Archive for the ‘Internet’ Category

Should Ofcom have the power to block or approve media and news deals?

A 4 February 2014 report published by the House of Lords communications committee has urged for changes to the regulation of media ownership.  It finds that the UK communications regulator, Ofcom, should take a more prominent and leading role in deciding whether media transactions or concentration should be approved. 

Merger control in media transactions be a complex area given the relationship between merger control review by the UK competition authorities on competition grounds and the potential for political/ public interest intervention on newspaper and/ or media public interest grounds.  Currently, the UK Government is able to intervene in a newspaper or a broadcasting/ media merger where the Secretary of State believes that a merger may raise a relevant public interest consideration and the transaction constitutes a relevant merger situation under the standard UK merger control rules.  There are specific public interest considerations for newspaper cases and also broadcasting and cross-media cases. 

When the UK sought to develop its laws in relation to public interest scrutiny of media mergers the relevant Government minister said in 2003 that:  “[media] plurality is important for a healthy and informed democratic society.  The underlying principle is that it would be dangerous for any person to control too much of the media because of his or her ability to influence opinions and set the political agenda” (Hansard, Lord McIntosh of Haringey (Parliamentary Under Secretary, DCMS) 2 July 2003). 

In relation to broadcasting and cross-media mergers, the principal media plurality considerations are set out in section 58(2C) of the UK Enterprise Act 2002 and include: “the need, in relation to every different audience in the United Kingdom or in a particular area or locality of the United Kingdom, for there to be a sufficient plurality of persons with control of the media enterprises serving that audience.” 

UK communications regulator Ofcom conducted a significant research study and extensive stakeholder consultation on plurality matters between November 2011 and June 2012.  In October 2011 Ofcom stated that: “We have defined plurality as a) ensuring there is a diversity of viewpoints available and consumed across and within media enterprises and b) preventing any one media owner or voice having too much influence over public opinion and the political agenda.” 

The committee now recommends that Ofcom should undertake periodic reviews of media plurality every four to five years to examine the sufficiency of plurality at the relevant time.  This power to examine and ultimately require divestments in tightly defined circumstances would arise independently of any structural change in the market such as a merger or acquisition. 

As a further change from the current rules, the committee recommends that Ofcom rather the Secretary of State should have final decision making power over whether specific media transactions should be approved, based on a balancing of the effect on competition and plurality. 

The committee’s report comes following an extensive public consultation.  Media plurality issues have come under scrutiny recently.  In the decade since the current regime was put into operation, only three cases have raised plurality “issues” such as to warrant a further inquiry.  Critically, there has been no final UK determination in a case involving only plurality issues.   

In BSkyB/ ITV, BSkyB had acquired material influence over ITV, an important UK broadcast news provider.  The Competition Commission concluded that sufficient media plurality remained for each major audience in the UK, both for a TV audience and a cross-media audience (taking into account the readership of News International’s newspapers).  BSkyB was required to divest its shareholding in ITV to below 7.5 per cent, for reasons connected with competition and not media plurality. 

The second case involved News Corporation’s proposed acquisition of the shares in BSkyB that it did not already own.  This was a highly unusual case which is unlikely to have many if any counterparts. The case did not reach a final decision by the Secretary of State so provides no definitive support for the efficacy or otherwise of plurality controls.  Quite the contrary, the case contributed to a full review of whether the existing media plurality test in the UK is workable in practice. 

A third case involved Global Radio’s acquisition of the entire issued share capital of GMG Radio Holdings Limited, the third largest UK commercial radio operator and operator of several radio stations across the UK.  On 3 August 2012 the Secretary of State issued a public interest intervention notice.  The intervention notice was issued on the basis that the media plurality public interest test might be relevant to consideration of the merger.  Despite the issue of the intervention notice, the Secretary of State announced that, on the advice of Ofcom, she would not refer the acquisition to the Competition Commission on media plurality public interest grounds.  The case was nevertheless referred but only on competition grounds.  The Competition Commission published its final report on 21 May 2013.  Global was required to partially divest some of the acquired or its own stations in each of the overlap areas to address the substantial lessening of competition found by the Competition Commission. 

Against this background, it appears that giving greater powers to Ofcom is intended to serve as a check on political interference that most ‘mainstream’ (i.e. non-media) media are insulated from. However, whether the Government will relinquish determinative power to Ofcom in the review of often high profile media transactions remains to be seen.   

The proposal to allow Ofcom to intervene even outside a specific transaction is highly controversial, albeit there would be a higher bar to intervention in such cases. 

The recommendations also propose to maintain a clear distinction between competition and plurality. Pluralism is designed to capture issues other than those that are covered by competition inquiries into market concentration.  The analysis has to encompass also the capacity of an entity to unacceptably influence public debate quite separately from any competition issues.   

Whether the recommendations will be implemented at all or in their proposed form is a matter of debate.  The recommendations also sit rather uncomfortably with the mandate of the new Competition and Markets Authority which will replace the Office of Fair Trading and the Competition Commission from April 2014. Its remit will be to have tighter reins on the sector regulators rather than giving them a wider berth. 

This post was prepared in consultation with Suzanne Rab, independent barrister specialising in competition and regulation at a leading chambers in Lincoln’s Inn.  Suzanne provided evidence to the House of Lords Select Committee review of media plurality.

DEFAMATION HAS CHANGED - How does this affect your business?

The new Defamation Act 2013, passed into law on the auspicious date of 25th April 2013, has come into force on 1st January 2014.

It brings in a whole new look to defamation, enacting a series of new measures, including:

  • a “New serious harm threshold”, which is aimed at helping people to understand that a certain level of damage has to be done to someone’s reputation before a claim will be successful, and which discourages wasting the Court’s time;
  • enabling protection for scientists and academics who publish “peer-reviewed” material in scientific and academic journals;
  • enabling protection for those publishing material on a matter of public interest (where they reasonably believe that it is in the public interest);
  • reducing libel tourism by tightening the test for claims involving those with little connection to England and Wales;
  • introducing a new process aimed at helping potential victims of defamation online, by resolving the dispute directly with the person who has posted the statement;
  • bring in a single-publication rule to prevent repeated claims against a publisher in respect of the same material.
  • Please contact Roger Field or Ian Penman

    (roger.field@newmedialaw.biz or ian.penman@newmedialaw.biz)

    if you would like to know more about the new defamation law, and how this will affect your business, please get in touch.

