FACULTY OF LAW
Lund University
Ali Bigdeli
Audiovisuals in the European Union
with
Competition Law perspective on the
legal policies in charge
Master thesis
30 credits
Henrik Norinder
Master’s Programme in European Business Law
Spring 2013
Contents
1
SUMMARY
1
2
PREFACE
3
3
ACKNOWLEDGMENTS
4
4
ABBREVIATIONS
5
5
INTRODUCTION
6
5.1
Some kind of introduction
6
5.2
Purpose
8
5.3
Material
9
5.4
Method
10
5.5
Delimitations
10
5.6
Outline
11
6 AN OVERVIEW OF THE AUDIOVISUAL INDUSTRY WITH
THE FOCUS ON TV-BROADCASTING AND MOVIE INDUSTRY 13
7
MARKET DEFINITION IN AUDIOVISUALS
8 GENERAL REMARKS ON EU COMPETITION LAW AND
AUDIOVISUALS
17
20
9 POSITIONS HELD BY AN AUDIOVISUAL UNDERTAKING,
ABUSE OF DOMINANT POSITION
22
9.1
General remark on abuse of dominancy
22
9.2
Dominant position held by an undertaking
23
9.3
Unjustifiable Abuse of dominancy and balancing
24
10 AGREEMENTS BETWEEN AUDIOVISUAL UNDERTAKINGS,
CONCENTRATIONS VIA HORIZONTAL AND VERTICAL
AGREEMENTS
29
10.1 General remarks on Horizontal and Vertical agreements
29
10.2 Relevant Market definition
31
10.3 Concentration by Horizontal or vertical Agreements
31
10.4 Competitive assessment of a Concentration and balancing
33
11 PUBLIC TV-BROADCASTING, EXCLUSIVITY AND SPECIAL
RIGHTS GRANTED
38
11.1 General remark on exclusivity and speacial rights
38
11.2 Legislation
39
11.3 Exclusivity and/or special rights granted to Public TV-Broadcaster
and balancing
40
12 STATE FINANCIAL AID TO AUDIOVISUALS
12.1 General remarks on State Aid granted to TV-Broadcasting and
Movie Industry
12.2
Legislation
12.3 State Aid granted to TV-Broadcasting and Movie Industry,
balancing
44
44
44
46
13 CONCLUSION
49
14 BIBLIOGRAPHY
55
15 TABLE OF CASES
59
1 Summary
Published Data from the European Investment Bank and the Audiovisual
Observatory in EU implies that the U.S. made Audiovisuals has dragged
down European Audiovisuals' market share in EU market. Apparently, the
constant situation is rising up some concerns about the future of the industry
and the cultural, social and economical externalities.
Considering the double nature of Audiovisuals and their character and
nature, two sets of wants and principles are recognisable in governing the
field. The market principles are governing the economical facets and
broader public principles are governing the cultural and social facets. The
both said principles are harnessing the "motive" to grow in the industry and
are hoping for a better balance and sustainability.
Briefly, the quality and the process of balancing as a variable in relation to
different wants and values can be discussed in two settlements.
On one settlement, the focus is on the Industries' attempts, their urges to
grow and gaining competitive positions in the market. Noticeably, this
attempt has been taken via the two main trends of having a dominant
positions and concentrations. Both trends are taking financial and
economical consideration as a motive.
By abusing a dominant position, an undertaking seeks to strengthen its
dominant yet unstable market position. Regarding this, the refusal to
provide media content is a noticeable and common form in audiovisuals.
By concentrating through the value chain and with other undertakings at
different or at the same market level, a company seeks to raise its efficiency
and competitiveness by reducing risks involved and benefiting from the new
facilities and potentials made by the network.
Various discussions are initiated in this part. These discussions cover
different topics such as the economical and financial rationale behind the
businesses' trends, the competitive restraints that Anti competitive acts may
cause, assessment of dominancy, assessment of an abuse, thresholds, market
share, justifications etc.
On the other settlement, the focus is on the Member states' attempts to help
and support the industries' growth. Distinctly, the two main governmental
supports take the form of exclusivity and special rights or State Financial
Aid granted to undertakings.
