No.47 May 2006 |
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This paper was presented at the Congress Sports
& Law on 28 April 2006 in Berlin, Germany and The views expressed
are the author’s personal views only and do not in any way represent
any official view or position of DG Competition or the European Commission.
Introduction
Ladies and gentlemen, it is a great pleasure for
me to speak at this Congress today. I will give a review of the most important
events regarding sports media rights in Europe from an EC Competition
Law1 perspective. The Commission's enforcement
activities have in particular related to the joint selling of media rights
and exclusive media rights deals. The Commission has adopted a number
of decisions on sports media rights and so have the national competition
authorities. The Commission has moreover made a sector inquiry into the
availability of sports content for mobile telephony. The study showed
us that some of the competition problems known in the traditional media
markets may also cause problems in the new media markets and may slow
down the developments of these markets. I will finally look at what the
future may bring us.
1. The Issues for the European Commission
The liberalisation of the TV markets in the 1980-1990s
has led to a proliferation of TV channels. Now, new media services are
beginning to crowd the market too. The result is an unprecedented demand
for sports media rights, as a minimum portfolio of sports rights seem
to be crucial for most media operators. The concentration of valuable
media rights in the hands of very few sports federations limits their
availability. Availability of media rights is reduced still further by
media rights contracts being concluded on an exclusive basis for a long
duration. The rights are often sold in a bundle and cover a whole event
and all modes of exploitation. This is generally to the advantage of the
largest operators, because they are the only companies that are able to
bid for these large rights packages. These are market circumstances where
anti-competitive practices can thrive. We see behaviour such as output
restrictions, market foreclosure or hampered development of certain markets
such as new media markets. This is likely to cause consumer harm in terms
of higher prices, reduced access to services and media content.
2. The Commission's Competition Law Enforcement
Activities
2.1.1. The relevant markets
Any starting point in an anti-trust investigation
is defining the relevant market. The test is set out in the Commission's
notice on the definition of the relevant market for the purposes of EC
Competition Law. It is basically a test of substitutability of products.
When we talk about substitutability of sports media
content - in plain language - a viewer who wants to see a given sports
event is unlikely to be happy with the coverage of any other event. This
applies in particular to top sports events. This has an impact on the
ability of an operator to sell advertising space and subscriptions.
In determining the relevant product market, we have
therefore looked at the ability of content to attract an audience; the
configuration of that audience; advertising revenues; and brand image.
The evolution of the Commission's practice has lead
to the definition of distinct relevant product markets as narrow as the
media rights to premium football events played regularly throughout the
season2.
In the media sector, products and services are not
always clearly separable. Questions arise to what extent technological
convergence affects the Commission’s analysis with regard to
the market definition in the media field. When we first looked at football
cases in the late 1990’s, Internet was a dial-up 56 K modem. Now
it is broadband with an amazing transmission capacity and very sophisticated
software that permits audio-visual streaming of TV like services and much
more. Such technological development is likely to lead to a redefining
of market definitions. Our original, rather technological platform oriented
approach, is valid as long as each platform displays distinctive characteristics
with respect to the service offered, such as in respect to new media rights.
Converging technologies are likely to make us focus more on the actual
service provided and much less on the technological platform used to distribute
the service. Example: A Cable TV network using IP based technology cannot
be called an Internet service, if the service actually provided carries
the characteristics of a TV service. Therefore you will be able to see
in the commitments made by the English Premier League that: “the
FAPL shall award the Live Audio-Visual and the Near-Live Audio-Visual
Packages on a technology neutral basis in respect of the delivery systems
and technologies by which the Core Rights in those Packages are capable
of being exploited.”3
Another important aspect of this issue is the situation
in which the media service is consumed. Our sector inquiry into 3G mobile
services has pointed to the significance of this aspect. A viewer who
has access to a home cinema TV is unlikely to substitute that viewing
experience with that of a mobile handset. Therefore, let me simply state
that at present, DG Competition notes that sports media rights can be
consumed via very different distribution modes and provide services each
displaying their own characteristics, which may be consumed in very different
circumstances. The market definition of converging services and technologies
provides a moving target, where we will have to put more and more emphasis
on the service provided and the circumstance in which it is consumed.