    Tel: +44 20 7291 1670

    Ian Penman

    Partner, New Media Law LLP

    +44 20 7291 1670

    OSCAR NOMINATIONS!

    “Philomena” has been nominated for FOUR Oscars!!  

    For best picture, best actress, best adapted screenplay & best original score.  

    “Philomena” starring Judi Dench & Steve Coogan is produced by New Media Law’s client Gabrielle Tana whose producer credits include “The Duchess”, “Coriolanus” and the soon to be released “The Invisible Woman”. “Philomena” is also nominated for 4 BAFTA’s; 3 Golden Globe Awards; 5 London Critics Circle Awards; and 1 Screen Actors Guild Award.  The film won several awards at the 2013 Venice Film Festival including Best Screenplay.   

    Released in the UK on 1 November 2013, “Philomena” and has grossed over £10.5 million at the UK and Ireland Box Office, making it the highest grossing independent British film of 2013.  The film has only just started its international roll out but has already achieved a global haul of US$45m with particularly strong results in the US, Australia and Italy.     

    Exciting news for all those involved in this brilliant film including our very own Peter Dally!  

    EU INVITES COMMENT ON COPYRIGHT REVIEW

    The European Commission has started a consultation on its continued efforts to review and modernise EU copyright rules. 

    The consultation “document” is focused on ensuring that the EU framework for copyright remains fit for the challenges of the digital world, exploits full potential for the single EU market, and stimulates growth and investment, while fostering cultural diversity.  It’s an ambitious aim and one which has been on the EU regulatory agenda for some time.

    The consultation comes in the wake of the Commission’s Content in the Digital Single Market communication of 2012 [http://ec.europa.eu/internal_market/copyright/licensing-europe/index_en.htm]. There it asserted its efforts to update the EU copyright rules through an industry-led initiative.  That process has led to recommendations for multi-territory licences for the use of music online on a small scale.  The Commission is expected to decide later in the year whether it wants to back this up with legislation.

    The consultation invites views on a wide range of topics including whether there are limitations in the current regime due to a patchwork quilt of rules and fragmented protection.

    The consultation spans some 80 questions over 8 sections.  It is a portmanteau ‘catch all’ document reflective of the multiple interests at stake.  It covers such issues as: 

    • Have you faced problems when trying to access online services in an EU Member State other than the one in which you live?
    • Have you faced problems when seeking to provide online services across borders in the EU?
    • How often are you asked to grant multi-territorial licences?
    • Do you think that further measures (legislative or non-legislative, including market-led solutions) are needed at EU level to increase the cross-border availability of content services in the Single Market?
    • Does the territoriality of limitations and exceptions, in your experience, constitute a problem?
    • Should digital copies made by end users for private purposes in the context of a service that has been licensed by rightholders, and where the harm to the rightholder is minimal, be subject to private copying levies?
    • Should the EU pursue the establishment of a single EU Copyright Title?

    These issues are among the most perplexing issues facing rights owners, collecting societies and distribution platforms in a digital age.  The territorial aspects of licensing are particularly controversial.  Rightowners have traditionally licensed different EU countries individually taking account of the specificities of each territory.  Yet this model is coming under increasing pressure in the face of goals for a truly borderless EU and demands for a more flexible pan-European solution.

    On a different but parallel track, the Commission has also indicated that it will launch an inquiry in 2014 into exclusive licensing of ‘premium’ rights.  That inquiry has arisen in a sports rights context following FAPL’s legal challenge through the UK and EU Courts.  Its interface with the current copyright consultation cannot be ignored.  See, further,  New Media Law News » Blog Archive » Do exclusive licences for media rights breach European law?  

    The crux of the matter is that this has been a long standing debate and where copyright, competition law, free movement of goods and the raft of EU legislation interact.  There have been noble efforts at “solutions” including a move for an EU copyright but so far none of these have received widespread support.  The consultation is laudable for its aims.  Yet as any avid watcher of this area will know, it can take time for consultations to work their way through and for solutions to be implemented and effective.  So, is the EU licensing framework fundamentally broken or is it a case of tweaking around the edges?   

    Answers on a post-(Christmas) card to Brussels. The 5 December consultation document invites comments by 5 February, 2014.

    For details of the Commission’s consultation see: http://europa.eu/rapid/press-release_IP-13-1213_en.htm?locale=en

    This briefing has been prepared with Suzanne Rab, a barrister specialising in EU competition and regulatory law at a leading chambers in Lincoln’s Inn and whom New Media Law instructs for competition law matters.

    Please contact Ian Penman or your usual NML advisor for further information on how we may assist you in responding to the consultation.

    .

    DO EXCLUSIVE LICENCES FOR MEDIA RIGHTS BREACH EUROPEAN LAW?

    The Red White and Blue:

    Mrs Murphy revisited

    The possible EU sector inquiry into premium rights

    Context

    At almost £300 million per season, in November 2013, BT paid more than double the current UK deals for the exclusive right to screen live Champions League matches from 2015.  Both of the current rights owners, Sky and ITV, were reported as saying that they were unwilling to pay over the odds based on their business models.  The BT Champions League deal follows a massive increase (71%) in the amount paid for the UK Premier League live broadcasting rights back in June 2013, in which BT played a part.  But a recent communication regarding the EU’s competition directorate may call into question the EU law treatment of territorial premium content rights. 