By granting exclusive or special rights, a member state seeks to strengthen
the market position of a public undertaking (including but not limited to
public TV-Broadcaster). This kind of interventions in the competitive
market is aiming to support the public and humanitarian principles (e.g.
provision of unbiased information to citizens). Considering the role of TVBroadcasters in the value chain and the life cycle of media contents,
governmental interventions by putting private sector in a competitive deficit
may result in negative externalities.
By granting State Financial Aid and injecting fiscal helps to specific sectors
in the industry, member states are aiming to support the industry by
strengthening undertakings' market position in comparison with their
competitors' and to ease down the financial risks involved. Moreover, parts
1
of these State Aid helps are devoted to supports for Cultural values and
social principles.
Different discussions are originated from the member states' policies in
supporting the industry. Notably, these discussions are about competitive
restraints, distortion of competition by public interventions, cultural and
social concerns involved, proportionality of a State Aid measure, criteria
introduced for the admissibility and legality of a State Aid, efficiency of
these fiscal supports and set thresholds and justification.
As can be seen, on the two settlements above, the main concern is keeping
the balance between all the considerations. These EU considerations at the
bottom line are derived from being aware of the double nature of
Audiovisuals. Consequently, the published figures, narrating the market
deficit of European audiovisual works in comparison with the U.S. made
ones, are and were predictable.
2
2 Preface
The field of audiovisual industry and related businesses have always been
my field of interest. As a movie collector and a music fan, I have always
been curious about these fields. My interest drove me to choose the topic of
my Master degree thesis in the same field hoping that I will continue
working and researching in the very same topic.
In the beginning of this study, I found out the variety and amount of the
materials are as many as are the products. I went through some and tried to
categorize them in accordance with the pre-sketch of my discussions in my
mind. I took the list to H. Norinder to have his comment on the general idea.
He looked at the paper in my hand with the list of materials and arrows,
showed me his desktop picture on the computer. The picture was taken from
some homes with canals in between and little bridges and old designed
vases and a man standing in front of a door. Probably, it was a scene from
Venice. Then he said, "This picture is the field of Audiovisuals in EU and
we are going to talk about this guy's yellow T-shirt."
Apparently, "the yellow T-shirt" in Audiovisuals is the Competition Law
Perspective on legal policies in charge.
Although this study is a limited perspective of the whole discussions and
studies, but the hope is that it will provide with an understanding on the
industry.
3
3 Acknowledgments
First, I would like to thank my supervisor H. Norinder for helping me with
this study and motivating me all the way through. His guidance and attitude
made the work under his supervision a charming chore.
I would also like to thank M. Shajarian, Pink Floyd, M. Namjoo, Mark
Knopfler, Gorillaz and Balmorhea for playing their music in my headphone
while I was writing this thesis.
4
4 Abbreviations
AVMSD
Audiovisual Media Services Directives
CABSAT
Cable and Satellite Directive
EAO
European Audiovisual Observatory
EC
EC Treaty
ECHR
European Convention on Human Rights
ECJ
European Court of Justice
ECTT
ECtHR
European Convention on Transfrontier
Television
European Court of Human Rights
EEA
European Economic Area
EEC
European Economic Area
EIB
European Investment Bank
EP
European Parliament
EPRA
European Platform of Regulatory Authorities
EU
European Union
GATT
General Agreement on Tariffs and Trade
IRIS
Observatory
RAI
Legal Observation of the European Audiovisual
ROI
Return of the Investment
TWFD
Television without Frontiers Directive
UNESCO
Cultural Organization
WIPO
United Nations Educational, Scientific and
WTO
World Trade Organization
Radio Audizioni Italia
World Intellectual Property Organization
5
5 Introduction
5.1 Some kind of introduction
What makes an Audiovisual Product popular? Does the public taste define
the "popularity" of it? Do those products shape the public taste as well?
How much is the role of Market in this manner?
Those were the questions in my mind, years ago during my high school
years at a movie shop and while I was trying to pick up a movie.
For me purchasing a movie was more like a "buy and try". Some popular
movies were fascinating giving you a constant Goosebumps and some were
hard to resist watching to the end. Alongside all the Advertisement
techniques, many factors were shaping my Purchase decision. Mostly, I was
interested in popular movies. Not surprisingly, by "popular movies" I can
only remember American made ones.