I think that the trend of focusing on the service rather than the technology
is moreover illustrated by the proposal for the new Television without
Frontiers Directive4 ,
which does not put emphasis on the distribution mode but on the actual
service provided.
Our case by case approach, under which we each time
undertake a careful market research is a guarantee that we will continue
to update our market definitions so that they remain valid at any relevant
time.
2.1.2. How does joint selling restrict competition?
Let me now turn to the Commission’s investigations
of joint selling arrangements. Joint selling describes the situation where
Clubs entrust the selling of their media rights to their Association.
A joint selling arrangement is a horizontal agreement. It is caught by
the prohibition in Article 81(1) of the EC Treaty, as the agreement prevents
the individual clubs each having a relatively small market share from
individually competing in the sale of media rights. Instead, we have a
joint sales organisation with a significant market power. Markets that
would be demand-led thus become supply driven. In the cases we have investigated,
we have typically identified the following types of restrictions causing
consumer harm:
The Association (the joint selling body) may either
internalise the marketing function by investing in an own sales organisation
– or it may outsource this function to a Marketing Agency5.
The relationship between the Association and the Marketing
Agency can often be characterised as a real agency relationship where
the Association carries the economic risk and the Marketing Agency acts
in the name of the Association. Real agency relationships are not caught
by the prohibition in Article 81 of the EC Treaty. If the Association
sell the rights to the Marketing Agency it is a transaction in the sense
of Article 81 of the EC Treaty6.
The Commission is neutral with respect to the marketing
model chosen by the Clubs and the Associations. However, it will investigate
the restrictive effects of the arrangement chosen by the parties such
as a joint selling arrangement.
2.1.3. Do joint selling arrangements create efficiencies?
The European Commission considers that joint selling
arrangements do create efficiencies within the meaning of Article 81(3)
of the EC Treaty. They can be carefully balanced so that the pro-competitive
effects outweigh the negative effects. A joint selling arrangement has
the potential of improving the media product and its distribution to the
advantage of football clubs, broadcasters and viewers.
The Commission has in particular identified three
types of benefits:
2.1.4. Remedies to address competition concerns
The question is then how to balance a joint selling
arrangement so that it becomes pro-competitive. The Commission applies
a number of standard remedies when addressing competition concerns resulting
from joint selling arrangements and exclusive media rights deals. These
may be intensified if required by the concrete market situation:
2.1.4.1. Standard approach: Remedy foreclosure by tendering.
The risk of foreclosure effects may be reduced by
the organisation of a competitive bidding process under non-discriminatory
and transparent terms at regular and frequent intervals. This approach
is being used in all of our cases, as it gives all potential buyers an
opportunity to compete for the rights.
2.1.4.2. Standard approach: Remedy foreclosure by limiting
duration of exclusive vertical contracts.
The Commission acknowledges the need for a certain
degree of exclusivity to protect the value of rights. We therefore address
the risk of long-term market foreclosure by requiring the joint selling
entity to limit the duration of the exclusive rights contracts to no more
than 3 seasons. This is a “sun setting” mechanism. A longer
duration creates a risk of a successful buyer being able to establish
a dominant position on the market, which reduces the scope for effective
ex ante competition in future bidding rounds. In the SkyItalia
merger case, we even went further. The merged entity undertook to buy
football rights for no longer than 2 seasons at the time and only for
DTH satellite distribution.7
2.1.4.3. Standard approach: Remedy foreclosure by limiting
scope of exclusive vertical contracts.
The Commission seeks to reduce the risk that a single
buyer acquires all valuable rights by obliging the joint selling entity
to unbundle the media rights in separate packages. This is a limitation
of the scope of exclusivity. More specifically, the Commission requires:
2.1.4.4. Standard approach: Remedy output restrictions:
fall-back option, use obligation, parallel exploitation.
The risk of output restrictions is reduced by a
requirement that unused rights should not be tolerated. This means that
where a joint selling body has not managed to sell rights by a certain
cut-off date, the entitlement to sell the rights fall back to the individual
clubs (“no hoarding”). The club is then at liberty to sell
the rights to any interested buyer in competition with the joint selling
body.