    Licensing

    The licensing of audiovisual content rights is typically conducted on a national basis to the extent that there is only a limited demand from bidders for global or pan-European rights; broadcasters usually operate on a territorial basis and serve the domestic market either in their own country or in a small cluster of neighbouring countries with a common language.[1]  

    Moreover, content licensing has traditionally been contracted on a territorially exclusive basis; licensees are granted absolute territorial protection regarding the licensed rights.  As one commentator points out, territorial exclusivity has been broadly accepted in individual Member States:

    In principle, under EU competition law, territorial restrictions fragmenting the EU internal market, such as absolute territorial protection, restrict competition by their very object (without the need to prove their effects). However, the jurisprudence and decisional practice concerning territorial exclusivity in the agreements between right holders (owners of premium content rights) and broadcasters has so far been limited and interpreted as allowing such absolute territorial protection.[2]

    This stance was endorsed at the EU level by the landmark Coditel II case.[3]

    Under well-established EU case law restrictions on the freedom to provide services can be justified if they pursue a legitimate objective, are justified by overriding reasons of public interest and are suitable for securing the attainment of that objective without going beyond what is necessary.

    Territorial exclusivity: Mrs Murphy and the Red White and Blue

    Then there was a challenge to the accepted thinking on exclusive territorial licensing in cases concerning pubs that bought foreign satellite decoders for screening live football matches.  The Premier League sought to prevent the avoidance of the exclusive territorial licensing and brought actions against the Greek suppliers and their licensees. 

    A parallel case arose from an appeal against a criminal conviction in proceedings against Mrs. Murphy, the now infamous publican who showed Premier League matches in her pub using a Greek decoder card.  What at first blush may have appeared to be a relatively straightforward case was ultimately a multi-layered complex legal scenario with a number of potentially wide-ranging outcomes.  The issues raised straddle free movement of goods, competition law and copyright infringement as well as the criminal law. 

    The UK High Court referred various questions to the Court of Justice of the EU (‘CJEU’) relating to the compatibility of The Premier League’s licensing arrangements with EU law.  These included questions relating to application of EU free movement rules and competition law.  In October 2011, the CJEU provided a landmark ruling, stating, amongst others:

     The Court of Justice holds that national legislation which prohibits the import, sale or use of foreign decoder cards is contrary to the freedom to provide services and cannot be justified either in light of the objective of protecting intellectual property rights or by the objective of encouraging the public to attend football stadiums.[4]Ultimately Mrs. Murphy’s prosecution was quashed by the High Court in London.  It was not a criminal offence to subscribe to a foreign decoder and to receive broadcasts from outside the UK using that decoder and the restrictions on the use of such decoders were unlawful under EU free movement principles.  She was therefore free to continue subscribing to Greek pay TV retailer Nova TV for broadcast Premier League matches via its decoder.  But she was not permitted to show the broadcasts in her pub as they would have breached the limited copyright the Premier League has, namely any opening video sequence, the Premier League anthem, pre-recorded films showing highlights of recent Premier League matches and various graphics.  The CJEU considered that the EU rules on free movement (specifically Article 56 TFEU) precluded national legislation that made it unlawful to import and sell foreign decoding devices.[5]  This restriction could not be justified by the objective of protecting IP rights.  It further ruled that the grant of exclusive satellite broadcasting licences for the territory of a Member State or states and which required the licensee not to supply decoding cards to enable viewing outside the territory restricted competition within Article 101(1) TFEU.On 22 November 2013, the Financial Times reported that the European Commission is set to launch a formal investigation into sales of pay-TV rights, quoting a short paragraph from a Commission communication published in May 2013:whether licensing agreements for premium pay-TV content contain absolute territorial protection clauses which may restrict competition, hinder the completion of the single market and prevent consumers from cross-border access to premium sports and film content…”[6]The context or impetus for the Commission comment in the document is that following the Murphy decision, it had conducted a preliminary fact-finding investigation to examine licensing agreements.  We observe that DG Competition categorises “sport rights, music, popular films, etc.” as premium content.   The comment by the judge in Murphy that there were wider legal issues to explore (and not least the delicate relationship with copyright) is expected to lead to a wider inquiry at EU level.  Such an inquiry may presumably take the form of an EU sector inquiry or similar which permits the Commission to undertake an inquiry into a sector even where it does not suspect wrongdoing by individual companies.  As stated in Article 17 of Regulation 1/2003 such inquiries are within the Commission’s remit.  In particular: 

    Where the trend of trade between Member States, the rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the common market, the Commission may conduct its inquiry into a particular sector of the economy or into a particular type of agreements across various sectors.”[7]

    A principal question to ask is, why now?  While there are no further comments from the Commission available in the public domain (save the one referenced at footnote 6), it is assumed that the judgment in the Murphy case was a catalyst.  And some preliminary fact-finding will have been necessary to justify opening the case.  Moreover, it is worth noting that it is over four years since the Commission concluded its pharmaceutical sector inquiry in July 2009 after a probe of some 18 months.  It is understandable that it may want to avoid too precipitous a probe to fend off the criticism in the pharmaceutical sector inquiry that a disproportionate amount of time was spent in basic fact-gathering. 

    As stated above, the Murphy case entailed a complex array of legal issues but it signals what appears to be a move away from the comfort of the previous case law enshrined in Coditel and a reassertion of a clear focus on the free movement of goods and services.

    Moreover, further complexities may arise owing to individual Member State investigations and competition cases (such as Ofcom’s pay TV investigation and the Competition Commission’s movies on pay TV investigation).  It cannot go unnoticed that in the UK’s probe into premium movies, the Competition Commission concluded that Sky did not enjoy such an advantage over its rivals as to adversely affect competition in the pay TV retail market.[8]

    What does a Commission sector inquiry entail?

    EU sector inquiries typically begin with an announcement (although in the pharmaceutical sector inquiry the Commission launched its inquiry with dawn raids) and the following process is invoked:

          Information requests sent to interested parties, suppliers, customers and the Member States.

          Preliminary findings issued followed by a consultation on the findings and proposed action (if any).

          Assessment of further information and a final report is issued.

          Standalone competition law investigations may be opened if the Commission believes that there has been an infringement of competition law; it may recommend other parties (e.g. Member States) to take action.

    A brief overview of previous Commission sector inquiries is provided in Figure 1. 