It seems that, the case of dominant and popular American made movies is
pretty much the same for other Audiovisuals. A quick look at the report
issued by the EIB on Audiovisual Industry shows that the market share of
American movies in the European Union was 73.7% in 20001. In addition,
figures published by the European Audiovisual Observatory shows that the
Hollywood Corporations enjoyed a market share of 63% in the European
Union2.
Although the mere presence of big actors is not substantially a legal
problem, but the absence of equivalent European audiovisual counterpart
with a competitive position in EU market is a factual deficit and is sourcing
some concerns at EU and at the member state level. That's why, European
TV experts warn, "if culture is marketed only and through economic forces,
many smaller states will find that their native culture is not economically
competitive".3
Different approaches have been taken by the member states and by EU
authorities in order to protect the so-called "Native Cultures" and "the
European Cultural Heritage". These protectionist acts may take different
forms and strategies. Be it an obligation to dub a movie into a local
language or a fund to protect the sector or introducing quotas for EU
Broadcasters etc. has not shown enough efficiency at the end.
Many factors based on different perspectives are shaping the current legal
perspective on the industry. Audiovisuals have been a controversial field for
legislators and policy makers. The subject encompasses double cultural and
economic values, which makes it subject to a parallel interventions from the
society and the market. Additionally, constant changes in the field by
1
European Audiovisual Observatory Press release, "The Imbalance of Trade in Films and
Television Programmes between North America and Europe Continues to Deteriorate",
Strasbourg, 9th of April 2002, available from
http://www.obs.coe.int/about/oea/pr/desequilibre.html (visited on 2013-03-23)
2
European Parliament, "Fact Sheet on the EU- Audiovisual and media policy ", 2009
edition, p 387
3
Wall St. J. 10, 1989, at B4, col.5.
6
introducing new technologies makes the policy making quite challenging.
From one hand, Audiovisuals' cultural values make them different from
other products and services. These differences ask for different treatments
including governmental interventions, exceptional clauses etc.
Besides, the field of Audiovisuals by its nature is tied up to the latest
innovations in technology. These new playgrounds add another dimension
to the subject.
In a comprehensive legal analysis, the subject can be highlighted in various
legislations. These legislations can be either Primary EU Laws or Secondary
Legislations and related Directives. These legal bodies set a frame to the
subject and try to make a balance between different concerns on the matter.
As predicted, related legislations are as various as are the concerns. EU
Treaties and Directives on the internal market, Competition law, human
rights4 etc. are collectively make the current legal scheme.
Treaty on the Functioning of the European Union (TFEU) in addition to
regulating the market, deals with EU Foreign Policy and external actions.
Moreover, Secondary Legislations directly or indirectly regulate the subject
in details. Chief Directives related to this field are Merger regulations5,
Commission's market definitions for audiovisual industry, Commission
guidelines on State Aid, Television without Frontier Directives6,
Audiovisual Media Services Directives7.
Policy making in the field of Audiovisuals is an attempt of keeping a
balance between various and seldom-contradictory values. Although the EU
has always been highlighting common cultural values, but at the same time
it has taken into account the cultural diversity of the Member States. These
considerations in addition to the other declared values (regarding integration
and approximation of actions) partly shape the EU's consideration on the
industry. Actions in connection with Audiovisuals in EU and Competition
Law have developed in two major directions namely; support scheme and
the Development of the Legal Framework and Case Law.
Support schemes are consisting of fiscal and non-fiscal supports assigned
from the budget and facilities of EU and member states for improvement of
the industry and cooperation in this field. These Supports vary from
financial supports, Special treatments, Preservation and collection of
Cinema Heritage8 etc.
Regarding the Development of the legal framework, The EU intended to
increase cooperation by harmonizing the legislation. One of the major
attempts is via TVWF Directives of 1989 and AVMSD Directives
4
For further reading visit: the Charter of the United Nations (Common Provisions on
pluralism, respect for human rights) , European Convention on Human rights, the charter of
Fundamental Rights of the European Union
5
The Council, regulation on the control of concentration between undertakings, 139/2004,
20th of Jan 2004
6
The Council, 89/552EEC, 1989(revised in 1997)
7
EP and the Council, 2010/13/EU, 10th of March 2010
8
EP and the Council, 2005/865/CE, 16th of Nov 2005, "Recommendation of the European
Parliament and of the Council on film heritage and competitiveness of related industrial
activities"
7
accordingly. Moreover, European Community Merger Regulation (ECMR)
plays an important role in supporting the industry by harmonizing the
legislations and setting the framework for concentrations in the market.
