130)diffusion (hereinafter referred to as ‘CLT')
and Lyonnaise des Eaux, now called Suez Lyon-
naise des Eaux. TPS was set up in the form of a

(1) OJ 13, 21.2.1962, p. 204/62
(2) OJ C 65, 28.2.1998, p. 5.

(3) OJ L 395, 30.12.1989, p. 1; corrected and republished in OJ

L 257, 21.9.1990, p. 13.
(4) OJ L 180, 9.7.1997, p. 1.

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partnership (soci(cid:130)t(cid:130) en nom collectif) under French
law with a view to launching and managing a
digital platform for the distribution in France of
satellite pay-TV programmes and services. The
stated object of the company also permits its activ-
ities to be extended to other French-speaking areas
in Europe.

(3)

On 13 March 1998 the parties
informed the
Commission of a change in the shareholder struc-
ture that had taken place after notification of the
agreements. CLT had withdrawn from TPS and
sold its shares to M6 Num(cid:130)rique and Lyonnaise
Satellite, which now each hold 25 % of the capital
of TPS.

At the time of notification, the ownership structure
of TPS was as follows:

(cid:190) TF1 D(cid:130)veloppement:

(cid:190) France T(cid:130)l(cid:130)vision Entreprises:

(cid:190) M6 Num(cid:130)rique:

(cid:190) Soci(cid:130)t(cid:130) pour le Num(cid:130)rique Francophone

(CLT):

(cid:190) Lyonnaise Satellite:

25 %,

25 %,

20 %,

20 %,

10 %.

le
Following the withdrawal of Soci(cid:130)t(cid:130) pour
Num(cid:130)rique Francophone, the stakes held in TPS
are distributed as follows:

(cid:190) TF1 D(cid:130)veloppement:

(cid:190) France T(cid:130)l(cid:130)vision Entreprises:

(cid:190) M6 Num(cid:130)rique:

(cid:190) Lyonnaise Satellite:

25 %,

25 %,

25 %,

25 %.

TF1 D(cid:130)veloppement is wholly owned by TF1. The
capital of France T(cid:130)l(cid:130)vision Entreprises is divided
between France T(cid:130)l(cid:130)com (66 %) and France T(cid:130)l(cid:130)-
vision (34 %), itself owned in equal proportions by
the public television companies France 2 and
France 3. M6 Num(cid:130)rique and Lyonnaise Satellite
are wholly owned subsidiaries of M6 and Suez
Lyonnaise des Eaux respectively.

(4)

On 27 July 1998 the parties also notified the
Commission of an amendment which deleted the
clause whereby the cable operators holding shares
in TPS undertook to coordinate their programmes
and services with those supplied by the digital plat-
form. The scope of the non-competition clause
was, at the Commission’s request, spelt out by two
amendments dated 17 September 1998, and a
provision on possible exclusive broadcasting of the

‘Arte' and ‘La Cinquieme' channels was deleted by
another amendment dated 17 September 1998.

B. The parties

1. TF1

(5)

T(cid:130)l(cid:130)vision Fran(cid:135)aise 1 (TF1) operates the first
French television channel broadcast in clear via the
terrestrial network. It has a broadcasting licence
which was renewed in 1996. TF1 is also distributed
by cable in the French-speaking parts of Belgium
and in Luxembourg.

(6) With a holding of 39 %,

the Bouygues group,
which operates mainly in the construction and
property development sectors, has, de facto, control
of TF1.

(7)

(8)

(9)

(10)

(11)

TF1’s main activity is the unencrypted broadcasting
of general-interest television programmes. TF1 is
also active via its subsidiaries in the advertising,
production and services sectors, audiovisual and
the marketing of audiovisual
film production,
rights,
two special-interest
channels, and the production and distribution of
derived products and services.

the broadcasting of

In 1996, the Bouygues group generated a world-
wide turnover of ECU 11 180,5 million, while that
of TF1 was ECU 1 475,8 million.

2. France T(cid:130)l(cid:130)vision

France T(cid:130)l(cid:130)vision is made up of France 2 and
France 3, two limited companies wholly owned by
the French State which operate the second and
third French television channels broadcast by
terrestrial
they are
required to comply with the conditions and public-
service obligations laid down by the law defining
their activities. France 2 and France 3 programmes
are broadcast in clear and are financed by televi-
sion-licence revenues and advertising.

In so doing,

transmission.

France 2 and France 3 broadcast general-interest
programmes nationally. France 3 also broadcasts
regional and local programmes. Both channels are
also distributed by cable in Belgium and Luxem-
bourg.

In addition to their general-interest broadcasting
activities, the two channels are also involved, via
various
in the
shareholdings and subsidiaries,
following audiovisual activities: advertising produc-
tion, audiovisual and film production, marketing of
audiovisual rights, broadcasting of special-interest
channels
and the
production and distribution of derived products
and services.

and educational),

(cultural

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(12)

In 1996, France 2 generated turnover of ECU 760,3
million, while that of France 3 was ECU 784,7
million.

Gobain (4 %), Cogema (3 %) and staff (1,1 %), the
rest (63,6 %) being in the hands of the general
public.

3. France T(cid:130)l(cid:130)com

(13)

(14)

(15)

France T(cid:130)l(cid:130)com is the long-standing telecommuni-
cations operator in France. It was partially priv-
atised in 1997, with 25 % of its capital now being
held by members of
institutional
investors and its staff. France T(cid:130)l(cid:130)com operates
voice-telephony (fixed and mobile) services, public
networks, terminals (telephones and fax machines,
telephone exchanges), cable networks and telematic
and multimedia services.

the public,

It owns the ‘Viaccess' conditional access technology
used by TPS and its rival platform AB-Sat.

In the cable distribution sector, France T(cid:130)l(cid:130)com
Cable, a subsidiary of France T(cid:130)l(cid:130)com, operates a
network of more than 1,2 million possible connec-
tions and has achieved a market penetration (5) of
23 %. In terms of
the number of subscribers,
France T(cid:130)l(cid:130)com Cable has a market share of
around 29,5 %.

(16)

In 1996, the France T(cid:130)l(cid:130)com group generated a
turnover of ECU 23 049,13 million.

4. M6

(17) M(cid:130)tropole T(cid:130)l(cid:130)vision (M6) is a company governed
by French law which received a broadcasting
licence on 26 February 1987 to operate a national
terrestrial channel. Its main shareholders are CLT
and Suez Lyonnaise des Eaux. Its licence was
renewed in 1996 with effect from 1 March 1997.

industry,

(18) M6 is also active in various branches of the audio-
visual
including advertising production,
cinema and audiovisual production, the marketing
of rights to audiovisual programmes and films, the
operation of
record,
magazine and video production, and teleshopping.

special-interest

channels,

(19)

In 1996, M6 generated a turnover of ECU 315,93
million.

5. Suez Lyonnaise des Eaux

(20) As of October 1997, the capital of Suez Lyonnaise
des Eaux was divided between the following share-
holders: Electrafina (GBL) (10 %), Cr(cid:130)dit Agricole
(7,6 %), AXA-UAP (6,2 %), CDC (4,5 %), Saint-

(5) The ratio of actual subscribers to the number of possible

connections.

(21)

Suez Lyonnaise des Eaux is developing its activities
in the areas of water distribution, cleansing, energy,
public works, infrastructure concessions and finan-
cial services. It is also present in the communica-
tions sector, principally via M6, of which it holds
34,45 % of the capital, and via its subsidiary Lyon-
naise Communications, which operates a cable
network in France with more than 1,5 million
possible connections and has achieved a market
penetration of 18,8 %. In terms of the number of
a
subscribers, Lyonnaise Communications has
share of around 26 % of the French market.

(22)

In 1996, its consolidated pro forma turnover was
ECU 26 394,52 million (the merger having taken
place on 19 June 1997).