    Figure 1: overview of Commission sector inquiries

    Sector Dates Outcome
    Pharma Jan 08 to Jul 09 1.58 years Monitoring continues.Enforcement actions.  New legislation for Member States re: introduction of generic drugs
    Retail banking Jun 05 to Jan 07 1.67 years Enforcement actions.Range of measures to strengthen competition in retail banking, including in the market for payment cards.
    Energy Jun 05 toJan 07 1.67 years Standalone competition lawInfringement cases; Third Energy Package.
    Local loop Jul 00 toJan 02 1.75 years Follow on actions – Infringement actions and monitoring.
    Leased lines Jul 99 to Dec 02 3.50 years Commission closed the inquiry owing to the ‘strong drop in prices since the inquiry’s launch’.

    While at a high level (each inquiry was both detailed and nuanced), key takeaways are:

          A sector inquiry requires disclosure of vast amounts of information by affected companies, even if they are not the main focus of inquiry.

          Since an inquiry may last well over a year, this inevitably presents challenges for ‘business as usual’ during the period of regulatory uncertainty and a consequent burden on management time.  The Commission aims to resolve such inquiries in 18 months but previous inquiries have lasted at least that time or longer. 

          On the other hand, a sector inquiry may allow for the industry case to be more effectively presented and heard if the process is properly managed.

    As such, even though a sector inquiry is different from a competition investigation into a possible infringement of competition law it should be treated with no less seriousness.

    In Figure 2 we provide a summary of potential (generic) outcomes of an EU sector inquiry. Figure 2: potential outcomes of an EU sector inquiry

    Sector Dates Outcome
    Pharma Jan 08 to Jul 09 1.58 years Monitoring continues.Enforcement actions.  New legislation for Member States re: introduction of generic drugs
    Retail banking Jun 05 to Jan 07 1.67 years Enforcement actions.Range of measures to strengthen competition in retail banking, including in the market for payment cards.
    Energy Jun 05 toJan 07 1.67 years Standalone competition lawInfringement cases; Third Energy Package.
    Local loop Jul 00 toJan 02 1.75 years Follow on actions – Infringement actions and monitoring.
    Leased lines Jul 99 to Dec 02 3.50 years Commission closed the inquiry owing to the ‘strong drop in prices since the inquiry’s launch’.

    This demonstrates that:

          The outcomes of sector inquiries are potentially wide ranging from a clean bill of health to a follow on investigation under competition law. Indeed many of the abuse of dominance investigations in the energy sector were sparked by or coincided with the energy sector inquiry (2005-2007).

          However, the Commission has no power to apply intrusive remedies such as mandated divestments unless an infringement of competition law is found (unlike the Competition Commission or its successor the Competition and Markets Authority (“CMA”) in the UK.[9]  Nevertheless, the Commission may make recommendations to other bodies or even national authorities to take effective action where they are better placed to deal.  For example, in the pharma inquiry the Commission urged wider reforms in relation to an EU Patent, a reform thought by many to be overdue.

    What are the implications for this inquiry?

    The recent Premier League and Champions League live broadcast rights auctions have led to the signing of numerous new contracts.  We do not have access to their detail and thus cannot form a view as to whether amendments were made following the Murphy judgment. 

    Rights to certain live football matches tend to be high value in monetary terms and for the viewers, a matter of life and death for many (recalling the famous Bill Shankly quote).  However, they are but one sub-genre within the broader sports genre.  There’s the other sports, and further genres beside – ‘music, popular movies etc.’ – to quote the Commission.  Multiply the number of rights holders by genre and licensees within Member States and it is clear that any industry inquiry (if all-embracing) is potentially enormous in scale and scope. 

    Moreover, each genre/sub-genre has its own specific economics and characteristics.  The economics of Hollywood movies and their temporal multi-format release channels – or windows – contrasts significantly to many other forms of content.  The packaging of content is also important – content has to be made specific to suit each particular territory.  In addition to marketing and promotion, there is possible adaptation to each relevant population on the basis of cultural and linguistic specifics.  Such costs are not negligible. 

    And don’t forget about online – it is conceivable that geo-blocking will be an issue of focus, particularly following the Commission’s ‘Licences for Europe’ stakeholder dialogue.  This resulted in, amongst others a pledge for the further development of cross-border portability of subscription services.  And we must not dismiss the CJEU’s focus on the importance of the free movement of goods and services in the internal market. 

    While the actual scope and focus of the inquiry remains to be seen, a number of issues have been flagged by the Commission in its comments so far.  It has earmarked that the following issues are likely to be examined, namely, whether the relevant licensing agreements contain clauses which may:

          restrict competition between Member States;

          hinder the effective operation of the single market; and

          unduly prevent EU consumers from accessing premium sports and film content across EU borders.

    We consider each in turn.

    Restriction of competition

    An agreement falls within the prohibition laid down in Article 101(1) TFEU when it has as its object or effect the prevention, restriction or distortion of competition. 

    In the Murphy case, the CJEU stated:

    it is apparent from the Court’s case-law that the mere fact that the right holder has granted to a sole licensee the exclusive right to broadcast protected subject-matter from a Member State, and consequently to prohibit its transmission by others, during a specified period is not sufficient to justify the finding that such an agreement has an anti-competitive object (see, to this effect, Case 262/81 Coditel and Others (‘Coditel II’) [1982] ECR 3381, paragraph 15).[10]

    However, any comfort given to rights holders and broadcasters that the principles enunciated in Coditel remained unaffected was short-lived. Several paragraphs later the CJEU stated that:

    “…a premium is paid to the right holders concerned in order to guarantee absolute territorial exclusivity which is such as to result in artificial price differences between the partitioned national markets. Such partitioning and such an artificial price difference to which it gives rise are irreconcilable with the fundamental aim of the Treaty, which is completion of the internal market. In those circumstances, that premium cannot be regarded as forming part of the appropriate remuneration which the right holders concerned must be ensured.”

    Consequently, the payment of such a premium goes beyond what is necessary to ensure appropriate remuneration for those right holders.”[11]

    And in conclusion:

    Accordingly, given that those clauses of exclusive licence agreements have an anticompetitive object, it is to be concluded that they constitute a prohibited restriction on competition for the purposes of Article 101(1) TFEU.[12]

    The CJEU considered that agreements that aimed to partition markets according to national borders or made cross-border supply more difficult must be regarded as agreements whose object is to restrict competition.