Legal analysis of Audiovisuals encompasses controversial debates on
different aspects of law. One of these debates is on the interactions of
realities of the industry and EU principles and concerns. For that reason, the
debate encompasses various subjects as competition law principles, market,
positions held and decisions made by audiovisual businesses and state
interventions. Additionally, each member state decides individually on the
quality of its cultural trade. Constitutionalization of these rights (individual
decision-making) in France and Italy shows the level of importance of this
sector for member states. Moreover, and although Nice Treaty has replaced
the Unanimity Voting in council with Qualified Majority voting9, but still
decision making in audiovisuals at EU level is not a common trend.
Different mechanisms are in charge to make all decisions in line with the
EU general policies.
Seemingly, a Left-right arrow symbolizes the connection between
"Popularity" and "Availability" in this section. Meaning that, whichever
makes an influence in each side of the equation is also a source of affection
on the other side. The level that EU is willing to raise them both has to be
assessed in connection with the other facets of the industry.
5.2 Purpose
As a legal assessment of EU's audiovisual industry and its current market
dimension, we encounter the big market deficit of European audiovisuals in
relation to constant dominant American made ones.
This situation leads us to question:
What are the reasons for the absence of competitive and equivalent
European Audiovisuals in the EU Market, which is dominated by American
made Audiovisuals?
This question leads us to look for the EU attempts on filling this vacuum.
Firstly, considering the potentials for further cooperation between EU
member states and EU's unique specifications as the biggest Trading Block,
more Competitiveness and more productivity of the Industry is expected.
Secondly, treating Audiovisuals in a same way as any other goods or
services can provides a safe stage for commercialization and a sudden boost
in their production. However, it may be disrespectful to their specific
qualities and externalities. Consequently and limited to the purpose of this
thesis, various legal boundaries in charge and EU's attempts to balance these
boundaries will be highlighted.
9
Treaty of Nice (amending the TEU, TEC and certain related Acts), Art157, 2001/C, 10th
of March 2001, OJ C 80/1
8
The attempt is to provide an analytical point of view on the legal framework
in EU with a focus on Competition Law. In that regard, regulations and case
laws related to this industry will be assessed.
5.3 Material
The materials that are supporting this thesis are consisting from Books,
Articles, Journals, Reports and relevant Legislations and Case Law.
Since the field of audiovisual trade is subcategorised to various Headlines,
the materials in use are sourcing from different fields.
These various characteristics are both beneficial, bringing different points of
view regarding the same subject and disadvantageous for cluttering up the
sources.
Materials that are used for this thesis are in three main fields. In the field of
competition law the books of "The Limits of Competition Law" by Prof
Tony Prosser and published by OXFORD University Press 2005, "European
Media Law"by Oliver Castendyk, Egbert Dommering, Alexander Scheuer,
Kathrin Böttcher (co-editor) published by Wolters Kluwer Law and
Business and "Culture and European Union Law" by Rachael Craufurd
Smith published by OXFORD University Press are used in different
arguments. Also the Articles of "Cultural Industries policy in regional trade
agreements" by Prof Hernan Galperin from Stanford University helps with
Competition Law related topics.
In the field of Internal Market Law and in discussions around the matter of
Law, the book of "The Substantive Law of the EU" by Catherine Barnard
provided me with good sources of materials.
It has to be mentioned that part of the discussions in this thesis are based on
definitions of different subjects. These definitions e.g. cultural preservation,
language, native culture, social values etc. alongside with other
supplementary definitions and statistics are partly projected in the
legislations or by the European Commission's annual reports. These reports
are available at the European Commission website at the address of
http://ec.europa.eu/culture.
During this legal analysis, reference to specific treaty Articles and directives
and regulations are vital for this study. "Blackstone's Statutes" edited by
Nigel G.Foster and published in 2010-2011 as its 21st edition and "Official
Journal of the European Communities" available at the Address of
http://eur-lex.europa.eu/en/index.htm made these references much easier
and accountable.