A use obligation prevents an operator from acquiring rights with a view to keep them off the market to protect another type of rights, which he exploits. In addition, we may require parallel exploitation.
In the UEFA Champions League case, the Commission ensured market availability
of deferred highlights and new media rights by imposing the parallel exploitation
of these rights by the individual clubs and UEFA.
2.1.4.5. Intensified approach: No single buyer
obligation.
If a serious foreclosure risk exists already
ex ante due to the presence of a dominant undertaking, which is likely
to acquire all valuable rights packages, an intensified approach may be
required as a safety net under the standard approach.
The imposition of a no single buyer requirement
would normally only be justified where a single buyer would secure a dominant
position extending beyond the duration of the contract in question. In
these circumstances, the standard approach is insufficient to ensure that
effective competition is maintained on the market.
It would also be possible to address the no single
buyer issue on the basis of Article 82 of the EC Treaty, which prohibits
the abuse of a dominant position.
2.1.4.6. Intensified approach: Limitation of exploitation
platform.
In the SkyItalia merger case, the European
Commission not only required a limitation of the maximum duration of contracts
with rights owners to two years, but it also limited the scope of the
exclusive football rights to be exploited by SkyItalia to DTH
satellite transmission.8
I would not exclude that such an approach could be applied with respect to new media rights in converging markets, if there would be a risk that a dominant operator in one market would extend this dominant position into a neighbouring market. 2.1.4.7. Intensified approach: Trustee.
The Commission may also require that the tender
procedure is overseen by a trustee who reports back to the Commission
to ensure and guarantee that a tender procedure is undertaken in a fair,
reasonable and a non-discriminatory manner.
2.1.4.8. Intensified approach: Sublicensing.
Where dominant downstream players have acquired
exclusive rights for neighbouring markets, full sublicensing of such rights
would be a feasible solution.
In the SkyItalia merger case a system of
“wholesale offer” of premium content was put in place, whereby
SkyItalia had to sublicense acquired “premium content”
rights on a non-exclusive basis to third parties active on other means
of transmission than DTH.
3. The Latest Cases
There have been a few cases during recent years.
The leading precedent is the UEFA Champions League case from July 2003
in which the Commission first accepted joint selling of football rights
and laid out the principles for a pro-competitive rights structure and
sales procedure. While the Commission's intervention was originally seen
as very controversial, it turned out to become a positive experience.
I would like to refer to Richard Worth, managing director of TEAM Marketing,
who acknowledges the positive impact that the European Commission's intervention
has had on the marketing of the UEFA Champions League media right.9
3.1. DFB – The German Bundesliga case
The next decision after the UEFA Champions League
case was the Commission’s decision in January 2005 on the Bundesliga.10
The Bundesliga case concerned a classical joint
selling arrangement where the clubs sell their media rights via a joint
selling company, DFL.
The proposal for commitments contained the classical
way of segmenting the rights into separate rights packages for TV broadcasting,
Internet and mobile platforms. Rights were to be disposed of using a public
tender procedure and exclusive rights contracts were not to exceed 3 years.
According to what I have read in the press, the
first tender procedure under the new regime has been terminated. From
the European Commission's point of view the result seems satisfying. There
seems to have been fair competition for the rights and it has led to a
good distribution of rights on the German market.
3.2. The FAPL case
The Commission has just made a formal decision in
the English Premier League case.11
Following the Commission's statement of objections
in December 2002, the Premier League presented a new commercial policy.
In July 2003, an invitation to tender was launched for the 2004-2007 seasons,
and most notably four packages of live TV rights, which were ultimately
won by BSkyB. The Commission raised certain concerns about the rights
that were offered, as well as the conduct and the outcome of the tender
procedure. Further settlement discussions took place.12
The provisional result, which followed the Commission's
standard approach, was market tested in April 2004:
The sales process will be overseen by a Monitoring
Trustee.
