Introduction

The Conseil Supérieur de l'Audiovisuel (CSA), the broadcasting regulatory authority, recently issued a decision cancelling the licence granted to a French television channel. The CSA punished Diversité TV – provider of digital terrestrial television channel Numéro 23 – for having made substantial changes in its shareholding structure, on the basis of which the CSA had granted the licence in 2012. The decision sheds light on the assessment of ownership of television channels by non-EU companies.

Assessment of joint control over channel

The CSA rendered its decision while examining the intended transfer of Numéro 23 to NextRadio TV for €88.3 million. Direct TV was initially wholly owned by the channel's chief executive officer and a group of French entrepreneurs. In 2013 Russian company United TV Holding (UTH) bought 15% of the capital, but the signed shareholders' agreement signed was not disclosed to the CSA.

The CSA was notified of the agreement more than one year later and following several reminders. The CSA considered that the agreement aimed to achieve a rapid change in the channel's ownership, in contradiction to the objective of a "stable and sustainable shareholder base", in regard to which Diversité TV had made commitments to the CSA in 2012 for a two-year period. In consideration of these commitments, a gradual increase in its quota obligations had been agreed.

Further, the CSA held that the veto right entrusted to UTH over "the definition of the company's strategy" implied joint control, which could not be permitted since this investor is not a national of the European Union.

Ownership is a key criterion that the CSA considers when awarding broadcasting licences. The Communication Act, which sets out the rules governing private and public television broadcasters, provides that a non-EU company cannot control, directly or indirectly, more than 20% of the share capital or voting rights of a French company holding a television licence. In the case at hand, the shares owned by the Russian company did not exceed the 20% threshold.

However, the CSA considered that the veto right granted to UTH for the approval of certain television channel expenses implied that the shareholders were acting in concert to implement a common strategy for Numéro 23. The Commercial Code states that joint control exists when two or more companies act in concert to determine decisions issued by the general assembly of a company in order to implement the common policy of a third company. Therefore, the CSA held that UTH's veto right allowed it to exercise joint control over Numéro 23.

Non-compliance with channel's goals

In addition to the organisational share capital ownership changes of which the CSA had not been informed, the channel had only partially met the cultural and informational diversity objectives set out in its application and had received several reminders and formal notices in regard thereto. One of the major breaches noted by the CSA was that the channel had failed to comply with its quotas for the broadcast of programmes in French and other European languages and did not sufficiently represent French society and culture in its programming.

Finally, the CSA noted that the intended transfer amount of €88.3 million had been decorrelated from the channel's financial position. This amount resulted mainly from the monetisation of the television licence that was granted by the French administration for digital terrestrial television broadcasting. The CSA considered that this approach constituted "an abuse of right implying fraud", since it was contrary to the principle of free access to public terrestrial frequencies, which is intended to allow fundamental imperative pluralism guaranteed by the act of September 30 1986, not to support financial speculation operations on free-of-charge terrestrial frequencies.

Comment

The CSA ordered the cancellation of the licence granted to Numéro 23, effective June 30 2016. By postponing the cancellation until this date, the CSA has left time for an internal administrative review of the decision in case Numéro 23 waives the conditions included in the shareholders' agreement and the intended change of ownership. Diversité TV may also lodge an appeal before the Conseil d'Etat (the highest administrative jurisdiction in France) to challenge the administrative penalty procedure.

Television industry stakeholders were eagerly awaiting the CSA decision on the transfer of Numéro 23 to NextRadio TV. However, by punishing the channel for modifying its shareholding in 2013 and monetising its licence in breach of the principles set out in the Communication Act, the CSA has avoided taking a direct position on the intended transfer.

For further information on this topic please contact Sabine Deloges at Nomos by telephone (+33 01 43 18 55 00) or email (sdeloges@nomosparis.com). The Nomos website can be accessed at www.nomosparis.com.

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