On 22 April 2016, the European Commission (“EC”) invited industry comment on the commitments proposed by Paramount Pictures International Limited (“Paramount”) in response to concerns raised by the EC. The EC’s concerns were that many of its contractual clauses in licensing agreements with Sky UK Limited (“Sky”) concerning cross-border access to pay-TV content may contravene Article 101 of the Treaty on the Functioning of the European Union (“TFEU”).
The EC published a Statement of Objections on 27 July 2015 which highlights the potential for the clauses to “prohibit or limit Sky from making its retail pay-TV services available in response to unsolicited requests from consumers residing or located in the EEA but outside the United Kingdom and the Republic of Ireland, and/or require Paramount to prohibit or limit broadcasters located within the EEA but outside the United Kingdom and the Republic of Ireland from making their retail pay-TV services available in response to unsolicited requests from consumers residing or located in the United Kingdom and the Republic of Ireland“.
In summary, the EC were concerned that the clauses may grant Sky “absolute territorial exclusivity” and therefore restrict cross-border competition by creating barriers on how television is bought and sold within the EU.
In response to the EC’s concerns, and in an attempt to avoid penalties for violations of EU antitrust rules, Paramount has offered formal five-year binding commitments including (among other things) to refrain from entering into, renewing or extending any contractual obligations which have the effect of preventing or limiting a broadcaster from responding to unsolicited requests in the manner specified in the Objections. (Click here for a full copy of the proposed commitments.)
The EC has the power, under Article 9 of Council Regulation 1/2003, to accept the commitments after having opened up its competition concerns and Paramount’s proposed commitments for third party comment for a period of one month.
This is another example of the EC’s continued efforts to eliminate “geo-blocking” (geographical restrictions on access to online content) and to promote the Digital Single Market in the EU. Alongside the Paramount commitments, the EU Commission’s case is continuing against 5 other major Hollywood studios, who were also addressed as part of the same July 2015 Statement of Objections that concerned Paramount. Those objections remain outstanding and no doubt the other recipients are waiting to see if the Paramount commitments will be readily accepted.
If US movie studios (and in turn producers of hit US TV shows) are forced to end territorial restrictions between EU Member States, it would represent a sea change in the market. Whether it will lead to consumers shopping across borders for their TV content remains to be seen. Whilst satellite broadcast is one issue, content is increasingly moving online, meaning cross-border purchasing is becoming easier. However, would a UK consumer really soon be purchasing their monthly TV and movie programming from Romania? There is the likelihood that language barriers will remain perhaps the biggest obstacle to consumers, even if legal barriers continue to be eroded. There is also of course the possible response from US studios who could simply license to broadcasters at a standardised cross-EU price, meaning cross-border prices will remain largely similar.