(23)

(24)

C. The relevant markets

1. Product markets

The notified operation chiefly affects the pay-TV
market, that being the market on which TPS oper-
ates. As producer of some of the special-interest
channels it distributes, TPS is also active on the
market in the acquisition of broadcasting rights
and the distribution and operation of
special-
interest channels.

includes

The market in technical services for pay-TV also
has to be taken into account since the object of
TPS
development, marketing,
purchase and sale of all conditional access systems
and the operation and marketing of subscriber
management systems.

the

1.1. The pay-TV market

(25) As may be seen from Commission Decision 94/
922/EC (6), and also from the Commission De-
cision of 7 October 1996 (Bertelsmann/CLT) (7) and
from the Commission Decison 1999/153/EC
(Bertelsmann/Kirch/Premiere) (8), pay-TV consti-
tutes a product market that is separate from free-
access television, whether the latter is financed
wholly or partly by advertising revenues. Whereas
in the case of free television there is a trade rela-
tionship between the broadcaster and the advert-
iser, in the case of pay-TV there is a trade relation-
ship between the broadcaster and the viewer as
subscriber. The conditions of competition are
accordingly different for the two types of television.

(6) OJ L 364, 31.12.1994, p. 1, at recitals 32 and 33; Case No
1V/M.779 (cid:190) Bertelsmann/CLT of 7 October 1996; Case No
IV/M.993 (cid:190) Bertelsmann/Kirch/Premiere of 27 May 1998.

(7) OJ C 364, 4.12.1996, p. 3.
(8) OJ L 53, 27.2.1999, p. 1.

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Whereas in the case of free TV the audience share
and the advertising rates are the key parameters, in
the case of pay-TV the key factors are the shaping
of programmes to meet the interests of the target
groups, with the emphasis on the first transmission
of feature films and sports coverage, and the level
of subscriptions charged. Other features of pay-TV
are the need for viewers to have a decryption
module (decoder),
is marketed
through a network of distributors or using a sales
team, and the need for a subscriber management
system and (in the case of the operator) for condi-
tional access technology.

the fact

that

it

in September 1998), although the channel can also
be received by satellite and cable. As in the case of
satellite and cable transmission, terrestrial pay-TV
offers programmes mainly based on feature films
and sport, is marketed via a distribution network,
uses a terminal associated with a decoding system
and requires a subscriber management system.

(26)

The relevant product market of pay-TV cannot be
subdivided into analog and digital pay-TV, as the
Commission has already pointed out (9). Digital
pay-TV is only a further development of analog
pay-TV. Although the two technologies currently
coexist on satellite and cable in France, analog
pay-TV is to be expected to be completely super-
seded by digital pay-TV in future. The case of
CanalSatellite Analogique is instructive here: some
of its subscribers having migrated to digital pay-TV,
CanalSatellite decided to withdraw its
analog
‘bouquet' in October 1998, a little more than two
and a half years after launching its digital bouquet.
In any event, whether it uses analog or digital tech-
nology, pay-TV displays the same features: need for
same method of
a conditional access
marketing,
choice of
programmes (10), etc.

subscriber management,

system,

as

in the case of

(29) As far as cable is concerned, subscriptions to
special-interest channels, whether analog or digital,
are,
satellite transmission,
marketed in the form of packages: a basic subscrip-
tion and a set of options. The cable operators
market most of the channels offered by the satellite
platforms and offer a mix of the channels broadcast
by CanalSatellite, TPS (11), AB-Sat and Canal+,
is
which makes their content similar
offered by the satellite operators. It should also be
pointed out that the satellite platforms each apply
the same pricing policy throughout France and do
not charge different rates according to whether or
not they are operating in a cabled area.

to what

(27)

Pay-TV services can be delivered in France via
terrestrial transmission, by satellite or by cable.

(30)

(28)

Traditionally, the pay-TV services of Canal+ have
been transmitted via terrestrial transmission. Today,
the terrestrial Canal+ service still has by far the
largest number of subscribers (around 3,5 million

(9) See footnote 8.
(10) A comparison of prices charged in 1996 shows that

the
subscription for Canal+ broadcast via analog terrestrial trans-
mission (FRF 175) was similar to that charged for CanalSatel-
lite Num(cid:130)rique (FRF 98 for the basic subscription plus FRF
55 for the cinema option plus FRF 30 for the music option).

little more than 22 % (number of

The penetration of cable is low in France: market
penetration in the pay-TV sector, excluding the
‘antenna service', which relays only the general-
interest channels that are broadcast unencrypted, is
a
actual
subscribers/number of possible connections) and
the overall level of penetration (number of cable
subscribers/number of households with television)
around 10 %. Furthermore, in cabled areas, where
consumers have a choice between cable and satel-
lite (cid:190) in urban and suburban areas (cid:190) satellite
television is generally subject
to a number of
constraints (rules governing apartment buildings,
municipal by-laws) relating to the installation of
satellite dishes which are favourable to cable. These
considerations do not, however, provide sufficient

(11) However,

the Num(cid:130)riC(cid:131)ble network controlled by Canal+

does not carry the TPS cinema channels.

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a

is

substitute

justification for treating cable and satellite as sep-
arate markets. The fact that the penetration of satel-
lite in cabled areas is low or very low tends, on the
contrary, to prove that, where cable pay-TV exists,
satellite pay-TV, with
it
consumers preferring the convenience of cable
connection to the formalities usually involved in
the installation of a satellite dish. It can therefore
be concluded that
the French pay-TV market
currently comprises the three methods of transmis-
sion: terrestrial, satellite and cable.

for

(31) According to data provided by the French Conseil
sup(cid:130)rieur de
three
satellite
l’audiovisuel,
and AB-Sat)
bouquets
accounted in June 1998 for 15 % of subscribers in
France, while 28 % were served by cable and 57 %
by Canal+ broadcast via the terrestrial network.

(CanalSatellite,

the
TPS

1.2. The market in technical services for pay-TV

(32)

(33)

The operation of pay-TV requires a special tech-
nical infrastructure for encrypting broadcasts and
enabling authorised viewers to decode them. To
that end, a terminal has to be installed in each
subscriber’s home. In the case of digital pay-TV,
the
for
demodulating the satellite or cable signal, decom-
pressing the digital
signal, demultiplexing the
different channels, unscrambling the encrypted
signal and managing conditional access, together
with a bank card interface.

terminal usually

combines

functions

data

system allowing

The pay-TV operator must have a conditional
transmission of
the
access
encrypted
on
information
containing
programmes subscribed to and on the subscribers
entitled to receive those programmes, together with
the television signals
themselves. The system
usually also comprises a smart card which is issued
the
to the subscriber and is able to decipher

authorisation data
terminal.

and transfer

them to the

1.3. The market in the acquisition of broadcasting
rights, in particular for films and sporting
events

(34)

attractive

is universally acknowledged that

films and
It
sporting events are the two most popular pay-TV
products. It is necessary to have the corresponding
rights in order to put together programmes that are
potential
sufficiently
subscribers to pay for receiving television services.
Films and sport are therefore pay-TV’s loss leaders.
There is no need for the purposes of this case to
determine whether separate markets exist for film
broadcasting rights and rights to broadcast sporting
events.

persuade

to

(35) As far as films are concerned, the rights acquired
fall into the following categories: unencrypted TV
broadcasting, pay-TV, pay-per-view, near video-on-
demand and video-on-demand (12). In accordance
with the sequence of film distribution in France,
rights to unencrypted terrestrial transmission may
be exploited at the earliest 36 months after a film’s
release for cinema showing, while pay-TV rights are
accessible after 12 months, with shorter periods
applying to co-productions. Pay-TV rights for satel-
lite or cable transmission can be divided into ‘first-
window' and ‘second-window' rights. This trend
was launched by the major Hollywood studios but
has not yet taken root among French producers/
distributors. It should also be noted that no distinc-
tion is made according to whether the rights are to
be exploited through analog or digital transmission.

(36)

Rights to sporting events are also broken down into
rights
for broadcasting in clear, pay-TV and
pay-per-view.

