Murphy, round 2: does exclusive territorial licensing of pay-TV breach EU competition law?

The blog post below also appears on the Blackstone Chambers competition law blog. Readers interested more generally in competition law may wish to subscribe to the Competition Bulletin: http://competitionbulletin.com/.

According to a report in the Financial Times last weekend, the European Commission is on the verge of commencing a formal investigation into potentially anti-competitive restrictions in pay-TV licensing arrangements.  Such an investigation could have significant ramifications for any owners of television rights in sports fixtures (or other content) who seek to maximise their revenues by licensing on an exclusive territorial basis.

The last time similar issues came before the Court of Justice, a rights owner rather than the Commission was on the offensive.  In Joined Cases C-403/08 and C-429/08, Football Association Premier League Ltd v QC Leisure, Murphy v Media Protection Services Ltd [2012] 1 CMLR 29, FAPL was attempting to use criminal and civil law provisions of the Copyright, Designs and Patents Act 1988 to enforce its model of exclusive territorial licensing of satellite TV rights for the Premier League.  Mrs Murphy, a publican who had used an illicitly obtained satellite decoder card to show Greek satellite broadcasts of Premier League matches in her Portsmouth pub, famously persuaded the Court of Justice that national legislation prohibiting the import, sale and use of satellite decoder cards from elsewhere in the EU contravenes the free movement rules in the EU Treaties, and that restrictions such as those in the licence agreements between FAPL and its satellite broadcasters, obliging the licensee not to provide decoding devices outside its territory, contravene Article 101 TFEU.  Her appeal against conviction (for the offence of fraudulently receiving a programme included in a broadcasting service) was successful.  Yet FAPL snatched victory from the jaws of this defeat, establishing in the QC Leisure litigation that activities such as Mrs Murphy’s are actionable as copyright infringement.

In summary, the position after Murphy and QC Leisure is that:

• It is not an offence to subscribe to a non-UK EU satellite broadcaster and to use a foreign decoder card to receive broadcasts from that broadcaster (since domestic law restrictions contravene free movement principles).

• The private use of foreign decoder cards to receive and display foreign satellite broadcasts of sports events does not involve copyright infringement by the private user (since there is no “communication to the public”, the relevant restricted act under the 1988 Act for receipt and simultaneous screening of a satellite broadcast or other live stream).

• Satellite broadcasting licence agreements may not (by force of Article 101 TFEU) impose restrictions requiring broadcasters to prevent customers using their satellite decoder cards in territories other than those for which the licence is granted.

• However, publicans who use foreign decoder cards to screen foreign satellite broadcasts of Premier League matches for their customers will be infringing copyright (more precisely, the “communication to the public” right) and liable to civil or criminal action in respect of such infringement; the same will be true in relation to any other copyright TV content which has been licensed for broadcast on an exclusive territorial basis.  (A nice technicality is that the only copyright publicans will be infringing is the copyright in logos superimposed upon the video feed and any additional graphics and accompanying music: in respect of the films themselves a defence is available under section 72 of the 1988 Act).   To that extent, exclusive territorial models of pay-TV licensing survived the litigation.

On the competition law point, the Court of Justice held that licence restrictions controlling the use of decoder cards by territory are intended to eliminate competition between broadcasters on a territorial basis, an anticompetitive object in contravention of Article 101 TFEU (¶¶142-144).  The Court did not, however, address the legitimacy of the grant of exclusive territorial licences themselves, since (as it noted at ¶141) that had not been challenged.   Exclusive territorial licences do not per se offend Article 101 TFEU: as the Court of Justice held in Case 262/81 Coditel II [1982] ECR 3381 at ¶20, the question is ‘whether in a given case the manner in which the exclusive right conferred by that contract is exercised is subject to arrangements the object or effect of which is to prevent or restrict the distribution of [the works] or to distort competition on the [relevant] market, in the light of the specific characteristics of that market’.

The Court of Justice in Murphy rejected FAPL’s attempt to justify national restrictions on free movement in Murphy in stark terms: the payment of a premium to ‘guarantee absolute territorial exclusivity which is such as to result in artificial precise differences between the partitioned national markets… goes beyond what is necessary to ensure appropriate remuneration for right holders’, such partitioning and artificial price differences being ‘irreconcilable with the fundamental aim of the Treaty, which is completion of the internal market’ (¶¶115-116).  Against that background, can the licensing arrangements of FAPL and others pass the Coditel II test?  Might FAPL’s attempts to use copyright enforcement to protect its licensing model even be characterised as an abuse of a dominant position by attempting to partition the internal market on national lines?  Answers on a postcard, addressed to Brussels.