EU Anti-trust Regulator Challenges Hollywood's Pay-TV Deals (7/23)     Print Email

By James D. Spellman, Strategic Communications LLC

spellmanIn another move to break down barriers to a single digital market, the European Union’s anti-trust crusader accused six of Hollywood’s largest movie studios and the British satellite broadcaster Sky of signing country-specific deals with pay-TV providers that obstruct competition to the disadvantage of consumers.

"European consumers want to watch the pay-TV channels of their choice regardless of where they live or travel in the EU,” said Margrethe Vestager, the EU Commissioner in charge of competition policy. “Our investigation shows that they cannot do this today, also because licensing agreements between the major film studios and Sky UK do not allow consumers in other EU countries to access Sky's UK and Irish pay-TV services, via satellite or online. We believe that this may be in breach of EU competition rules. The studios and Sky UK now have the chance to respond to our concerns."1]

After an 18-month-long investigation, a “statement of objections” has been sent to the studios and Sky, but EU officials hinted that investigations are still underway into pay-TV providers in France (Canal Plus), Germany (Sky Deutschland), Spain (DTS), and Italy (Sky Italia). The six studios named in the “statement” are: Walt Disney; 20th Century Fox; Warner Bros.; Paramount Pictures (a unit of Viacom Inc.); Sony Pictures; and, NBCUniversal (Comcast Corp.).

The EU contends that the licensing contracts these studios signed with Sky UK include “geo blocking” clauses that block access to films through online pay-TV or satellite pay-TV when subscribers travel outside the licensed territory (UK and Ireland). The EU complaint asserts, “These clauses grant ‘absolute territorial exclusivity’ to Sky UK and/or other broadcasters. They eliminate cross-border competition between pay-TV broadcasters and partition the internal market along national borders.” The EU can fine companies up to 10 percent of their global annual revenue for antitrust violations.

This is the latest in several antitrust cases Vestager has launched against American companies, including Apple, Facebook, Amazon, Qualcomm, and Google. Mastercard has also been accused of charging consumers inflated fees.

Underneath these efforts is a persuasive argument, as the Economist points out, that “the single market is an aspect of the EU that enjoys support even from Eurosceptics, and competition has always been at its heart.”[2]

As Vestager herself put it in a recent op ed in Politico: “The single market is Europe’s single most important asset. Designing good competition policies for this market has a large role to play in sustaining the economic recovery in Europe. And robust enforcement of competition policy — be it cartels, mergers, antitrust or state aid — is essential to tap the power of the single market to boost growth and create jobs. After all it is home to over 20 million companies. And it is also home to about half a billion consumers. At the end of the day, EU competition policy to me is about consumers. About people. About us all.”[3]

These and other EU initiatives are part of a bigger push to establish a single digital market for the 28 EU member-countries free of impediments that obstruct competition, block electronic commerce, and limit consumers’ access to services. This enormous effort will encompass: rules to make cross-border e-commerce easier by aiming to give consumers rights and remove obstacles preventing businesses from selling across borders; overhaul of European copyright law to ensure that consumers who buy films, music or articles in their home country can also enjoy them while travelling across the EU; strengthening security in digital services to protect personal data and punish those who violate the law.[4]

Only 15% of online shoppers in the EU buy something in another country, according to commission figures, while only 7% of small and medium-sized businesses sell across national borders. “95% of Europeans have been prevented from visiting a website from another EU country or (have) been redirected to a different site with higher prices,” says Vice-President for the Digital Single Market Andrus Ansip. National regulatory barriers and contracts that include such prohibitions as “geo blocking” are to blame, many analysts say.

Facebook CEO Mark Zuckerburg favors the concept. “Sometimes you’re trying to conform to 20 different versions of different kinds of laws,” he said. “I think that [a Digital Single Market] would be very good. It would make it easier for companies to offer services, easier for them to comply with the laws because they actually know what the laws are in all these different places.”[5]

Some, though, argue the EU’s proposals don’t go far enough. “DSM contains too few elements for liberalisation that compensate for adding further regulations and liabilities, albeit on an EU level,” said Hosuk Lee-Makiyama, director of European Centre for International Political Economy and an expert on trade policy.[6]

 

[1]European Commission, “Antitrust: Commission sends Statement of Objections on cross-border provision of pay-TV services available in UK and Ireland.” Press release, July 23, 2015. http://europa.eu/rapid/press-release_IP-15-5432_en.htm .

[2]Economist, “The Enforcer. Margrethe Vestager, the Danish competition commissioner, tests her mettle.” May 15, 2015. http://www.economist.com/news/europe/21650169-margrethe-vestager-danish-competition-commissioner-tests-her-mettle-enforcer.

[3]Margrethe Vestager, “My competition philosophy.” Politico, July 20, 2015. http://www.politico.eu/article/competition-philosophy-vestager-commission-amazon/.

[4]European Commission, “A Digital Single Market for Europe: Commission sets out 16 initiatives to make it happen.” Press release, May 6, 2015. http://europa.eu/rapid/press-release_IP-15-4919_en.htm

[5]Kurt Wagner, “Mark Zuckerberg Is On Board With the EU’s Digital Single Market Plan.” Recode, May 14, 2015. http://recode.net/2015/05/14/mark-zuckerberg-is-on-board-with-the-eus-digital-single-market-plan/.

[6]Duncan Robinson, Murad Ahmed, and Richard Waters, “EU sets out plan to shake up Europe’s digital market.” Financial Times, May 6, 2015. www.ft.com.