    It appears from the judgment that it is not the exclusive licences themselves that are being challenged as restrictive by object but the requirements on broadcasters not to supply devices that would enable supply outside the territory. This latter requirement is the basis of absolute territorial exclusivity which is the apparent nub of the CJEU’s concern.  The CJEU considered that such clauses would not meet the conditions of individual exemption under Article 101(3) TFEU since they would go beyond what was necessary to protect the underlying IP rights.

    However, Article 101(3) was not raised before the national court. In the authors’ view, the issue of compatibility with Article 101(3) will inevitably be testing ground for further inquiries which by their nature will be fact-based.  One thing is sure, however, is that the CJEU’s pronouncements as to such clauses being restrictive by object raises the burden on rights holders to justify their arrangements under Article 101(3).

    Hindering the completion of the single market

    There is some overlap between the CJEU’s reasoning in relation to free movement and competition issues.  The crux of the matter from the perspective of free movement is whether the restriction on free movement so identified is objectively justified.  In the pub cases the CJEU rejected the objective of the protection of IPR and the objective of encouraging the public to attend football stadiums as adequate justification.  In so doing it has forced the question as to whether the hitherto accepted economic justifications for the current premium rights licensing models still hold.  In short, it has forced a rethink into the underlying economics of the industry.

    Prevention of consumers from cross-border access to premium sports and film content

    The CJEU cast doubt about the legality under competition law and free movement law of restrictions in exclusive licensing that provide absolute territorial protection for broadcasters by preventing consumers in one Member State from acquiring devices to allow them to view broadcasts from another Member State.  As such, it may be considered a partial victory for consumers who buy such equipment across borders.  A prime example is expats who like to view their favourite domestic TV shows once abroad. 

    And this is of course where online enters the fray.  Consider all the frustrated Brits on holiday abroad during the summer of 2012, unable to watch the Olympics on the BBC iPlayer. The Licences for Europe stakeholder dialogue resulted in a pledge by the audiovisual industry to increase gradually the cross-border portability of subscription-based audiovisual services.  The status of this initiative at the time of the inquiry, will play a key part in the extent to which the Commission delves deeper into online cross-border issues. 

    It is unclear as to whether music will fall under the scope of the inquiry.  A question arises as to the extent to which such content could be considered ‘premium’ – if indeed any EU inquiry is limited to such.  Whatever the scope of inquiry, it is likely that any examination of the EU rules on exclusive licensing on a territorial basis will not go unnoticed by players in other or related sectors where such practices are common.  In a different context the European Commission’s inquiry into the licensing practices of collective societies in the CISAC case has emphasised that the delicate balance between competition, copyright and fee movement remains an ongoing policy priority.

    On 12 April 2013, the General Court gave judgment in appeals brought by CISAC and its collecting society members against the Commission’s decision in 2008 finding that the societies had infringed Article 101(1) TFEU through their reciprocal representation agreements.[13]  Although the General Court ruled that the Commission had not established evidence of a concerted practice between the societies as to the terms of their agreements it dismissed appeals against the Commission decision finding that the individual provisions in the agreements were in fact contrary to Article 101(1) TFEU.[14]

    What next?

    What are the likely implications of the sector inquiry for stakeholders?  Some serious issues are sure to be raised.  For example, may there be a wholesale change to future content licensing deals?  May the economics of the various content genres be significantly undermined?  To what extent will DG Competition take into consideration possibly nuanced audiovisual-specific (and policy) factors?

    Rights holders, broadcasters and licensees all have a stake in the inquiry and will need to assess where their interests lie.  Those facing complaints or investigations domestically will also need to ensure consistency of messaging. The key drivers of the inquiry will likely be the strength of complaints, the coherence of arguments and the evidence presented.  While an ostrich-like strategy may be warranted for a peripheral player, such players may want to consider whether there are opportunities from more active participation.

    Among the issues to consider are:

          Development of the business’ regulatory strategy and how this impacts on commercial decision-making (licence fees, renewals etc.).

          Case-making and submission to the Commission and other bodies.

          Evidence assembly in relation to the above.

    Whatever the focus of the inquiry, interesting questions arise as to its relevance to licensing of audiovisual rights more generally.  At this stage it may be premature to predict the way in which the inquiry might unfold.  Important issues for determination will include:

          Whether and to what extent music is covered.

          The relationship between online access and cross-border access.  The commitments made in the recent Licences for Europe initiative may provide a sufficient level of comfort in some areas (e.g. cross-border access to online live streaming of live and catch-up domestic broadcasts for consumers when they go overseas).

          The extent to which the economics of different sectors dictate a different treatment.  In the Murphy case, the CJEU expressed concerns about partitioning national markets, “such as to result in artificial price differences between the partitioned national markets. Such partitioning and such an artificial price difference to which it gives rise are irreconcilable with the fundamental aim of the Treaty … that premium cannot be regarded as forming part of the appropriate remuneration which the right holders concerned must be ensured”.  An important first step will be to demonstrate the economics of the movie value chain and the nature of licensing policies vis-à-vis individual territories.  

          The Premier League cases concerned premium sporting rights.  The traditional rationale for territorial licensing is based on the different risks inherent in penetrating different territories.  The CJEU accepted that the objective of protecting intellectual property rights could be a relevant justification for restrictions on free movement but only appropriate remuneration is accepted.  The CJEU considered that the restrictions in issue went beyond what was necessary. 

    Interesting issues arise as to whether a particular pricing model is justified by reference to the economic value of the services provided. In the case of broadcasting this may be measured in terms of the size of the audience.   Where high returns are not guaranteed, rights holders and licensees (including putative licensees) will want to argue their case as to why a particular business model is or is not justified.

    How may we assist

    We are able to assist you in preparing your response to the forthcoming inquiry as follows: 

          Helping you to develop the strategic response to the inquiry, including advice on the appropriate ‘lines to take’ with the Commission.