The first time the amended sales process will come into practical test will be for the 2007-2010 football seasons. I understand that the procedure has been launched - let us wait and see what happens. 3.3. National cases
As you know, in the spirit of modernisation, the
Commission puts emphasis on cooperation with national competition authorities
in the framework of the new anti-trust procedures that have applied as
of 1 May 2004. The Commission encourages national competition authorities
to intervene in cases where they seem better placed to do so and they
have done so in a number of cases.
One of the more exciting national cases was the
sale of the Belgian football rights in 2005. The Belgian League organised
a tender procedure for the sale of six different television rights packages
for three seasons. Belgacom, the Belgian telecoms operator bought up all
rights with a view to launch a new IP based TV service. I am not so worried
about Belgacom acquiring all rights this time around as Belgacom is a
newcomer in this market. Therefore no ex ante dominance exists.
I know that some of the bidders are unhappy about
the conduct of the tender procedure and there is currently litigation
before the Belgian courts, so it would not be pertinent for me to speculate
further at this time.
4. Sector Inquiry
Let me finally mention the sector inquiry into the
availability of sports content for 3G mobile services, which the European
Commission launched in January 2004.15
The inquiry is now concluded.16
The sector inquiry concluded that there are general
characteristics that make the viewer experience of sports content watched
over mobile devises fundamentally different from TV, such as cost of usage,
the content available and in particular, the length of time that consumers
want to spend viewing the content and the ability to personalise the viewing
experience. It seems that mobile platforms will be used when the viewer
has no access to TV as the viewer generally prefers watching the action
on a bigger screen.
The inquiry found four main bottleneck problems
that may risk limiting the access to sports content on mobile devices:
The sector inquiry has enabled us to get a clearer
view on the prevailing commercial behaviours in the value chain of sports
content for mobile platforms. The European Commission advocates a competition
policy that assures access to sports rights for distribution over mobile
platforms is not unduly restricted through anti-competitive practices
resulting in output limitations. Market players are invited to address
possible anti-competitive conduct and effects resulting from their business
practices. The European Commission will take account of the findings of
the inquiry in future proceedings in this area.
5. The Future - Conclusion
I do not anticipate revolutions in EC Competition
Law enforcement with respect to the sports media markets in the near future.
Converging media markets raise new issues for the
European Commission's enforcement of EC Competition Law in the sector,
however, this has been around the corner for a long time. Convergence
has not happened as quickly as predicted, but has moved along at a rather
moderate pace with respect to the broad consumer market.
Operators will certainly want to provide converged
services and to be present on all markets and platforms. That is OK as
long as it does not lead to the extensions of any dominant positions,
market foreclosure and output restrictions.
As I said in relation to the definition of the relevant
market, we will see a gradual change from a technological platform based
approached to a more purely service characterised approach, as illustrated
by the English Premier League case. However, since we approach the sector
on a case by case basis, we are able to make fresh analysis of the markets
and therefore also adopt our analysis to new developments in converging
media markets.
However, our fundamental approach, as I have outlined
it, will also stand the test of convergence, I think. Our objective is
to maintain open and competitive media markets and a level playing field
for all parties without market foreclosure and output restrictions, so
as to maintain a culture where innovation can thrive to the benefit of
consumers, business and the sports.
Thank you for your attention. 1 OJ C 372 on 9/12/1997.
