Chillin'Competition

The Canal+ judgment raised important issues relating to the interpretation of Article 9 of Regulation 1/2003. These were covered yesterday by Alfonso.

The substantive question underpinning the original Pay-TV case was equally important (and, to a certain extent, also novel). As I explained when commenting on AG Pitruzzella’s Opinion (see here), the challenge against the Paramount decision focused on contractual clauses limiting Sky’s ability, as a TV provider, to offer copyright-protected content across borders.

Of these, the clauses prohibiting Sky from making available, via the Internet, licensed content to customers outside the UK were by far the most interesting from a theoretical and a practical standpoint. These have been widely referred to as the ‘geo-blocking clauses’. I will focus my comments on these (leaving satellite aside).

In yesterday’s judgment, the Court did not rule on whether such contractual obligations are restrictive by object. It did not and could not. One should bear in mind that a commitment decision adopted in accordance with Article 9 of Regulation 1/2003 does not rule on whether Articles 101 and/or 102 TFEU have been infringed. By the same token, the Commission’s analysis in this context is limited to identifying concerns justifying an investigation.

The Court’s analysis in Canal+ was thus confined to whether the General Court had erred in law when it concluded that the clauses limiting the cross-border transmission of content justified the concerns raised by the Commission in the context of its preliminary assessment (paras 51-54).

In fact, the Court is careful to clarify that there is no ‘definitive’ conclusion as to whether there is an infringement. The press release issued by the institution expressly ‘emphasises the preliminary nature of the assessment of the anticompetitive nature of the conduct at issue in the context of a decision adopted under Article 9 of Regulation No 1/2003‘. This is a valuable clarification, as the preliminary assessment in a commitment decision (or a Court ruling reviewing it) can be (and is) mistaken for a statement of the law.

Are the geo-blocking clauses restrictive by object?

Even though we do not have a definitive answer to whether the geo-blocking clauses are restrictive by object, it looks like that the most recent developments in the case law provide the necessary framework to evaluate the question. Of these developments, Generics is probably the most significant one (see here for my case note, recently published in the Common Market Law Review).

It has long been clear that the qualification of an agreement as a ‘by object’ infringement requires an analysis of the economic and legal context of which it is a part. In Generics, the regulatory context (and in particular the intellectual property system) featured prominently.

It is clear from that judgment that, if there are ‘insurmountable barriers’ to entry, there would be no restriction, whether by object or effect. It is a good illustration of how the counterfactual operates at the ‘by object’ stage: if the absence of competition is attributable to the regulatory context (as opposed to the agreement), Article 101(1) TFEU would not be infringed.

Against this background, the question one should be asking is whether, in the economic and legal context of which the geo-blocking clauses were a part, there were ‘insurmountable barriers’ preventing Sky from offering copyright-protected content, via the Internet, outside the territories covered by its licence.

If you read the Commission’s preliminary asessment in Paramount, you will realise that this crucial question is never addressed (which is why it never came to a definitive conclusion about whether there was an infringement and why the Court could not rule on the matter). The full evaluation of the economic and legal context would have to wait for an infringement decision (or, why not, an Article 10 decision declaring there is no infringement after all).

Does the copyright system raise ‘insurmountable barriers’ to entry?

If one considers the applicable copyright regime, it is difficult to avoid the conclusion that it would be unlawful for Sky (or any other licensee) to offer protected content, via the Internet, outside the territory covered by the licence.

The Commission itself comes to this very conclusion in its first short-term review of the geo-blocking Regulation, published last month. As explained in the document, the lawful communication to the public of copyright-protected content online necessitates a licence in every territory in which the said content is made available.

Crucially for the Pay-TV case, the Commission confirms, in its review, that the above is true irrespective of whether the sale is ‘active’ or ‘passive’ (you may remember that Paramount focused on the fact that geo-blocking precludes passive sales; as the law stands, a transmission is not any less unlawful merely because it qualifies as a passive sale).

This is the background against which it would be necessary to evaluate whether the geo-blocking clauses raise ‘insurmountable barriers’ to the cross-border provision of content and thus whether they amount to a restriction by object.

The analysis comes across as more straightforward than in Generics. In the latter, there was a process patent that may or may not have been valid, which may or may not have prevented lawful entry by generic producers. In the Pay-TV case, on the other hand, it is not seriously questioned that providing content outside the territory covered by the licence would amount to a copyright infringement.

If so, one could reasonably argue that any absence of competition is attributable to the copyright regime, not to the geo-blocking clauses. However, we would have to wait and see (if the matter ever reaches the Court after a Commission decision or following a preliminary reference).

I will be addressing this and other matters in the forthcoming proceedings of the GCLC conference on vertical agreements that took place in January this year (that is, geologic eras ago). I presented on market integration (see here for my slide deck), which remains a fascinating and topical question (in particular when it overlaps with intellectual property). In this same vein, you may also remember my post on Ping written a few months ago too.

Here is the 4th batch of 2020 competition memes (click here for the first, second and third posts in these series). Given the very large number of contributions received we will not be able to post all of of them on the blog (the jury will see them all, though; we feel sorry for them…). Please remain assured that the selection below has been made pursuant to unfair, unreasonable and discriminatory criteria (and by a committee, which makes it even worse).