31 July 2015
Last week, the European Commission made concrete moves which it thinks will help it to deliver on its promise to create a Single Digital Market. On Thursday (23 July) DG Competition sent a statement of objections to six major Hollywood studios and Sky UK claiming that their contracts involve anti-competitive clauses. What is at issue? Nothing other than the “geo-blocking” clauses that have already been the subject of sceptical comment in the context of the European Commission’s e-commerce sector inquiry (for more on this see here and here and here and here). Geo-blocking, in the words of the European Parliament in its recent study (studies on challenges for competition policy in a digitalised economy), is the practice of “preventing users from accessing content based on location”. DG Competition alleges that Sky UK and each of six major Hollywood studios (NBC Universal, Paramount Pictures, Sony, 20th Century Fox, Warner Brothers and Disney) bilaterally entered into licensing agreements which obliged Sky UK to restrict consumers from other EU Member States from accessing UK pay TV services either online or via satellite when in other EU Member States. Film rights (and indeed other rights) are often licensed on an exclusive basis to a single broadcaster in each Member State. The Commission suggests that where licensing terms prevent the exclusive broadcaster being able to respond to unsolicited requests to transmit content to other countries, then this may partition the single market and infringe Article 101(1) – a transfer of the active/passive selling distinction from the realm of goods and services to the world of digital content and national copyright.
The investigation began in 2014 and similar investigations are under way in other EU Member States. They follow the FAPL decision of October 2011 (here). Those familiar with this area will recall that the Murphy case did not hold that it was anti-competitive for the FA Premier League to enter into exclusive licensing arrangements with a broadcaster in each country but it did hold that it was contrary to the competition rules to require a broadcaster to prevent its satellite decoder cards (which enable reception of the licensed program content) from being used outside the licensed territory see here for a discussion on the Advocate General’s opinion in FAPL.
However, dealing with this issue does not merely involve contractual arrangements that impose absolute territorial protection - complicating the matters under investigation are national cultural concerns and national copyright rules. The European Parliament recently noted in its studies on challenges for competition policy in a digitalised economy that the ability to access content from anywhere in the EU may also be as a result of geographical restrictions imposed by owners of intellectual property rights. This is why geo-blocking will be assessed not only under the antitrust rules but also by reviewing copyright law across Europe. The Commission is also keen to ensure wider access to online content within the internal market which will involve a review of the Cable and Satellite Directive. The allegations raised by the Commission against Sky UK and the Hollywood Majors may have a profound impact on the scope of copyright protection (particularly in relation to the doctrine of exhaustion) and may foreshadow significant changes to the copyright landscape once the modernisation of EU copyright law gets underway.
Geo blocking is a major focus of the e-commerce sector inquiry and we will undoubtedly be seeing more investigations on this topic. As companies start to respond to the chunky Commission information requests now being sent out by the sector enquiry case team, they need to have an eye on key Commission’s concerns on this subject, which may ultimately result in some significant pressure on existing business practices.