Chillin'Competition

On the first anniversary of Cartes Bancaires (see here for Alfonso’s instant classic on the judgment), Commissioner Vestager gave a speech on Intellectual Property and Competition at the IBA Competition Conference in Florence. There is no trace of the ruling in the speech. There is, on the other hand, a reference to another carte. It is not the carte bleue either but the carte blanche, and this, in the context of a statement with which it is difficult to disagree (‘property rights never give you a carte blanche for exemption from regulatory obligations’).

The speech addresses two issues that have been abundantly discussed in the blog. Standard-essential patents – surprise – is one of them. Pretty much in line with Alfonso’s position, the Commissioner appears to interpret Huawei as broadly endorsing the Commission approach to the matter. The second one is the Pay TV case (and this in the context of the Digital Single Market Strategy). To mark Cartes Bancaires’ first birthday, I will focus on the latter.

You will remember that the Commission sent a Statement of Objections to Sky UK and the major studios. It was suggested in the press release that geo-blocking provisions prohibiting Sky UK from offering its online content outside of the UK are restrictive of competition by object (see here for my reaction). Commissioner Vestager’s speech insists on the same idea. It is valuable because it is less ambiguous than the press release in several important respects and thus more explicit about the challenges that the Commission will face in the Pay TV case.

Commissioner Vestager makes it very clear that Sky UK would not be able to offer its content online in the Member States where the rights have been licensed to another broadcaster. If it did, it would be breaching the rights of that licensee. Accordingly, removing the contentious geo-blocking provisions would not be enough to promote the cross-border provision of copyright-protected content in the EU. It would only be possible to achieve this policy goal– and the Commissioner is explicit and candid in this regard – by changing copyright rules.

So to recap: even in the absence of geo-blocking obligations, Sky UK would not be able to lawfully offer its online services in territories allocated to other licensees. It would have to breach the latter’s copyright to do so. Are these obligations be restrictive of competition by object, then? Cartes Bancaires (in line with Murphy) was a good reminder of the importance of the economic and legal context of an agreement when establishing whether it is restrictive by object. And I cannot think of a better classroom example than this case to show that such context can make a real difference in practice.

It is clear since Societe Technique Miniere that an agreement is only caught by Article 101(1) TFEU when it restricts competition that would otherwise have existed. This is the famous counterfactual analysis, which featured prominently in landmark cases like European Night Services, O2 (Germany) and, more recently, E.On/GdF. Interestingly, this principle has been explicitly endorsed by the Commission in the context of parallel trade restrictions. According to the Guidelines on vertical restraints, even absolute territorial protection may fall outside Article 101(1) TFEU altogether (i.e. it may not restrict competition by object or effect) if the counterfactual analysis reveals that no market entry would have occurred in the absence of the agreement. In the same vein, the Commission takes the view in the Guidelines on Article 101(3) TFEU that the counterfactual analysis applies both to potential restrictions by object and by effect.

Against this background, and since the Commission seems to concede – now unambiguously – that Sky UK would only be a potential competitor to other licensees in a different economic and legal context (that is, only following the reforms of copyright rules), I fail to see how, in the post-Cartes Bancaires universe, an agreement of this kind can be considered to be in breach of Article 101(1) TFEU ‘by its very nature’. As usual, however, I would love to read your views on this question. And please note that all of this goes without even starting to discuss Coditel II and Murphy!