1.4. The market in the distribution and operation

of special-interest channels

(37)

Special-interest channels are essential for putting
together pay-TV services. Although certain French
or foreign general-interest channels are also distrib-
uted by cable or satellite, the fact remains that they
do not constitute a category of programmes that are
specific to pay-TV.

offers

(12) Pay-TV refers to the encrypted transmission, by whatever
means, of television programmes or channels which can be
accessed on payment of a subscription.
Pay-per-view
encrypted
programmes, for which a charge is made per viewing, at a
time scheduled by the operator. Near video-on-demand is a
pay-per-view service accessible on several channels (multi-
plex); video-on-demand offers
to a
programme,
for which a charge is made per viewing, at a
time chosen by the consumer.

the consumer access

individual

access

to

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Official Journal of the European Communities

L 90/11

(38)

(39)

(40)

(41)

This market is enjoying rapid growth owing to the
introduction of digital technology which, thanks to
compression, enables a much higher number of
channels and services to be distributed than analog
technology.

Initially limited to a few channels produced for
cable in France, this market now comprises more
than 140 French, European and non-European
special-interest channels transmitted by satellite
and cable.

(44)

2. Relevant geographic markets

TPS currently markets its services only in France
but may in future extend its coverage to other
French-speaking countries in Europe, as provided
for in the notified agreements. However, it is not
necessary for the purposes of this case to determine
whether the geographic market should be defined
as the French market or the French-speaking Euro-
pean market.

to the market

The same applies
in technical
services for pay-TV, which the Commission has
already recognised in Decision 94/922/EC and in
its
Bertelsmann/Kirch/
Premiere (13) as being closely linked to the supply
of pay-TV programmes.

regarding

decision

(42) As far as the market in the distribution of special-
interest channels is concerned, although foreign
channels are distributed in France, the fact remains
that their inclusion in the satellite bouquets and in
the range of programmes distributed via cable is
negotiated and organised at most at national level.

(43) As regards the geographic market for the acquisi-
tion of broadcasting rights, although rights can be
sourced from anywhere in the world and some
operators acquire rights for more than one territory
at a time, it has to be borne in mind that broad-
casting rights are still acquired mainly on a
national basis or, at the most, by language area (14).
Thus,
in Commission Decision 89/536/EEC the
Commission noted that film broadcasting rights are
usually granted for a given language version and
broadcasting area.
the
purposes of this case to determine whether the
market for the acquisition of broadcasting rights
should be defined as the French market or the
French-speaking European market.

is not necessary for

It

3. Structure of the markets

3.1. The pay-TV market

transmission, but

The longest-established competitor on the French
pay-TV market is Canal+. Launched in 1984, this
pay-TV service is accessible chiefly via analog
is also offered in a
terrestrial
jaune
digital multiplexed version (Canal+ bleu,
and vert) broadcast by satellite and is transmitted in
both analog and digital form on cable. Canal+
currently has a total of 4,3 million subscribers. Its
programming, as a premium channel, focuses on
exclusive first transmissions of feature films and
top-quality sporting events. Canal+ enjoys a strong
brand image in France and possesses highly devel-
oped know-how in the management of pay-TV
services thanks to its long experience in the field.

The Canal+ group is also active in cable distribu-
tion since it controls
the Num(cid:130)riC(cid:131)ble cable
network, which has a share of around 21 % of the
cable market in France.

In 1992 CanalSatellite, a 70 % controlled company
by Canal+, launched a bouquet of analog pay-TV
channels broadcast by satellite. A CanalSatellite
Num(cid:130)rique service was launched in 1996. By the
end of 1997, CanalSatellite Analogique still had
around 100 000 subscribers whereas CanalSatellite
Num(cid:130)rique had already recruited 650 000. Canal-
Satellite Analogique decided to cease operations in
October 1998. CanalSatellite Num(cid:130)rique had
900 000 subscribers by the end of June 1998 and
expected to reach the figure of one million
subscribers in the autumn of the same year.

In terms of numbers of subscribers, the Canal+
group, including the premium channel Canal+,
CanalSatellite
and the Num(cid:130)riC(cid:131)ble network,
accounted for approximately 70 % of the French
pay-TV market by 30 June 1998.

The Canal+ group is also active on several pay-TV
markets outside France: Spain, Italy, the Nordic
countries, French-speaking Belgium, Flanders, the
Netherlands, Poland and Africa. The group has
launched or is preparing to launch digital platforms
alongside the premium channels in most of these
countries. The group had a total of 10,3 million
subscribers in Europe by 30 June 1998 (15).

(45)

(46)

(47)

(48)

(13) See footnotes 6 and 8.
(14) OJ L 284, 3.10.1989, p. 36.

(15) Satellifax, 24 July 1998.

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Official Journal of the European Communities

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(49)

In April 1996, the AB group, whose main activity is
programme production and the distribution of tele-
vision rights,
launched another bouquet on the
French market composed of some 20 satellite pay-
TV channels produced by the group. As at 30 June
1998,
this bouquet had 100 000 subscribers. In
March 1997 AB-Sat concluded a Simulcrypt agree-
ment with CanalSatellite enabling subscribers to
the two bouquets
to receive both operators’
programmes on a single digital terminal and with a
single card. AB-Sat and CanalSatellite have also
signed an agreement whereby some of AB-Sat’s
channels, and in particular the sports channel, are
transmitted by CanalSatellite. An agreement was
also concluded in July 1998 with TPS for the
distribution of one of AB-Sat’s channels as part of
TPS’s basic bouquet and five more as an option.

has a licensing agreement with France T(cid:130)l(cid:130)com,
and it looks after its own subscriber management.

(53)

France T(cid:130)l(cid:130)com, as the designer and owner of the
Viaccess conditional access system (a digital version
of the Eurocrypt system), is active on this market,
where it competes with the Canal+ group, which
owns the Mediaguard conditional access system
and has developed the Mediasat digital terminal.

(54)

The Viaccess system is also used by AB-Sat, which
has concluded a licensing agreement with France
T(cid:130)l(cid:130)com, and by the cable operator Lyonnaise
Communications.

(50)

TPS, for its part, had 457 000 subscribers by 31
July 1998 and estimated that it would have 600 000
by the end of the year.

(51) On the pay-TV market, the largest cable operators,
launched by the
taking part in the ‘Plan-C(cid:131)ble'
French Government in 1982, are France T(cid:130)l(cid:130)com,
Lyonnaise C(cid:131)ble, both of which have stakes in TPS,
and Num(cid:130)riCable, which is controlled by Canal+.
As at 31 January 1998, France T(cid:130)l(cid:130)com had
442 000 subscribers (6,22 % of the pay-TV market),
Lyonnaise
439 212
subscribers (6,18 % of that market) and Num(cid:130)ri-
C(cid:131)ble 357 210 (5,1 %) (16). Those three operators
together hold around 80 % of the cable market.
The remaining 20 % is shared between a number
of smaller cable operators.

Communications

had

3.2. The market in technical services for pay-TV

(52)

The notified agreements allow TPS to develop and
market conditional access systems and subscriber
management systems. However, for its operations
TPS has for the time being opted for the Viaccess
conditional access system, in respect of which it

(16) Avica publication, January 1998. These figures include only
subscribers who have an individual contract with the cable
operator and exclude subscribers to the ‘antenna service'. The
in clear and does not
latter relays the channels broadcast
constitute a pay-TV service proper since there is no direct
relationship between the subscriber and the cable operator
(the price of
the service is billed along with the building
maintenance charges).

3.3. The market in the acquisition of broadcasting
rights, in particular for films and sporting
events

(55)

The TPS Agreement provides for the creation of
movie channels, a pay-per-view service and com-
panies to produce them (17). Three movie channels
and a children’s channel, which broadcasts almost
exclusively cartoon films, are currently produced by
TPS Cin(cid:130)ma, a wholly owned subsidiary of TPS.
Pay-per-view services (films and sporting events)
are produced by the company Multivision, which is
78 % controlled by TPS, alongside France T(cid:130)l(cid:130)com
and Suez Lyonnaise des Eaux.

