Alfredo M. O'Farrell November 17 2011 New preventive measure announced for pay television market Marval OFarrell Mairal | Competition & Antitrust - Argentina Alfredo M. O'Farrell Competition & Antitrust BackgroundFactsDecisionCommentBackgroundOn August 18 2011 the secretary of domestic trade issued a new preventive measure within the pay television market and ordered an important provider of pay television channels to refrain from entering into certain conduct that may infringe the provisions set forth in the Antitrust Law (25,156). The secretary based its decision on Resolution 721, issued by the National Commission for the Defence of Competition on August 17 2011.(1)This resolution originated from an accusation filed before the commission by the attorneys of pay television operator Telecentro SA against Fox Sports Latin America SA, in view of certain irregularities evidenced in the commercialisation of sports television channels.Under Section 35 of the Antitrust Law, during the course of an investigation the commission is entitled to: issue preventive measures that establish compliance with certain conditions; or order the cessation of anti-competitive behaviour, when such conduct has the potential to damage competition. Although not required by the law, the commission generally does not issue preventive measures if the requirements of likelihood of the law and danger in the delay are met.FactsOn August 10 2011 Telecentro, one of the most important pay television operators in Argentina, filed an accusation against Fox Sports alleging that it had infringed the provisions set out in the law. In its brief, the claimant stated that the two companies had long maintained a commercial relationship as part of which Fox Sports provided Telecentro with a number of television channels, including Fox Sports HD. By the time the accusation was submitted, Fox Sports HD was included within the channels commercialised by Telecentro to its clients.Notwithstanding this commercial relationship, the claimant stated that on August 4 2011 it had been served with a registered letter sent by Fox Sports notifying Telecentro that if it did not accept the commercial conditions set for renewal of the agreement (which had ended on July 31 2011), as of August 18 2011 Fox Sports would interrupt the provision of Fox Sports HD.Telecentro had been informed about these commercial conditions by means of a letter sent by Fox Sports on June 17 2011, which proposed the following: a 40% increase in the price of Fox Sports HD in respect to the price currently being paid by Telecentro; and the hiring of a new channel, Fox Sports +, to be included in the basic analogue package of the television operator.The claimant argued that as these conditions were unilaterally imposed by Fox Sports, they constituted abusive conduct against the general economic interest, represented in this case by pay television consumers.Telecentro refused to accede to the conditions and instead insisted that the relationship between the parties should be renewed under similar terms to the agreement previously in force between the parties. The claimant further argued that if the agreement was not renewed and Fox Sports HD was eliminated from Telecentro's programme list, this would likely cause certain clients to relocate to another pay television operator. The claimant felt that Fox Sports had abused its market power, as it had known that Telecentro faced strong competitors within the pay television market (eg, Cablevision and Directv) and would therefore be unwilling to cancel the agreement.The claimant therefore requested that the commission issue a preventive measure, pursuant to Section 35 of the law, based on the fact that Fox Sports' conduct was unlawful and against general economic interest as: it limited, restricted and distorted competition in the pay television market; and it set discriminatory conditions for Telecentro and directly benefited Cablevision and Directv which, according to the claimant, may have had a local or foreign-based corporate relationship with Fox Sports.DecisionThe commission's analysis first focused on determining whether there had been a possible infringement of Section 2(j) of the law, which states that a denial to sell may constitute anti-competitive conduct. Section 2(j) sets forth that the act of conditioning a purchase or sale on an obligation not to use, acquire, sell or supply goods or services produced, processed, distributed or commercialised by third parties may be regarded as anti-competitive conduct. The commission judged that the claimant had received an actual threat, since Fox Sports stated that the provision of the sports channel Fox Sports HD could be discontinued.The commission then analysed the possible commission by Fox Sports of a tied-in sale, which may also limit competition, as governed by Section 2(i) of the law. In this respect, the enforcement agency verified that the renewal of the Fox Sports HD channel was offered to Telecentro jointly with the new Fox Sports + channel, which was expected to be included in the pay television operator's programme.The commission determined that the pay television operator was the only party that could decide whether to include a channel, and that forcing the acquisition of a new channel solely because there may be the possibility of losing a highly-valued channel could be regarded as a tied-in sale in the terms of the Antitrust Law.On August 17 2011 the commission therefore issued a preventive measure under Section 35 of the law ordering Fox Sports not to impose the hiring of Fox Sports + as a necessary condition for hiring Fox Sports HD. Telecentro would therefore be able to decide for itself whether to incorporate this latter channel into its programme list. The commission further ruled that Fox Sports must continue to provide its services for 90 days under similar terms to the previous agreement, until the parties reach an agreement regarding the channels involved.Comment The new preventive measure shows that the commission continues to assess competitive conditions in the pay television market. However, it is still possible that this new preventive measure may be revoked upon the filing of an appeal, as in previous cases.For further information on this topic please contact Alfredo M O'Farrell or Miguel del Pino at Marval O'Farrell & Mairal by telephone (+54 11 4310 0100), fax (+54 11 4310 0200) or email ([email protected] or [email protected]). The Marval O'Farrell & Mairal website can be accessed at www.marval.com.ar.Endnotes(1) A Spanish version of the decision issued by the commission on August 17 2011 is available at www.cndc.gov.ar/dictamenes/RES%20Y%20DICT%20C.1397.pdf.