Relaxing whilst doing Competition Law is not an Oxymoron

The Commission accepts Paramount’s commitments: what limits for remedies in EU competition law?

with 5 comments

The Outer Limiits KI

The Commission announced yesterday that it has accepted the commitments submitted by Paramount. This is an important landmark in the Pay-TV case [Alfonso, who is representing an interested party, already wrote about Paramount’s commitments here]. It is in any event far from being the last chapter. There are no indications that the other major studios are willing to follow the same path.

The commitments offered by Paramount are very far-reaching, but not totally unheard of. As I understand them, Paramount has committed not to enforce its intellectual property rights against Sky (or any other broadcaster). More precisely, it has accepted not to require by contract the respect of copyright legislation and not to bring an action against Sky when the latter responds to unsolicited offers from subscribers based in EEA Member States other than the UK (sigh) and Ireland. The latter commitment may sound surprising, but we know at least since Huawei that enforcing intellectual property before a court may be a breach of competition rules.

What is truly extraordinary about these commitments is what the Commission does not say about them. The remedy package may not work at all, and it is likely that the Commission will not reach the outcome it wishes (i.e. that copyright-protected content is offered online across borders). One obvious reason is that taking action against a single copyright holder does not really change anything for as long as the legal status of the contested practices remains unclear.

The second reason is perhaps the most interesting. For these commitments to achieve anything meaningful, Sky (or any other broadcaster) would have to play the game. In other words, Sky would have to decide that it is willing and able to breach copyright. And I can think of many reasons why it may not be in the interest of a pay-TV operator to do so. If a pay-TV operator decides to undermine the value of copyright in other territories, the studios may decide to license their rights to other operators in the following auction. In addition, licensees in other territories may decide to fight back, making everybody worse off.

The third reason is (sigh) that referendum…

If it is far from clear that the remedies will achieve the outcome desired by the Commission, it is almost certainly because there was not a competition law problem in the first place. If you can’t fix it, it ain’t broke.

Written by Pablo Ibanez Colomo

27 July 2016 at 1:54 pm

Posted in Uncategorized

5 Responses

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  1. […] Pay-TV case is important in the context of FRAND licensing of SEPs because (as Chilling Competition notes) enforcing intellectual property claims in SEP licensing cases can amount to competition harm. The […]

  2. Legal aspects and the earlier referral to the InfoSoc Directive aside, I would like to pose a question from a more economical perspective: why should this product be given special treatment with regards to the exhaustion doctrine? Is the product truly that special? I find that hard to believe…

    Bram Nijhof

    28 July 2016 at 11:05 am

  3. Hi Bram,

    I think it is not appropriate to speak of a ‘product’. The product is a film. What makes the difference is the right at stake. The pay-TV case is about the right of communication to the public, as opposed to the right of distribution (which is at stake when we talk about the sale of DVDs).

    So the question should be: should the right of communication to the public be subject to exhaustion? To which I answer: of course not. The exhaustion doctrine only makes sense as far as the right of distribution is concerned.

    More precisely, the exhaustion doctrine makes sense when we are talking about (i) tangible property that (ii) can be resold. One can resell a DVD. Thus, it makes sense to limit the scope of the right to the first sale. One cannot resell a broadcast of a film. This is what the Court understood in Coditel I.

    Think about this question from a different perspective: the right of distribution gives the author the right to control the marketing of each copy of a DVD; and the right of communication to the public gives the right to control each broadcast.

    From an economic perspective: think about a copy of a DVD as a private good and a broadcast as an example of a public good (at least it is non-rival in use). And we know there is underinvestment in public goods in the absence of some form of protection.

    Pablo Ibanez Colomo

    28 July 2016 at 1:18 pm

  4. Hi Pablo,

    First of all, I think we can agree that non-tangible products can and often do represent a finite commercial value which can be exhausted, so said intangible nature in itself does not justify a special treatment.

    Secondly, though I agree with your classification of a broadcast as non-rival up to a certain extent, I have extreme difficulties classifiying the broadcast of Hollywood films as a public good;-). The non-rivalrous character also does not justify the special treatment, as long as payment for each individual ‘distribution’ of the broadcast is provided, which is the case with pay-tv subscriptions I believe (or in the case of film, one-time viewing, or rental for a fixed amount of time).

    The new technological options availbe to broadcasters today provide for numerous solutions to the issues that the Court faced in the Coditel era.

    Bram Nijhof

    28 July 2016 at 5:08 pm

    • Thanks for your comment, Bram!

      The point about intangible property is not that it has a ‘finite commercial value’, but that is non-rival in use (and yes, this includes Hollywood films!).

      For the rest: if you say that you would ensure that payment for each communication to the public is provided, you are imagining a situation in which there is no exhaustion, which was my point. So I guess we agree 😉

      Have a great weekend!

      Pablo Ibanez Colomo

      29 July 2016 at 1:13 pm

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