(56)

Via its two subsidiaries which produce channels
and services, TPS is therefore active on the market
in the acquisition of television rights, particularly
for films and sporting events.

(57) As far as film rights are concerned, TPS has signed
agreements with five large American studios for the
acquisition of pay-TV and pay-per-view rights;
however, in three of these cases the rights acquired
are for ‘second window' pay-TV (after broadcasting
on Canal+). TPS also has pay-per-view rights to
the Roland-Garros tennis tournament, to the Euro-
pean Champions League football matches and to
some of the Coupe de France football champion-
ship matches.

(17) Traditionally, a company producing special-interest channels
and
rights,

acquires
manages and markets the channels it produces.

broadcasting

programmes

devises

2. 4. 1999

EN

Official Journal of the European Communities

L 90/13

(58)

(59)

Its main competitors in this field, and in particular
in the purchase of film rights, are Canal+ and the
special-interest channels in which Canal+ has a
stake, notably via the Multith(cid:130)matiques company.
The Canal+ group enjoys a particularly strong
position on this market. As a premium channel
that has built its reputation chiefly on first trans-
missions of quality feature films, Canal+ has
signed contracts with five of the seven major Holly-
wood studios and with Polygram in order to obtain
exclusive rights over the first transmission of their
films on pay-TV. Canal+ is said to hold rights
equivalent to around 87 % of Hollywood’s output,
expressed in terms of box-office receipts (18). It
should also be mentioned that the price paid by
Canal+, on the basis of its 4,3 million subscribers,
constitutes the floor price in negotiations between
distributors and purchasers of pay-TV rights.

The Canal+ group
the UGC
DA/Canal+ DA film catalogue, which comprises
some 4 800 films as well as fiction films, cartoon
films and documentaries.

owns

also

(60) As far as rights to sporting events are concerned,
the Canal+ group has exclusive encrypted trans-
mission and pay-per-view rights to the French foot-
ball championship and to football championships
in certain other European countries. It also has
exclusive encrypted transmission and pay-per-view
rights to Formula 1 racing. The exclusive rights to
other sporting events held by Canal+ are some-
times
shared with unencrypted
channels).

limited (rights

(61) Although the AB group operates mainly in the
programme production and rights distribution
sector and owns a catalogue comprising more than
30 000 hours of programmes (19), AB-Sat also uses
the broadcasting rights acquisition market in order
to purchase rights to fiction films and sporting
events.

(62)

The general-interest channels are also active in this
market, both for the purposes of acquiring rights to
sporting events for their broadcasts in clear and
with a view to acquiring rights to existing films or
to new films, in particular through co-production
in the case of French cinema films. The general-
interest channels are above all very active in

(18) Opinion 98-A-14 delivered on 31 August 1998 by the
Conseil de la concurrence concerning the takeover of Havas
by Compagnie G(cid:130)n(cid:130)rale des Eaux (cid:190) Bulletin officiel de la
concurrence, de la consommation et de la r(cid:130)pression des
fraudes of 7 October 1998.

(19) AB group presentation, September 1997.

commissioning audiovisual works (TV series, televi-
sion films, cartoon films and TV programmes) (20).

(63) Of a total of 163 new French films produced in
1997, 73 were co-produced by the general-interest
channels; Canal+ purchased in advance
the
pay-TV rights to 134 of those films (21) and TPS the
rights to four (22).

(64) As producers of

the
members of TPS are also present on this market.

special-interest channels,

(65)

(66)

(67)

(68)

3.4. The market in the distribution and operation

of special-interest channels

The market in the distribution and operation of
special-interest channels
is enjoying extremely
rapid growth, particularly with the appearance of
digital platforms.

Stakes in the long-standing channels, referred to as
the ‘cable channels', were held by the leading
pay-TV operators: Canal+ and the three largest
cable operators, namely Lyonnaise des Eaux, now
Suez Lyonnaise des Eaux, G(cid:130)n(cid:130)rale des Eaux and,
to a lesser extent, France T(cid:130)l(cid:130)com. Most of the
in
unencrypted TV operators also had stakes
special-interest channels, although their holdings
were more modest.

Since the emergence of satellite platforms,
the
companies involved in pay-TV all have holdings in
special-interest channels operating on the market.

The stakes held in special-interest channels are
fairly evenly distributed among the main players on
this market. Canal+ is a major player, however,
since it has holdings in the longest-standing chan-
nels which have achieved the best penetration of
the cable market and have the largest number of
subscribers (23).

(20) French legislation requires the general-interest channels to
invest 15 % of their turnover in commissioning audiovisual
works filmed in French and to devote 3 % of their turnover
to developing the production of French-speaking and Euro-
pean cinema films.

(21) Canal+ is under the obligation to invest 9 % of its turnover

in the acquisition of cinema films made in French.

(22) CNC Info No 268, April 1998.
(23) Report by the Conseil sup(cid:130)rieur de l’audiovisuel entitled ‘La

t(cid:130)l(cid:130)vision a p(cid:130)age par satellite', August 1997.

L 90/14

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Official Journal of the European Communities

2. 4. 1999

(69) Certain foreign companies are also active on this
market: American channels such as CNN, ABC
and NBC and recently Arabic-speaking channels
distributed via TPS and certain cable networks. The
(Disney, Fox, Paramount,
Hollywood studios
Universal) are also suppliers of
special-interest
channels, the distribution of which is usually nego-
tiated and sometimes imposed as part of a package
with film rights.

D. The operation: the notified agreements

(70)

Four agreements have been notified. The basic
principles governing the operation of TPS are set
out in the Agreement of 11 and 18 April 1996,
subsequently expressed in more concrete and struc-
tured terms in the Associates’ Pact, signed on 19
June 1996, and in the TPS and TPS Gestion
(‘TPSG') Articles of Association of the same date.

(71)

These agreements and the contractual clauses
referred to below are valid for 10 years.

2. Aims of the TPS agreements

a

and

range

develop

distribute

(76) Under the notified agreements, TPS’s object is to
devise,
of
programmes and services aimed at French-speaking
television viewers in Europe, for which they are
required to pay. This service is to be broadcast in
digital mode by satellite and to be received directly
by satellite dishes and cable networks. The com-
pany’s object covers all operations which might be
linked to this activity, including:

(cid:190) the purchase, sale, marketing, advertising and
television programmes and

broadcasting of
services;

(cid:190) the purchase, hiring and supply of technical
services necessary for routing and access to the
digital service,

(cid:190) the development, marketing, purchase and sale
of all conditional access systems, and the opera-
tion and marketing of subscriber management
systems,

(cid:190) the negotiation of agreements concerning the
production, co-production and creation of tele-
vision programmes and services intended for
TPS.

1. Administration of TPS

3. Contractual clauses

TPS’s management
second
company, TPSG, which has exactly the same share-
holder structure as TPS.

is entrusted to a

TPSG is governed by a board of directors with 12
members, three of whom are appointed by TF1,
three by France T(cid:130)l(cid:130)vision Entreprises and six by
M6 Num(cid:130)rique and Lyonnaise Satellite. The board
of directors has to give its prior approval to any
decision concerning changes in the activities of
TPS and TPSG, substantial modifications to TPS’s
development plan and operating forecast, the adop-
tion of annual operating and investment budgets,
the general policy on the composition of the digital
services offered, pricing policy, etc. The board of
directors decides by simple majority on any matters
relating to TPS’s commercial policy, and the
chairman does not have a casting vote.

(77)

3.1. Non-competition

to
clause
Article 11 of the Agreement of 11 and 18
April 1996 and Article 5.3 of the Associates’
Pact of 19 June 1996:

(amendments

‘Exclusivity')

to TPS,

the parties undertake not

Except for ongoing cases as at the date of conclu-
sion of the agreements, and except for the sale of
new programmes and services that are not under
contract
to
become in any way involved, even indirectly, and
for as long as they remain TPS shareholders, in
companies engaged in or whose object
is the
distribution and marketing of a range of television
programmes and services for payment which are
broadcast in digital mode by satellite to French-
speaking homes in Europe.

