ga ette

64 Jan/Feb 2017
BRIEFING | EURLEGAL
Law Society Gazette | gazette.ie
NEWS FROM THE EU AND INTERNATIONAL AFFAIRS COMMITTEE
EDITED BY TP KENNEDY, DIRECTOR OF EDUCATION, LAW SOCIETY OF IRELAND
Last July, the European Commission
made commitments
offered by a British registered
company (Paramount Pictures
International Limited) and the
US-based Viacom Inc – jointly
referred to as Paramount – legally
binding under EU competition
rules. These remedies address
the commission’s competition
concerns arising from particular
clauses in film-licensing contracts
between Paramount and Sky UK
Limited and Sky Plc (collectively
known as Sky). The relevant provisions
prevented Sky from offering
its retail pay-TV services
to customers located in the European
Economic Area (EEA),
but based outside Britain and Ireland.
Separately, Paramount was
obliged to prevent non-British
or Irish EEA-established pay-
TV broadcasters from making
their services available to British
or Irish customers in response to
unsolicited requests.
The licensing of films
Film producers typically control
all rights to a particular movie.
Those rights are often licensed
to pay-TV companies who, in
turn, retail the relevant content to
CROSS-BORDER ACCESS
TO PAY-TV SERVICES
viewers (the various Sky Cinema
channels are an obvious example
of this). Different revenue sources
are used to finance film production.
These include so-called
‘output agreements’, pre-sales
contracts and co-financing agreements.
Major movies are typically
licensed for pay-TV using output
agreements, whereby a studio/
producer licenses their entire future
film production to a particular
broadcaster for a certain period
of time. Since premium films
are, along with live coverage of
major sporting events, probably
the key factor in selling pay-TV
subscription packages, licensing
contracts are typically concluded
on an exclusive basis for a particular
territory. The licensed
area typically coincides with the
territory of a particular EU/EEA
member state or a small group
of EU/EEA member states that
share a common language, such as
Ireland and Britain.
Paramount and Sky
Paramount, whose recent blockbusters
include The Big Short, Zoolander
2 and The Wolf of Wall Street,
agreed a 2009 contract granting
Sky the exclusive right to exhibit
certain movies to pay-TV and
subscription video on demand (or
SVOD) customers in Ireland and
Britain. This agreement also provided
that Sky should not knowingly
allow viewers outside Ireland
and Britain to receive the relevant
satellite broadcasts. In addition,
Paramount was not to authorise
the use of any third-party satellite
decoder that would allow end-users
in Ireland or Britain to watch
the relevant films. The 2009 contract
also stipulated that Sky was
to use ‘geo-blocking’ to prevent
un-authorised
internet
transmission outside the relevant
territory.
Commission investigation
Article 101 of the Treaty on
the Functioning of the EU
(TFEU) generally prohibits
agreements
between
undertakings, decisions by
associations of undertakings,
and concerted practices that have
the object or effect of restricting
competition in the EU. However,
restrictive agreements
may be exempted where their
overall effect is to promote
competition. In order to
determine whether an
agreement is an object breach of
article 101, the commission
should examine its content and
MAJOR MOVIES ARE TYPICALLY LICENSED
FOR PAY-TV USING OUTPUT AGREEMENTS,
WHEREBY A STUDIO/PRODUCER LICENSES
THEIR ENTIRE FUTURE FILM PRODUCTION TO
A PARTICULAR BROADCASTER FOR A CERTAIN
PERIOD OF TIME
objectives as well as the relevant
legal/economic context.
The background to the commission’s
investigation lies in
the Court of Justice of the EU’s
October 2011 ruling in the FA
Premier League/Murphy case (see
‘Pub football and the distribution
of digital content’, Gazette,
March 2012, p57). The CJEU
found in Murphy that the ban on
the use of foreign decoders means
that each licensee is granted absolute
territorial exclusivity over
the broadcasting of FA Premier
League games and, thus, competition
from other broadcasters is
eliminated. This partitioning of
the market results in an object
infringement of article 101. The
CJEU’s decision prompted the
commission to examine whether
other licensing contracts for
premium movies and sports content
contain absolute territorial
protection clauses that prevent
viewers elsewhere in the EEA
from watching such broadcasts.
The commission’s investigation
showed that the major Hollywood
film studios typically license their
productions to a single pay-TV
broadcaster in each EU/EEA
member state or, alternatively,
in a group of EU/EEA member
states with a common language.
In January 2014, the commission
initiated formal proceedings
to consider whether certain
provisions in the licensing
contracts between the major US
films studios and the key EEAbased
pay-TV companies (namely
Sky, Canal Plus, DTS of Spain,
Sky Deutschland and Sky Italia)
breach article 101 of the TFEU.