The European Commission announced today that it has launched a formal antitrust investigation into cross-border pay-TV services. The Commission is specifically interested in agreements between: (i) several major US film studios (Twentieth Century Fox, Warner Bros., Sony Pictures, NBCUniversal, and Paramount Pictures), and (ii) large European pay-TV broadcasters (such as BSkyB, Canal Plus, Sky Italia, Sky Deutschland and DTS of Spain).

Film studios typically licensing audiovisual content to broadcasters on an exclusive and territorial basis, a business model which has arisen (in part at least) in this sector due to the national scope of the underlying IP rights. The Commission is concerned that licensing provisions which grant “absolute territorial protection” to broadcasters for satellite broadcasting or online streaming infringe Article 101. Under these arrangements, typically a single pay-TV broadcaster in a Member State can show licensed content only within that State and cannot broadcast elsewhere, even in response to unsolicited requests from those in other Member States. This is at the heart of the concerns, with the Commission making clear that territorial licensing per se is not an issue, nor is it trying to push studios towards licensing on a pan-European basis (so it says). The Commission’s investigation “will focus on restrictions that prevent the selling of the content in response to unsolicited requests from viewers located in other Member States – the so-called “passive sales” – or to existing subscribers who move or travel abroad”.

The investigation is a good reminder that EU competition law views with suspicion any hindrance to one of its key policy objectives: the creation of a single market within the EU. The investigation arose from the ashes of the high profile Premier League/Murphy judgment of the Court of Justice in 2011, where the Court ruled that the granting of absolute territorial exclusivity to broadcasters showing Premier League matches could not be justified.

As with many Commission investigations, it is difficult to tell from the initial announcement quite what will ultimately emerge as the key issues, such things have a tendency to evolve as all parties concerned get to grips with the facts and initial legal theories. Although the conditions of competition for different types of content can vary significantly, developments will undoubtedly be watched closely by those in related sectors.