It has to be concluded from these provisions that
the shareholders in TPS do not exercise joint
control over the company’s commercial policy.

3.2. Clause

concerning TPS’s programmes and
services (Article 6 of the Agreement of 11 and
18 April 1996:
‘Digital programmes and
services')

In the event of sale of shares in TPS or in TPSG, a
pre-emption procedure is set in motion in order to
give preferential treatment to the initial partners.

(78)

3.2.1. In order to supply TPS with the programmes
it requires, the parties have agreed to give TPS first
programmes
refusal

respect

the

in

of

(72)

(73)

(74)

(75)

2. 4. 1999

EN

Official Journal of the European Communities

L 90/15

and in respect of

or services which they themselves operate or over
which they have effective control within the
producing company,
the
programmes and services which they produce. TPS
is also entitled to final refusal or acceptance on the
best terms proposed by competitors with regard to
any programmes or services which its shareholders
offer to third parties. If it accepts them, whether on
exclusive terms or not, TPS will apply financial and
contractual terms which are at least equivalent to
those which the programmes and services could
receive elsewhere.

(79) As regards the acquisition of these channels and
services, TPS will freely decide, on the basis of its
own assessment, whether or not to agree to in-
tegrate them into its digital bouquet, either ex-
clusively or non-exclusively; however, the parties
underline their objective of having programmes
and services in TPS’s digital bouquet on an ex-
clusive basis.

(80)

(81)

Since the general-interest channels are dealt with
separately and in detail below,
these provisions
concern only the special-interest channels and tele-
vision services controlled by the members of TPS.

3.2.2. A provision relating specifically to the
general-interest channels (TF1, France 2, France 3
and M6) lays down that those channels are to be
exclusively transmitted by TPS, which will meet
the technical costs of transporting and broadcasting
the programmes but will not pay any remuneration
for them. The possibility of entrusting exclusive
transmission of the Arte and La Cinquieme chan-
nels to TPS was also originally provided for in the
agreements, but
the relevant clauses have been
deleted by the parties.

(82)

If, as a result of an external legislative or regulatory
constraint, one of
the general-interest channels
were no longer exclusively transmitted by TPS, that
channel would have to bear the satellite and trans-
port costs.

coordinating these programmes and services with
those already on cable, has been deleted by the
parties at the Commission’s request. An amend-
ment to the Agreement of 11 and 18 April 1996
was notified to the Commission on 27 July 1998.

E. Observations by third parties

(84) A number of

interested third parties have
submitted observations in response to the notice
published pursuant to Article 19(3) of Regulation
No 17. Most comments
relate to the clause
concerning cable: these stressed that its application
would weaken the independent channels. Given
the small size of the cable sector in France and the
position of the two cable operators who are share-
holders in TPS and together hold 56 % of the
cable market, restricting the access of independent
channels to their network would seriously threaten
their viability.

(85) As is indicated above, the parties to the TPS agree-
ments have deleted the clause concerning cable: on
27 July 1998 they notified the Commission of an
amendment deleting the clause with effect from 2
April 1998.

(86) Certain third parties have also commented on the
preferential
right which the shareholders have
granted to TPS in respect of the programmes and
services they operate. Since the term ‘programmes'
can be interpreted extensively, the clause in ques-
tion would have the practical effect of granting TPS
a preferential right not only in respect of
the
national channels (which are the subject of a
specific provision) and the special-interest channels
and interactive services produced and operated by
the parties, but also in respect of all the broad-
casting rights held by the TPS shareholders. The
preferential right over broadcasting rights would
have a clear crowding-out effect on producers of
linked to
special-interest channels who are not
TPS.

3.3. Clause concerning cable (Article 5 of
Agreement of 11 and 18 April 1996:
nation with the cable service')

the
‘Coordi-

(87)

(83)

The clause whereby the cable operators who hold
in TPS undertook to give priority to
shares
including the programmes and services supplied by
TPS on their networks, in particular its pay-per-
view services, and to consult with each other on

The Commission considers that the clause in ques-
tion should be construed strictly and should be
applied solely to the channels and television
services produced and operated by TPS’s share-
holders. The broadcasting rights held by the
members of TPS are therefore not covered by any
preferential
inter-
pretation has been confirmed by the parties to the
agreements by letter of 9 October 1998.

right granted to TPS. This

L 90/16

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Official Journal of the European Communities

2. 4. 1999

those channels

(88) As to the provision concerning exclusive transmis-
sion of the general-interest channels by TPS, inter-
ested third parties have stressed that the presence
of
in the bouquet offered to
subscribers confers a substantial competitive advan-
tage. According to a survey carried out in January
1998 by Audicabsat-M(cid:130)diam(cid:130)trie,
the general-
interest channels traditionally attract by far the
largest audience shares in France, namely 90 % of
viewers, all methods of transmission combined, and
75,1 % of cable viewers. Moreover, the often poor
reception of
the terrestrial channels in a large
number of homes (estimated by some sources at
over 8 million) makes the possibility of receiving
them in digital mode particularly attractive to the
public.
terrestrial
broadcasts is poor, there was therefore said to be a
serious risk that competition might be eliminated
in favour of TPS.

In areas where reception of

(89)

(90)

Lastly, some third parties have put forward the view
that the composition of the TPS pool could give
rise to competition problems. It should be pointed
out in this connection that the project was only
able to go ahead thanks to the presence of all the
shareholders in TPS, who brought not only the
financial capacity necessary for the investments
needed to launch TPS and for covering the
resulting losses, but also a great deal of experience
and know-how essential for gaining a satisfactory
market share.

The Commission has examined these observations,
which confirmed comments
it had previously
received. The concerns voiced had already been
discussed with the parties and had been taken into
account by the Commission in its assessment of
the notified agreements. Therefore, with the excep-
tion of the clause concerning cable, which has been
deleted by the parties, the observations received
have not prompted the Commission to make any
substantial change to its position on the notified
agreements as announced in the abovementioned
notice and presented below.

II. LEGAL ASSESSMENT

A. Application of Article 85(1) to the creation

of TPS

(91)

Through the TPS agreements, the parties have set
up a company that is not under the joint control of

its shareholders. An agreement to set up a company
does not, however, in itself constitute a restriction
of competition within the meaning of Article 85(1).

(92) Having received comments

from third parties
voicing concern at the risks of collusive behaviour
between the members of TPS, and particularly the
broadcasters with shares in it,
the Commission
nevertheless examined the impact of the creation
of TPS on the relevant product markets, and
concluded that there was no risk of coordination
between the parties to the TPS agreements.

(93) On the pay-TV market, the broadcasters who are
members of TPS are not present outside TPS. They
operate mainly on the unencrypted television
market, where they have continued to compete
fiercely since the creation of TPS. Neither are the
two cable operators who are parties to the TPS
agreements to be regarded as genuine competitors
on the pay-TV market
since they operate in
different geographic areas, and the overlap between
cable and satellite pay-TV is very small in France.

(94) On the market in technical services for pay-TV,
for the time being in
the other TPS share-

France T(cid:130)l(cid:130)com is not
competition with any of
holders.

(95) On the market in the acquisition of broadcasting
rights, in particular for films and sporting events,
where the unencrypted broadcasters with shares in
TPS are extremely active in purchasing unen-
crypted broadcasting rights there is little risk of
coordination as long as TV broadcasting in clear
continues to account for the bulk of their activities
and the resulting competition between them is
maintained (24). The members of TPS also acquire
pay-TV rights as producers of special-interest chan-
nels. However, none of them produce or directly
control movie channels; as far as sports channels
are concerned, only TF1 holds shares in the Euro-
sport channel, alongside Canal+.

regards

(24) Third parties voiced their concern to the Commission at the
possibility of collusion between the broadcasters with shares
in TPS as
the acquisition of broadcasting rights,
quoting the example of TCM. The company TCM was set up
by some of the broadcasters with shares in TPS (TF1, M6 and
CLT, which subsequently withdrew) when an overall agree-
ment was concluded with Paramount. That agreement, which
was vitally important to the creation of movie channels and
therefore to the launch of TPS, provided for the purchase not
only of pay-TV and pay-per-view rights, but also of unen-
crypted broadcasting rights, which were acquired by TCM
with funds provided by its shareholders. The Commission
sent the parties to the agreement setting up TCM, which was
the subject of a separate investigation, a comfort letter stating
that the agreement did not restrict competition provided that
TCM’s activities were confined to the conclusion of agree-
it took that view
ments essential to the operation of TPS;
particularly because the parties undertook to place all
the
unencrypted broadcasting rights on the market and to resell
them at market prices and without discrimination.