          Collating evidence in support of specific licence pricing policies.

          Developing the appropriate counterfactual and approach to benefits/efficiency/economic arguments.

    Please get in touch if you would like to discuss the issues raised in this paper. 

    Any opinions expressed in this communication are personal and are not attributable to Competition Economists Group LLP

    Contact details 

     
    Dr. Alison Sprague Partner, CEG EuropeOne Fetter Lane, London, EC4A 1BR, United Kingdom   T  / +44 (0)20 3440 5526M / +44 (0)75 0784 0740 E / asprague@ceg-europe.comwww.ceg-europe.com Suzanne Rab Barrister, Serle Court6 New Square, Lincoln’s Inn, London, WC2A 3QS, United Kingdom T /  +44 (0)20 7242 6105D /  +44 (0)20 7400 7117M / +44 (0)75 5704 6522E /  srab@serlecourt.co.ukwww.serlecourt.co.uk

    Alison Sprague

    Dr. Alison Sprague is a partner in CEG’s London office.  She has more than 15 years’ economics consulting experience and specialises in the media, entertainment and telecoms sectors, advising private and public sector clients. Her sector experience includes television, radio, film, internet, music, sport, gambling, music, publishing and fixed/mobile telecoms.  She has led numerous strategy and economics projects, providing commercial, competition, policy and regulatory advice.  She has additionally conducted research into brands and advertising effectiveness and led a number of expert witness reports. Several projects have employed econometric techniques.  Clients comprise leading broadcasters; pay TV retailers, and telcos; trade associations; regulators, government departments, and their legal advisers, in the UK and overseas (including the EU, Eastern Europe, South Africa, Russia, India, Hong Kong). Alison has written numerous thought leadership papers - on media plurality (in the UK and Australia), local newspapers, government media policy, copyright, gambling, future business models for fixed and mobile internet, mobile markets in the EU, consumer policy and the competition regime in the UK.   Alison has expertise in advertising revenue forecasting gained in numerous successful franchise applications and renewals and cases covering competition, deregulation, litigations, due diligence, and privatisation. She has also examined funding models, public value and economic impact in relation to public service broadcasters, assessed possible uses, values and bidders for the UK’s ‘digital dividend’ (UHF) spectrum, and examined the likely impact of changing the amount of permitted advertising minutage on TV.   She conducted two major studies of pay TV markets in the EU as input to a client’s submission to Ofcom’s pay TV investigation. Other competition experience includes a merger in the Netherlands TV market, EU roaming charges, UK transport pricing, the collective selling of UK sports rights, UK newspaper and magazine distribution, EU and UK fixed-to-mobile termination rates, the UK outdoor advertising sector, EU local loop and leased lines, and GSM spectrum in the Netherlands. She recently appraised international media plurality and competition regimes as input to a regulatory response on behalf of a major satellite industry association.  She has additionally examined sports rights including an estimation of the implicit value of the rights to the Champions League in terms of advertising and sponsorship revenue, an analysis of the Premier League’s revenue distribution model, an assessment of the regulatory and competition issues in respect of the Premier League’s next sale of its broadcast rights, and reviewed an expert report regarding the collective selling of football rights following an investigation by the OFT.   Many of the studies she has led have been published, including: the BBC’s educational activities for the BBC Trust; the European pay TV sector in support of client submissions to Ofcom’s pay TV investigation; advertising effectiveness; the economic impact of the BBC, how Ofcom takes into account the consumer interest in its regulatory processes; the assumptions underpinning the reach projections for the BBC iPlayer; measuring media plurality on behalf of News Corporation, and a report for Ofcom on the commercial viability of local TV.   Alison has three degrees in economics. She was Research Assistant to Professor Patrick Minford and her M.Phil and D.Phil theses supervisor was Professor Stephen Nickell.  She was also a college lecturer at Oxford University.  Prior to joining CEG, she held positions at FTI, PwC, KPMG and NERA.  She is a member of the IAB’s Future Trends Working Group and is co-author with Suzanne Rab of “Media Ownership and Control: Law, Economics and Policy in an Indian and International Context” (forthcoming in Hart Studies in Competition Law in 2014). 

    Suzanne Rab 

    Suzanne is a barrister specialising in competition law at Serle Court, a leading chambers based in Lincoln’s Inn.  Suzanne has wide experience of EU law and competition law matters combining cartel regulation, commercial practices, IP exploitation, merger control, public procurement and State aid.  Suzanne advises in relation to a wide range of industry sectors, with a focus on industries that are subject to sector-specific regulation.  Suzanne has advised on a considerable range of competition law and regulatory issues in the converging communications and media sector including in matters relating to telecoms, online distribution, pay TV, newspapers, sports rights and licensing of copyright. In the telecoms sector, she has advised a UK mobile operator on the licensing, competition and regulatory aspects of the UK Competition Commission’s investigation into termination charges.  At EU level, she has advised on the European Commission’s competition investigation into differential pricing of iTunes in the EU Member States.  She has also been engaged to advise on the EU and UK competition law, regulatory and merger control issues relating to Video-on-Demand.  In the print media, Suzanne’s representative engagements include advising a UK investor on the competition law and public interest aspects of its proposed investment in a major UK newspaper quality title and a regional newspaper on the competition law implications of its distribution arrangements.  Suzanne has advised at the cutting edge of media plurality issues including advising News Corporation on the UK and EU competition law and public interest aspects of its proposed acquisition of the shares in British Sky Broadcasting Group that it does not already own.  In the audio-visual sector, she has advised a range of players from start-ups to major content owners and broadcasters.  Suzanne has advised extensively on the intersection between intellectual property and competition law in communications, and media and technology cases.  Suzanne has wide experience of advising business, governments, regulators and governments on the design and implementation of new laws and regulatory regimes in line with international best practices, including in telecoms and network industries.   

     

     In private practice as a solicitor for 15 years prior to joining the bar, she has held positions at magic circle and leading international antitrust practices.  Most recently she was an antitrust partner with a leading international practice.  She has also held the role of director at PricewaterhouseCoopers working within its strategy, economics and forensics teams. 