back
2 In BIB/Open (Case IV/36.531 OJ 1999 L 312/1, 28) the Commission defined separate markets for the wholesale supply of film and sports channels observing that movies and sports are “key sales drivers” for pay-TV operators. In TPS I (Case IV/ 36.237 OJ 1999 L 90/6, 34) the Commission found it universally acknowledged that film and sports are the most popular television products are able to achieve high viewing figures and reach an identifiable audience, which is especially targeted by certain advertisers. In the UEFA Broadcasting Regulations case (Case IV/37.576 OJ 2001 L 171/12) hinted that a separate market for the broadcasting (and new media) rights for football events played regularly throughout every year could exist. This view was confirmed in the cases Newscorp/Telepiu (Case COMP/M.2876), EC — TPS (OJ L 90, 2.4.1999, p. 6), Canal+/RTL/GJCD/JV (COMP/M.2483)(IP 01/1579), COMP/C.2-37.398 - Joint selling of the commercial rights of the UEFA Champions League, Commission decision of 23 July 2003, OJ L 291, 8.11.2003, p. 25. COMP/C.2-37.214 - Joint selling of the media rights to the German Bundesliga, Commission decision of 19 January 2005, OJ L 134, 27.05.2005, p. 46. Notice published pursuant to Article 19(3) of Council Regulation No 17 concerning case COMP/C.2/38.173 and 38.453 - joint selling of the media rights of the FA Premier League on an exclusive basis, OJ C 115, 30.04.2004, p. 3-6. In line with the UEFA Champions League exemption decision, and the DFB commitment decision, as well as a number of similar decisions at national level in the United Kingdom and elsewhere, the Commission’s preliminary conclusion is that the broadcasting rights to premium football events played regularly throughout the season constitutes a distinct relevant product market. back 3 Paragraph 2.5 of the FAPL’s commitments: http://europa.eu.int/comm/competition/antitrust/cases/decisions/38173/commitments.pdf back 4 The Commission adopted the legislative proposal for the revision of the “Television without Frontiers” Directive on 13 December 2005. This proposal provides a set of basic rules for all audiovisual services and modernizes the rules of the current Directive for television services, COM (2005) 646 final. Article 1c): “television broadcasting’ or ‘television broadcast’ mean a linear audiovisual media service where a media service provider decides upon the moment in time when a specific programme is transmitted and establishes the programme schedule”; Article 1 e): “non-linear service’ means an audiovisual media service where the user decides upon the moment in time when a specific programme is transmitted on the basis of a choice of content selected by the media service provider”; back 5 E.g. Television Event and Media Marketing AG (T.E.A.M.), an independent marketing company, assists UEFA in the implementation and follow-up of the commercial aspects of the UEFA Champions League. As an agent under UEFA's control and responsibility, T.E.A.M. conducts negotiations with the commercial partners. The agreements are signed and executed by UEFA, which assumes all legal responsibilities. See paragraph 14 of Commission Decision of 23 July 2003 relating to a proceeding under to Article 81 of the EC Treaty and Article 53 of the EEA Agreement concerning Joint selling of the commercial rights of the UEFA Champions League. back 6 On this market, see the Commission's decision in Case No COMP/M.2483 - GROUP CANAL + / RTL / GJCD / JV back 7 Case No COMP/M.2876 – Newscorp/Telepiu’, Commission Decision of 2 April 2003. back 8 See case COMP/M.2876 – Newscorp/Telepiu, Commission decision of 2 April 2003, §231, that records that Newscorp undertook in respect of ongoing exclusive contracts to waive exclusivity and other protection rights for non-DTH transmission for football and other sport events. This will allow operators competing on other means of transmission (for example, cable, Internet and UMTS.) to have direct and immediate access to premium sport contents. Regarding future exclusive contracts §233 records as regards football rights, the limitation of the duration of future exclusive contracts for DTH transmission with football teams to two years and the unilateral termination right granted to football right owners are effective undertakings, in that they will make premium football contents contestable on the market at regular intervals. back 9 See Sportbusiness international, the December/January 2006 issue, page 47, in the article “In a league of its own.” back 10 OJ L 134, 27.05.2005, p. 46. back 11 IP/06/356: Competition: Commission makes commitments from FA Premier League legally binding, of 22 March 2006. back 12 For the results, I refer you to the European Commission's press release of 16 December 2003, IP/03/1748 back 13 Essentially, clubs can: (i) exploit their matches on their own club TV channels a certain period after the match has been played (depending on when the match is played); (ii) exploit their matches on club web-sites from midnight of the day of the relevant match; and (iii) offer mobile clips on club mobile subscriptions (from 12 hours following the end of the relevant match). back 14 Essentially, in case any of the live TV packages remains unsold at the beginning of the season, then the relevant matches can be exploited by clubs. back 15 Commission decision of 30 January 2004, see IP 04/134. back 16 http://europa.eu.int/comm/competition/antitrust/others/sector_inquiries/new_media/3g/ back ![]() http://www.icsspe.org/portal/index.php?w=1&z=5 |
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