On 22 April 2016, the European Commission published commitments that were offered by Paramount Pictures to address competition concerns relating to provisions in its licence agreements with broadcasters that restrict the cross-border provision of pay-TV services.

In January 2014, the Commission opened proceedings to investigate contractual clauses in licence agreements between several major US film studios and the largest European pay-TV broadcasters. US film studios typically conclude bilateral agreements with a single pay-TV broadcaster for each country in the EU to licence audio-visual content, such as films, on an exclusive and territorial basis. In July 2015, the Commission announced that it had sent a statement of objections to broadcaster Sky UK and six US film studios alleging that clauses in licence agreements restricting the cross-border provision of pay-TV services, via satellite or online, may violate Article 101 of the TFEU.

In particular, the Commission had identified clauses in the licence agreements preventing Sky UK from responding to unsolicited requests from customers located outside its licenced territory of the UK and Ireland. In the Commission's view, broadcasters must not be prevented from making passive sales to viewers in other EU member states. In addition, some licence agreements contained clauses requiring the film studios to ensure that broadcasters other than Sky UK were prevented from making their pay-TV services available in Sky UK's licenced territory. According to the Commission, these clauses would grant "absolute territorial exclusivity" to Sky UK and eliminate cross-border competition between pay-TV broadcasters.

To address the Commission's competition concerns, Paramount Pictures has offered the following commitments:

  • Paramount Pictures will not (re)introduce contractual obligations, which prevent or limit a pay-TV broadcaster from responding to unsolicited requests from consumers located outside the broadcaster's licenced territory;
  • Paramount Pictures will not (re)introduce contractual obligations, which require Paramount Pictures to prohibit or limit pay-TV broadcasters located outside the licenced territory from responding to unsolicited requests from consumers within the licenced territory.

Paramount Pictures has also offered a commitment that it will not enforce such obligations in its existing pay-TV licence agreements.

The commitments would apply for a period of five years and cover both standard pay-TV services and subscription video-on-demand services. The Commission intends to declare the proposed commitments binding. Such a decision is not a conclusion that there has been an infringement of the EU competition rules, but it legally binds Paramount Pictures to respect the commitments it has offered.

Interested parties can submit their views on the proposed commitments until 23 May 2016. The Commission is continuing its investigation regarding the conduct of the five other US film studios and Sky UK.  

The pay-TV investigation shows the Commission's approach to the application of competition rules to new digital markets. The Court of Justice ruled in 2011 that broadcasters were not allowed to establish absolute territorial protections in licence agreements in the context of football matches broadcast via satellite. The Commission now seems to have applied the same principles used by the Court of Justice to geo-blocking online content, a topic that has been high on the Commission's agenda for some time. In May 2015, the Commission launched a sector inquiry into e-commerce, which included a focus on providers of digital content. The initial findings on the existence of geo-blocking practices were published in March 2016 [see our April 2016 newsletter]. In parallel with its investigations under competition law, as part of its Digital Market Strategy, the Commission published its action plan to modernise EU copyright rules and a proposal for a Regulation to enable the cross-border portability of digital content in December 2015. Further proposals in this respect are soon to be expected.