    Suzanne is also co-author with Alison Sprague of “Media Ownership and Control: Law, Economics and Policy in an Indian and International Context” (forthcoming in Hart Studies in Competition Law in 2014).



    [1] In contrast, demand for music licensing is often much wider than national e.g. from iTunes.

    [2] OECD Roundtable on Competition Issues in Television and Broadcasting, contribution submitted by the services of the European Commission, Directorate-General for Competition; p 92. See:  http://www.oecd.org/daf/competition/TV-and-broadcasting2013.pdf

    [3] Case 262/81 Coditel SA and others v Ciné-Vog Films SA and others [1982] ECR 3381.  Available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ .do?uri=CELEX:61979CJ0062:EN:PDF 

    [4] Judgment of the Court, Joined Cases C‑403/08 and C‑429/08.  Available at: http://curia.europa.eu/juris/document/document.jsf?text=&docid=110361&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=20618

    [5] TFEU refers to the Treaty of the Functioning of the European Union.

    [6] See:Commission Staff Working Document accompanying the report from the commission on Competition Policy 2012 at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri= SWD:2013: 0159:FIN:EN:HTML

    [7] DG Competition web page outlining the media sector.  Available at: http://ec.europa.eu/competition/sectors/media/overview_en.html

    [8] Although we note that this inquiry was not focused on absolute territorial protection, not least given its domestic remit. 

    [9] The CMA replaces the UK’s first stage and second stage competition authorities with effect from 1 April 2014.

    [10] See: Para 137, Judgment of the Court, Joined Cases C‑403/08 and C‑429/08.  Available at: http://curia.europa.eu/juris/document/document.jsf?text=&docid=110361&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=20618

    [11] Ibid.

    [12] Ibid.

    [13] CEG advised one of the parties in the CISAC case.

    [14] Case T-392/08 - AEPI v Commission, Case T-398/08 - Stowarzyszenie Autorów “ZAiKS” v Commission, Case T-401/08 - Säveltäjäin Tekijänoikeustoimisto Teosto v Commission, Case T-410/08 - GEMA v Commission, Case T-411/08 - Artisjus Magyar Szerzõi Jogvédõ Iroda Egyesület v Commission, Case T-413/08 - SOZA v Commission, Case T-414/08 - AKKA/LAA v Commission, Case T-415/08 - IMRO v Commission, Case T-416/08 - EAU v Commission, Case T-417/08 - SPA v Commission, Case T-418/08 - OSA v Commission, Case T-419/08 - LATGA-A v Commission, Case T-420/08 - SAZAS v Commission, Case T-421/08 - Performing Right Society v Commission, Case T-422/08 - Sacem v Commission, Case T-425/08 - KODA v Commission, Case T-428/08 - STEF v Commission, Case T-432 - AKM v Commission, Case T-433/08 SIAE v Commission, Case T-434/08 - TONO v Commission, Case T-442/08 - CISAC v Commission and Case T-451/08 - Stim v Commission

    COMPETITION LAW ADVICE FROM NEW MEDIA LAW

    December 4

    We are delighted to announce that Suzanne Rab is now working with New Media Law, and is available to advise clients on Competition Law issues via our office.

    Suzanne is an independent barrister specialising in competition law at a leading chambers based in Lincoln’s Inn. Suzanne has wide experience of EU law and competition law matters combining cartel regulation, commercial practices, IP exploitation, merger control, public procurement and State aid.

    Suzanne advises in relation to a wide range of industry sectors, with a focus on industries that are subject to sector-specific regulation. Suzanne has advised on a considerable range of competition law and regulatory issues in the converging communications and media sector including in matters relating to telecoms, online distribution, pay TV, newspapers, sports rights and licensing of copyright.

    In the telecoms sector, she has advised a UK mobile operator on the licensing, competition and regulatory aspects of the UK Competition Commission’s investigation into termination charges. At EU level, she has advised on the European Commission’s competition investigation into differential pricing of iTunes in the EU Member States. She has also been engaged to advise on the EU and UK competition law, regulatory and merger control issues relating to Video-on-Demand.

    In the print media, Suzanne’s representative engagements include advising a UK investor on the competition law and public interest aspects of its proposed investment in a major UK newspaper quality title and a regional newspaper on the competition law implications of its distribution arrangements. She has also conducted legal and economic analysis of competition and consolidation in the UK regional newspaper sector with PwC Economics.

    Suzanne has advised at the cutting edge of media plurality issues including advising News Corporation on the UK and EU competition law and public interest aspects of its proposed acquisition of the shares in British Sky Broadcasting Group that it does not already own.

    The law is a challenging platform from where we can genuinely help others + enjoy learning continous lessons. Objectivity, personability + excellent organisational skills are key. The size + nature of a niche media practice like ours allows me a good amount of flexibility with which I can also enjoy motherhood as well as a career in the law.

    To see Suzanne’s full CV (in pdf format) use the link below.

    http://www.newmedialaw.biz/pages/suzanne-rab.php

    PHILOMENA and THE SCOTTSBORO BOYS score a double hit!

    New Media Law’s clients scored a double triumph this week when TWO projects were simultaneously listed in The Sunday Times as Top Picks in the Film and Theatre Sections of their Critical List.

    Philomena” starring Judi Dench & Steve Coogan is produced by New Media Law film stalwart Peter Dally’s client Gaby Tana of Magnolia Mae Films. It has already won the Best Screenplay award at the Venice Film Festival and is tipped for Oscars. Peter’s producer client Josephine Buchan was involved in the production of  “The Scottsboro Boys”,  currently showing at The Young Vic. It ’s a musical based on the true story of a group of black teenagers wrongly accused of rape.  As per The Sunday Times review: “The appalling story of the wrongly imprisoned Boys is told as a disconcerting minstrel show, and it works brilliantly – grotesque, hilarious and shameful all at once”.

    Well done to Peter and of course CONGRATULATIONS! to Gaby and all involved in the production of “Philomena” and to Josephine, Catherine Schreiber and The Young Vic for “The Scottsboro Boys”!