2. 4. 1999

EN

Official Journal of the European Communities

L 90/17

(96) On the market

is,

there

channels,

admittedly,

in the distribution of special-
interest
some
competition between TPS shareholders and TPS
itself in so far as they all have stakes of varying
sizes in special-interest channels. As far as satellite
transmission is concerned, however, the risk that
they might coordinate their behaviour is now ruled
out by the clause granting TPS a priority right to its
shareholders’ special-interest channels. As regards
the distribution of special-interest channels via
cable, coordination between TPS shareholders,
particularly on price, is hardly conceivable given
the differences between the commercial value of
the different channels: some channels are much
longer established and more popular and con-
sequently have a higher commercial value than
more recently created and less well known chan-
nels. Price differentials range on average between
FRF 6 and FRF 2 per month and per subscriber
depending on the
concerned, with
subscriptions to movie channels costing up to FRF
20.

channel

B. Application of Article 85(1) to the contrac-

tual clauses

(97)

The following clauses are examined below:

(1) non-competition clause (Article 11 of

the
Agreement of 11 and 18 April 1996 and Article
5.3 of the Associates’ Pact, as amended by the
codicils dated 17 September 1998);

(2) clause

granting TPS

over
programmes and services produced and distrib-
uted by its shareholders (Article 6 of the Agree-
ment of 11 and 18 April 1996);

refusal

first

(3) clause in Article 6 of the Agreement of 11 and
18 April 1996 concerning the exclusive trans-
mission of
in
TPS’s bouquet.

the general-interest channels

1. The non-competition clause, the scope of
which was spelt out by the two amend-
ments dated 17 September 1998, may be
regarded as a restriction ancillary to the
creation of TPS for the period deemed
necessary to start up the company.

(98)

TPS was chosen by its shareholders as the vehicle
for penetrating the French pay-TV market. When
TPS was launched, major doubts were raised as to
its chances of success. The heavy investments
required, the difficulty of establishing itself on a
market dominated by an experienced operator

possessing a strong subscriber base, the difficulties
of gaining access to quality programmes, and major
uncertainty surrounding consumer response to the
provision of a wider range of pay-TV services made
these circum-
TPS a high-risk venture. Under
stances, it is logical for the parties to concentrate all
their efforts on the project during the launch phase
in order to enable this new operator to emerge on
the pay-TV market.

(99)

The non-competition clause can therefore be
regarded as ancillary to the creation of TPS during
the platform’s crucial launch phase and can there-
fore be deemed pro-competitive in that it con-
tributes to the creation of a new entrant on the
French pay-TV market during that period. On the
basis of the data supplied by TPS on the amount of
the investments necessary for launching the plat-
form, forecasts regarding accumulated losses, the
time and the number of subscribers needed to
reach break-even point and the rate of cancellation
of subscriptions, and the company’s performance
over the first 18 months, the length of the launch
phase can be estimated at
three years. Con-
sequently, the clause does not fall within the scope
of Article 85(1) during the first three years of its
application.

(Article 6 of

2. The clause concerning programmes and
services
the Agreement)
requires the parties to give TPS first refusal
in respect of all the special-interest chan-
nels and television services they operate or
over which they have effective control
within the producing company. They also
undertake to give TPS final refusal or
acceptance on the best market conditions
in respect of any programmes or services
which they offer to third parties, with TPS
having the option of carrying those chan-
nels and services on an exclusive or non-
exclusive basis.

(100) This provision comprises four different obligations:
a right of first refusal for TPS, which binds the
parent companies to TPS; a right of final refusal for
TPS, which also binds the shareholders to the
company; the obligation on TPS to grant its share-
holders the best market conditions should they
accept a channel or a television service; and the
right for TPS to distribute a channel or a service on
an exclusive basis, a provision which binds the
parties.

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Official Journal of the European Communities

2. 4. 1999

(101) The obligation on the members to give TPS first
refusal over their special-interest channels might
possibly be regarded as ancillary to the launch of
the platform; this obligation, which is imposed for
ten years, nevertheless results in a
a period of
limitation of the supply of special-interest channels
and television services. In this respect, the clause in
question falls within the scope of Article 85(1).

3. The provision appearing in Article 6 of the
Agreement concerning the exclusive trans-
mission of the general-interest channels
(TF1, France 2, France 3 and M6) by TPS
calls for special examination.

the

general-interest

(102) This provision grants TPS the exclusive right to
(also
broadcast
referred to as terrestrial channels)
in encrypted
form and digital mode by satellite, those channels
also being retransmitted by the cable network, on
which they are offered as part of
the ‘antenna
service'.

channels

(103) The general-interest channels traditionally attract
the largest audience shares in France, namely 90 %
of viewers, if all methods of transmission are aggre-
gated, and 75,1 % of cable viewers.

via

(104) There is also potential demand for the general-
interest channels broadcast in digital mode, which
could largely be accounted for by a peculiarity
concerning the reception of terrestrial broadcasts in
terrestrial
France. Although broadcasting
frequencies is by far the most common method of
transmission, reception of the programmes is occa-
sionally poor or even impossible in some areas of
France. According to a survey conducted by M(cid:130)dia-
m(cid:130)trie over the period November to December
1997 (25), 9 254 000 of the 22 330 000 homes with a
television set were located in areas where reception
of
the general-interest channels is poor. These
figures are only indicative, however, because in
addition to the four general-interest channels
broadcast exclusively on TPS they also include Arte
and La Cinqui(cid:138)me, for which the initialisation rate
is 80,6 % of households, and the terrestrial Canal+
service, which approximately [ . . . ] (*) households
axe thought to receive in poor conditions.

(105) The attractiveness of the general-interest channels
as part of TPS’s bouquet was estimated in surveys
carried out on behalf of the company:
[ . . . ] of
they had decided to
stated that
interviewees

(25) M(cid:130)diam(cid:130)trie, bi-monthly initialisation survey, November of

December 1997.

(*) Parts of this text have been edited to ensure that confidential
those parts are enclosed in

information is not disclosed;
square brackets.

subscribe because of the presence of the general-
interest channels.

(106) Consequently, although they do not constitute a
separate programme category or a type of content
that is essential for pay-TV, since the two other
digital bouquets have been launched (cid:190) with great
success in the case of CanalSatellite (cid:190) without
the general-
offering them as part of
interest channels are undeniably important and
attractive to viewers, to the sole benefit of TPS.

the deal,

(107) The exclusive right to broadcast the four channels
concerned for
the agreements,
the duration of
namely 10 years, albeit limited to encrypted satel-
lite transmission in digital mode, does constitute a
restriction of competition since it denies TPS’s
competitors access to attractive programmes.

(108)

It therefore has to be concluded that Article 85(1)
does apply to Article 6 of the Agreement of 11 and
18 April 1996.

(109) The provision concerning possible exclusive broad-
casting of the Arte and La Cinqui(cid:138)me channels on
TPS has not been applied since TPS has concluded
a non-exclusive agreement with those channels.
The parties furthermore deleted the provision in
question by an amendment dated 17 September
1998.

C. Effect on trade between Member States

first

in France, but

(110) The TPS agreements provide that the platform is
aimed at serving all French-speaking homes in
Europe:
subsequently in
Belgium and Luxembourg as well. The range of
services offered also includes a number of channels
originating in other Member States. The TPS agree-
ments will therefore have an appreciable effect on
trade between Member States on the pay-TV
market.

