The European Commission has opened formal antitrust proceedings to examine certain provisions in licensing agreements between several major US film studios (Twentieth Century Fox, Warner Bros., Sony Pictures, NBCUniversal, Paramount Pictures) and the largest European pay-TV broadcasters such as BSkyB of the UK, Canal Plus of France, Sky Italia of Italy, Sky Deutschland of Germany and DTS of Spain.

The Commission said that it will in particular investigate whether these provisions prevent broadcasters from providing their services across borders, for example by refusing potential subscribers from other Member States or blocking cross-border access to their services.

“The opening of proceedings in no way prejudges the outcome of the investigation; it only means that the Commission will treat the case as a matter of priority,” the Commission said.

Audiovisual content, such as popular films, is licensed by the US film studios to pay-TV broadcasters on an exclusive and territorial basis, i.e. typically to a single pay-TV broadcaster in each Member State (or a few Member States with a common language).

Following a fact-finding investigation carried out in 2012, the Commission will examine whether provisions of licensing arrangements for broadcasting by satellite or through online streaming between US film studios and the major European broadcasters, which grant to the latter “absolute territorial protection,” may constitute an infringement of EU antitrust rules that prohibit anticompetitive agreements (Article 101 of the Treaty on the functioning of the European Union – TFEU).

The Commission said that the provisions granting “absolute territorial protection” ensure that the films licensed by the US studios are shown exclusively in the Member State where each broadcaster operates via satellite and the internet. These films cannot be made available outside that Member State, even in response to unsolicited requests from potential subscribers in other Member States.

In October 2011, the EU Court of Justice addressed in its Premier League/Murphy judgment, the issue of licensing restrictions granting broadcasters an exclusive live broadcasting right for Premier League matches on a territorial basis, generally corresponding to the territory of a Member State.

These licensing provisions entailed that TV viewers could only watch the matches transmitted by the broadcasters established in the Member State where they resided. The Court noted that licensing provisions preventing a satellite broadcaster from providing its broadcasts to consumers outside the licensed territory enable each broadcaster to be granted absolute territorial exclusivity in the area covered by the license, thus eliminating all competition between broadcasters and partitioning the market in accordance with national borders.

The Court further held that such provisions could not be justified by the need to ensure appropriate remuneration for the rightholders, given that this could be calculated by taking into account the actual and potential audience both in the Member State of broadcast and in any other Member State in which the broadcasts were received.

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