    WOODY ALLEN / REQUIEM FOR A NUN - Copyright infringement?

    Faulkner Literary Rights, LLC v. Sony Pictures Classics Inc., et al

    ‘My dad was a nun..’ said Baldrick. 

    ‘Don’t be silly…., how could that be?’ said Blackadder. 

    ‘Because… when the judge said “Profession?”, my dad responded “Nun”‘.  Replied Baldrick!  

     

    This case concerns an ambitious claim by Faulkner Literary Rights against Sony. They claimed that the use of a quote from “Requiem for a Nun”, a book by William Faulkner, in the Woody Allen film “Midnight in Paris”, amounted to copyright infringement.

    Owen Wilson (the lead character) in Midnight in Paris misquoted Faulkner, and stated that: ‘The past is not dead! Actually, it’s not even past. You know who said that? Faulkner. And he was right. And I met him, too. I ran into him at a dinner party.’  This is a variation on the quote in Requiem for a Nun which reads: ‘The past is never dead. It’s not even past.’

    The courts tested for substantial similarity in copyright using both quantitative and qualitative analysis.  The plaintiff relied on the latter and stated that the quote was central to the theme of the book.  The courts rejected this under the established law that copyright protection does not reach to ideas (or concepts), only expression. 

    The US District Court for the Northern District of Mississippi ultimately found that the use of the quote was considered de minimis - a trifle which the law does not concern itself with. In short, a snappy line paraphrased and credited to the original author was considered fair use.

    The courts went on to add that if anything, the homage paid to William Faulkner in the film would increase the market value of Requiem for a Nun.  The fact that the case was even brought before the courts seemed to irk the judge who questioned ‘How Hollywood’s flattering and artful use of literary allusion’ came to be a point of litigation.

    Kester Mather – Intern at New Media Law, 17/10/13

    CHINA TIGER REVIVAL - Inaugural dinner

      CHINA TIGER REVIVAL

    Breaking news: 2 October 2013

    CHINA TIGER REVIVAL

    New Media Law would like to thank Sir David Tang and Stephen Fry for their most excellent hospitality at China Tang in the Dorchester Hotel last night (1st October 2013) for the inaugural dinner for China Tiger Revival.

    China Tiger Revival is a new charity set up by conservationist Li Quan, together with New Media Law partner Ian Penman (who is Chairman and founding director of the charity), with patrons Lord Clement-Jones, Lang Lang, Nick Rhodes and Jackie Chan.

    Its primary focus is working with the Chinese government to provide a protected habitat in China for the South China Tiger.  The South China Tiger is an endangered species, but thanks to the efforts of Li Quan, the Tiger is now slowly but surely increasing in numbers.  Li’s groundbreaking work in the re-wilding of the South China Tiger has shown that there is still a glimmer of hope for the survival of the species.

    New Media Law is proud to be associated with Li’s work, and with the support of patrons such as Sir David Tang and Stephen Fry, Li will be able to continue her vital work in ensuring that the words of William Blake continue to refer to an existing species that can still be seen by our children in the future.

    Tiger! Tiger! burning bright
    In the forests of the night,
    What immortal hand or eye
    Could frame thy fearful symmetry?

    In what distant deeps or skies
    Burnt the fire of thine eyes?
    On what wings dare he aspire?
    What the hand dare sieze the fire?

    And what shoulder; what art.
    Could twist the sinews of thy heart?
    And when thy heart began to beat,
    What dread hand? what dread feet?

    What the hammer? what the chain?
    In what furnace was thy brain?
    What the anvil? what dread grasp
    Dare its deadly terrors clasp?

    When the stars threw down their spears,
    And watered heaven with their tears,
    Did he smile his work to see?
    Did he who made the Lamb make thee?

    Tiger! Tiger! burning bright
    In the forests of the night,
    What immortal hand or eye
    Dare frame thy fearful symmetry?

    New Media Law - at www.rAsia.com

    Ian Penman and Rick Riccobono attended and spoke at www.rAsia.com in Moscow on 24 and 25 June 2013.

    The conference was in Moscow, and focussed on global licensing, the future of copyright and mobile.

    On Monday 24, Rick and Ian gave a presentation about the copyright licensing process for new models in the music industry, which led to an analysis of the future of copyright licensing.  The panel discussion that followed was moderated by Ralph Simon.

    The slides and transcription of the presentation can be found here:

    http://rasia.com/2013/forum/en/video-24

    But beware, the transcription is in Russian!

    On Tuesday 25, Ian participated in a panel discussion about content and mobile.

    More detail can be found at www.rasia.com:

     

    About the Forum

    On June 24-25 the international innovation Forum rASia.COM will be held at the Digital October centre in Moscow.

    It is a unique annual event encouraging  the exchange of latest technologies  and experiences between entrepreneurs from all over the world.

    The main goal of the Forum is to answer the most pressing question: ‘What will tomorrow bring?’ It will give us a new perspective and thus allow us to observe trends of the world economic system and help to evaluate the efficiency of our own business strategies in a new way, and get new ideas and inspiration.

    Traditionally, the Forum programme consists of 4 subjects:

    • wireless mobile technology and the Internet;
    • new media, up-to-date advertising technologies and marketing solutions;
    • venture capital funding, finance and investments, payment systems, innovative bank technologies;
    • content and entertainment business.

    The most current issues will also be covered:

    • innovations in luxury and premium markets;
    • amazing innovations (robots, 3D printing, augmented reality, immortality);
    • women and innovations, the female point of view on the situation;
    • Brands & Co-branding;
    • Made in Moscow.

    This year the Forum is focused on Indian business perspectives—”Doing business with India”.

    An exclusive video TELL (Techology, Edutainment, Life and Lifestyle) will be shot within the Forum with the participation of companies’ top managers: shareholders and and executives.

    The Forum will combine the reports by leaders from all over the world and they will share their success stories with the audience.

    Also, various training conferences, workshops and round table discussions will be held at Digital October.

    The Forum is an excellent opportunity to present your ideas and business models, finding new contacts and offering your services.

    Contacts: conference@rasia.com.

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