(111) The market in the acquisition of television rights
will also be affected by the creation of TPS insofar
as the company, as a producer of special-interest
channels, has to source programmes from Euro-
pean rightholders.

D. Application of Article 85(3)

(112) As demonstrated above, the provisions concerning
the
and services
programmes
members of TPS and the exclusive transmission of
the general-interest channels on TPS are caught by
Article 85(1) of the EC Treaty.

controlled by

2. 4. 1999

EN

Official Journal of the European Communities

L 90/19

(113)

It is therefore necessary to examine whether the
provisions fulfil the conditions for the application
of Article 85(3).

IMPROVING THE PRODUCTION AND DISTRIBU-
TION OF GOODS, AND BENEFIT FOR CONSUMERS

1. Improving the range of services on offer
and increasing distribution and production

(114) By facilitating the successful launch of a new plat-
form on the pay-TV market,
the provisions
concerning TPS’s first refusal over the special-
interest channels and television services produced
or controlled by its members and its exclusive right
to transmit the general-interest channels enable a
new operator to emerge and increase the range of
pay-TV services available to French viewers.

its

(115) Furthermore, creation of a new platform automat-
ically leads to the development of new special-
and new services: TPS has
interest channels
produced four channels,
shareholders have
created another
four, and contracts have been
concluded with foreign channels, and in particular
Arabic-speaking channels, for broadcasting them
on the platform. Both as regards the production of
new channels, resulting in the purchase of rights
and the making of programmes, and in broad-
casting terms, the creation of TPS clearly has a
positive impact on increasing the production and
distribution of goods.

(116)

In general terms, the introduction of competition
on the pay-TV market has the effect of stimulating
operators, who endeavour to develop and further
improve their range of programmes and services.

(121)

(117) The increase in the number of special-interest
channels also leads to an increase in the content
available for cable distribution, since the channels
broadcast as part of satellite packages are usually
included in the range available on cable networks.
Cable distribution is therefore also improved.

2. Benefits for consumers

(118) By allowing a new operator to emerge, the above-
mentioned two provisions lead to an increase in the
range of services on offer and to the development
of new services based on the use of a new tech-
nology, something which cannot but be beneficial
to television viewers.

the

plus

the movie

(119) Neither can it be disputed that the extremely keen
competition that developed as soon as TPS was
created between that platform and CanalSatellite/
Canal+ has also benefited consumers. The first
that competition was special
tangible result of
offers and advantageous financial conditions for
subscribers:
subscription to CanalSatellite
Num(cid:130)rique fell from FRF 153 for the basic service
plus
the music
channels
programmes in 1996 to FRF 130 in early 1997, as
part of a special offer valid for the first year’s
subscription for the basic service plus four movie
channels plus Disney Channel, which was equiva-
lent to the introductory subscription charge for the
full TPS service during the same period; another
result was a subscription to CanalSatellite’s basic
service for FRF 50 instead of FRF 98 per month for
all Canal+ subscribers in the autumn of 1997.
free
offer
TPS’s
subscription) also prompted other promotions by
CanalSatellite (such as a free satellite dish, also
offered by TPS).

(four months’

introductory

(120) TPS’s market entry and the resulting competition
has therefore had a beneficial effect on the prices
and terms offered to final consumers.

3. Indispensable nature of the restrictions

(a) Clause concerning TPS’s channels and televi-

sion services

In order to secure a minimum content, and in
particular a minimum number of special-interest
channels, so that it could put together and market
its bouquet, TPS had to have recourse to the chan-
nels and services produced or controlled by its
shareholders. Channels such as LCI, S(cid:130)rie Club,
Teva and Festival were thus offered by the different
TPS shareholders for inclusion in the bouquet.

(122) Without preferential access to those channels, TPS
would have had to produce a large number of
channels itself, which would have greatly increased
the already extremely high costs of launching the
platform, or else it would have had to look to other
the special-interest channels
channels. However,
transmitted by CanalSatellite, which are among the
best established on the French market, are covered
by exclusivity terms and are therefore unavailable,
at least for some time; furthermore, while it was
channels
theoretically
produced by AB-Sat and wholly owned by it, that
would have made no sense for two platforms being
launched on the market at the same time, which

transmit

possible

to

L 90/20

EN

Official Journal of the European Communities

2. 4. 1999

needed to build a brand image and therefore to
differentiate the range of channels they offered. It
is therefore particularly important for TPS, as a new
market entrant facing competition from a well-
established first operator possessing attractive and
plentiful programme content,
to have priority
access to its members’ special-interest channels
during the launch period so that it can create an
identity for itself and ensure continuity in the
services it offers during that period. In estimating
the length of time during which TPS should be
allowed to have such priority access, the Commis-
sion has taken into account the data and forecasts
provided by the parties (cid:190) such as the amount of
investment necessary for launching TPS, forecasts
regarding accumulated losses,
the time and the
number of subscribers needed to reach break-even
point and the rate of cancellation of subscriptions
(cid:190) and the company’s performance over the first 18
months of operations. This information, assessed in
the light of current market conditions and the rela-
tive strengths of TPS, on the one hand, and of
Canal+ and CanalSatellite, on the other, has led
the
the Commission to take
minimum period during which the priority access
under consideration is to be deemed essential to
TPS is three years.

view that

the

(b) Provision concerning exclusive transmission of

the four general-interest channels

(123) As a new entrant facing an operator which had, at
the time TPS was launched, 4,2 million subscribers
to Canal+ and 350 000 subscribers to CanalSatel-
lite Analogique and had launched CanalSatellite
Num(cid:130)rique in February 1996, TPS suffers from a
considerable handicap in penetrating the market.

(124) When acquiring pay-per-view rights to films and
sporting events, TPS also has to contend with the
strong position of Canal+.

(125)

In dealing with the American film makers, TPS is
in a much weaker position than Canal+, which
has been their sole partner for 12 years in France.
TPS has succeeded in concluding an overall agree-
ment with two studios and in negotiating the
acquisition of TV rights for its movie channels,
films that have
mainly for second showings of

already been broadcast on Canal+. The situation is
even more one-sided in terms of the value of films
(based on box-office figures
since
Canal+ holds rights representing 85 % of Holly-
wood’s output, as compared with 15 % for TPS.

in France),

(126)

It should also be stressed that the cost is very high
for new entrants, since the price of pay-TV rights is
determined by the number of subscribers, and
Canal+’s current customer base of 4,3 million
subscribers is taken into account by the distributors
of film rights when determining the reference price
in France.

(127) AB-Sat has, for its part, as a producer and distrib-
utor of rights, a catalogue of over 30 000 hours of
programmes and has concluded partnership agree-
ments with certain American studios. It should be
noted here that AB-Sat has chosen not to launch a
premium platform that would have competed
head-on with CanalSatellite, based on exclusive
first showings of
films and top-quality sporting
events, but has instead opted for a complementary
range of services.

(128) As regards sporting events and in particular football
(cid:190) an extremely popular sport in France according
to a study by Eurostat (cid:190) TPS has rights to broad-
cast 132 football matches per year, whereas Canal-
Satellite has the rights to the 242 matches played
during the French football championship (26).

(129)

In order to put together an attractive choice which
differs from that of its competitors and to circum-
vent the difficulty of acquiring rights to films and
sporting events, TPS has relied on the exclusive
presence of the general-interest channels in order
to offer a wide range of programmes.

(130) The exclusive transmission of the general-interest
channels is the factor which differentiates TPS’s
package from the others. Given the reception prob-
lems with terrestrial broadcasts in certain areas of
France, the inclusion of those channels gives TPS
considerable consumer appeal in those areas.

(131) Without the general-interest channels, TPS would
have no chance of successfully penetrating the
French pay-TV market and standing as a genuine
alternative to Canal+/CanalSatellite, particularly in
view of the fact that the range of films offered by
TPS comprises fewer exclusive first showings than
Canal+ and that CanalSatellite broadcasts exclu-
the longest-established and best-
sively most of
known special-interest channels in France, there-
fore those which are capable of recruiting most
subscribers. It should be mentioned in this connec-
tion that CanalSatellite also used to, and continues
to, broadcast channels some of whose shareholders
also hold stakes in TPS (LCI, Eurosport and Paris
Premi(cid:138)re, which is not broadcast on TPS) (27).

(26) Opinion 98-A-14 delivered on 31 August 1998 by the
Conseil de la concurrence concerning the takeover of Havas
by Compagnie G(cid:130)n(cid:130)rale des Eaux.

(27) Paris Premi(cid:138)re, whose main shareholder is Suez Lyonnaise

des Eaux, is broadcast exclusively on CanalSatellite.

2. 4. 1999

EN

Official Journal of the European Communities

L 90/21

(132)

It should therefore be concluded that the exclusive
transmission of the general-interest channels, by
making the TPS package attractive to consumers
and differentiating it from other services, is indis-
pensable to its penetration of the French pay-TV
market.

the

service.

thereby meeting the expectations of

(133) Nevertheless, the indispensable nature of the exclu-
sivity will naturally diminish over time, as TPS
recruits subscribers and gains experience in the
to improve its
pay-TV field that will enable it
its
service,
loyalty and raising
viewers and securing their
awareness
promising
of
performance of TPS over its first 18 months of
operation,
forecasts
(457 000 subscribers in July 1998 as against an
initial forecast of [ . . . ]), confirm both the effective-
ness of the exclusive presence of the four general-
interest channels, as a differentiating factor and a
loss leader, and TPS’s ability to penetrate the
market earlier than expected, admittedly in the face
of competitors, Canal+ and CanalSatellite,
the
second of which has also achieved results beyond
its initial forecasts.

in excess of

its original

The

(134) The duration of the exclusive right to broadcast the
general-interest channels, which was to run for 10
years according to the Agreement, was deemed
excessive by the Commission, as TPS had to estab-
lish itself on the market before the end of that
period. It is furthermore extremely important, if
this new platform is quickly to gain a market share
and act as an effective competitor, for it to be able
to build up a subscriber base as quickly as possible,
thanks in particular to the distinguishing feature
conferred by the presence of
the four general-
interest channels. Although it is difficult to forecast
precisely how the market and the companies oper-
ating on it will develop (cid:190) as is shown by the fact
that the performance of CanalSatellite and TPS is
currently outstripping forecasts (cid:190) the Commission
has used a set of financial and commercial data in
order to estimate how long TPS can reasonably
enjoy an exclusive right to transmit the general-
interest channels. In doing so it has taken account,
inter alia, of data on the investments necessary for
launching TPS and forecasts regarding accumulated
losses,
the time and the number of subscribers
needed to reach break-even point and the rate of

cancellation of subscriptions to that platform. This
information was assessed in the light of current
market conditions and the relative strengths of
TPS, on the one hand, and of Canal+ and Canal-
Satellite, on the other. The Commission has come
to the conclusion that the minimum period during
which the exclusive right to broadcast the four
general-interest channels is considered essential to
TPS is three years.

4. No elimination of competition in respect
of a substantial part of the products in
question

(135) Far from eliminating competition, the TPS agree-
ments are pro-competitive. Development of
the
pay-TV market has been strongly stimulated,
emergence of keen
particularly
through the
competition between CanalSatellite
and TPS,
competition which would not have developed
between CanalSatellite and AB-Sat: as mentioned
earlier, given its programming policy AB-Sat is not
in head-on competition with Canal+ and Canal-
Satellite.

(136) The results recorded on the pay-TV market demon-
strate that competition is far from being elim-
inated: Canal+ succeeded in recruiting 100 000
more subscribers in 1997, despite being considered
by some observers to have reached its ceiling. For
its part, CanalSatellite has completely outstripped
its own forecasts: 900 000 subscribers as at 30 June
1998 although it expected to reach that target only
by [ . . . ]. As at 31 May 1998, the total number of
subscribers to Canal+, CanalSatellite Analogique
and CanalSatellite Num(cid:130)rique and to the Num(cid:130)ri-
C(cid:131)ble cable network accounted for around 70 % of
all pay-TV subscribers in France.

(137) The number of cable subscribers is also continuing
to increase: 358 456 subscribers to Num(cid:130)riC(cid:131)ble in
July 1998 (as compared with 235 680 in May 1997);
504 162 subscribers to France T(cid:130)l(cid:130)com C(cid:131)ble (as
and 416 665
against 258 310 in May 1997);
subscribers to Lyonnaise C(cid:131)ble (as against 300 156
in May 1997 (28)). Clearly, development of satellite
TV has had an extremely favourable knock-on
effect on cable TV. The impact of
large-scale
advertising campaigns for satellite TV raises public
awareness of the special-interest channels that are
also available on cable.

(138) There are consequently no grounds for taking the
view that
the creation of TPS could eliminate
competition on the pay-TV market or on the
markets for the purchase of TV rights or the
distribution
channels;
competition has, on the contrary, been strength-
ened on these markets by the entry of a new player.

special-interest

of

(28) Ecran Total magazine Nos 176 and 232.

L 90/22

EN

Official Journal of the European Communities

2. 4. 1999

E. Duration of the exemption

Article 3

(139)

(140)

In accordance with Article 8 of Regulation No 17,
a decision in application of Article 85(3) of the
Treaty must be issued for a specified period.
Pursuant to Article 6 of Regulation No 17, the date
from which such a decision takes effect may not be
earlier than the date of notification.

In line with those provisions, as regards the clause
concerning the special-interest channels and televi-
sion services set out in Article 6 of the Agreement
of 11 and 18 April 1996 and to the provision
concerning the exclusive transmission of the four
general-interest channels on TPS, also set out in
Article 6 of the Agreement of 11 and 18 April
1996, this Decision should take effect from the
date of notification and for a launch period which
is estimated by the Commission, on the basis of the
data referred to in recitals 121 to 134, at three years.
Since TPS began marketing its services in mid-
December 1996, the exemption is granted until 15
December 1999,

HAS ADOPTED THIS DECISION:

Article 1

On the basis of the facts in its possession, the Commis-
sion has no grounds for action pursuant to Article 85(1) of
the Treaty in respect of the creation of TPS by TF1,
France T(cid:130)l(cid:130)vision Entreprises, M6 and Suez Lyonnaise
des Eaux.

Article 2

The Commission has no grounds for action pursuant to
Article 85(1) of the EC Treaty during the launch period,
namely until 15 December 1999, in respect of the non-
competition clause set out
in the codicil amending
Article 11 of the Agreement of 11 and 18 April 1998 and
Article 5.3 of the Associates’ Pact.

In accordance with Article 85(3) of the EC Treaty, the
provisions of Article 85(1) of the EC Treaty are hereby
declared inapplicable, for the period from the date of
clause
notification to 15 December 1999,
concerning TPS’s special-interest channels and television
services, set out in Article 6 of the Agreement of 11 and
18 April 1996, and to the provision concerning the
exclusive transmission of the four general-interest chan-
nels on TPS, also set out in Article 6 of the Agreement of
11 and 18 April 1996.

to the

Article 4

This Decision is addressed to:

(1) T(cid:130)l(cid:130)vision Fran(cid:135)aise 1
33, rue Vaugelas
F-75015 PARIS

(2) France 2

Maison France T(cid:130)l(cid:130)vision
7, esplanade Henri de France
F-75907 PARIS CEDEX 15

(3) France 3

Maison France T(cid:130)l(cid:130)vision
7, esplanade Henri de France
F-75907 PARIS CEDEX 15

(4) France T(cid:130)l(cid:130)com

6, place d’Alleray
F-75015 PARIS

(5) M(cid:130)tropole T(cid:130)l(cid:130)vision
16, cours Albert 1er
F-75008 PARIS

(6) Suez Lyonnaise des Eaux
72, avenue de la Libert(cid:130)
F-92000 NANTERRE.

Done at Brussels, 3 March 1999.

For the Commission

Karel VAN MIERT

Member of the Commission