Other than that, accompanying materials are referred during the text.
The basic statistics, and needed Data to support this thesis are collected
from EU Official publications. In this regard, Sector Papers by the European
Investment Bank, reports by the European Audiovisual Observatory and the
Commission's reports on the industry provided most of the Data.
9
5.4 Method
This thesis tries to establish a legal analysis for the EU market dimension of
the audiovisual industry. This analysis is provided by focusing on EU
competition law. In establishing a discussion about this subject, I used two
methods.
Firstly, by implementing the Multi-methodology this thesis uses both the
Quantitative and the Qualitative Analysis for the evaluations. The
Quantitative Analysis is aiming to assess the numerical Data published by
EU Institutions. This form of assessment is specifically helpful with
analysing the market statistics.
Additionally, by implementing the Qualitative Analysis, this thesis is trying
to assess the various statements, comments, rulings etc. obtained from EU
institutions.
Secondly, by implementing the comparative method this thesis would
provide a selective comparison between different legal policies taken by
Member states and of EU Institutions.
The factual problem/concern is the lack of competitiveness of this sector.
Limited to the subject and by implementing the abovementioned methods,
this thesis will assess number of contradictory protected values and relevant
legal policies at EU and Member state level.
5.5 Delimitations
The subject of this thesis is a legal analysis of the European Audiovisual
Market with the focus on EU Competition Law. In this regard, the
interactions of the two main industries (TV-broadcasting and Movie
Industry) have been highlighted as suitable examples. This limitation is
unavoidable due to the limited time gap and vast amount of materials.
The subject of Audiovisuals' legal analysis is as gigantic as is the industry.
As a result, narrowing down the subject to abovementioned fields will help
the clarity and simplicity of this study.
Moreover, legal analysis sets the field of this study meaning that other fields
of science are excluded. At the same time, audiovisuals are tied up to
different facets of law namely; Intellectual Property Right, Copy Right and
its neighbouring rights etc. These fields of Law are in a constant interaction
with the Competition Law. Consequently, references will be made
occasionally during this thesis. These references are only limited to the
interactions with Competition Law; As a result, an indebt analysis is
excluded.
EU supports to Audiovisuals also cover General Supports mostly in line
with the EU cultural Heritage preservation and non-commercial Cultural
Cooperation. Although, these supports may have direct or indirect
influences on the industry, they are excluded from this study. These general
supports encompasses EU attempts on Intercultural Dialogue, Deposit of
10
Audiovisual works10, Digital Library11, Education and training, sport events
and other major events supporting these programmes.
Interrelation of Audiovisuals and related technologies like electronics or
telecommunications, introduce new facilities on a daily basis. These
technological facilities can be Broadband Internet Connections, Middleware
Technologies or Interactive Television Services etc. These technologies and
directives regulating them may be referred during this thesis only limited to
the subject.
E-commerce and Advertisement are assigning to themselves parts of
audiovisual Regulations. These fields are crucial for the financing of
Audiovisuals (especially for private Broadcasters). These side industries and
related regulations are left out of this study.
EU competition Law perspective on Audiovisuals is meaningful in the
Internal Market context. Consequently, the thesis is focusing on the Internal
Dimension of the EU legal policies. External legal policies on Audiovisuals
including bilateral Trade Agreements with third countries, the UN and the
UNESCO Conventions, EU Economic Partnership Agreements with
African, Caribbean and Pacific States, Euro-Mediterranean Partnership, free
trade agreements, WTO including GATTS and TRIPS and the Convention
on the Organization for economic Cooperation and Development are out of
the frame work of this thesis.
Audio Visual Media Services Directives is without a doubt a leading
directive in this field. However, an in-depth analysis of the said directive is
excluded from this thesis. The exclusion has made due to the limited
framework of this study.
Finally yet importantly, U.S. made audiovisual products and services as the
biggest competitor in EU audiovisual market deserve an in dept analysis on
a separate study and this thesis does not have as a purpose or capacity, the
analysis of U.S. Audiovisuals and the related legislations.
5.6 Outline
Firstly, the Introduction part gives a general overview of the subject and a
schematic sketch of the framework.
Regardless of the limitations of this thesis and its focus, the Introduction
tries to prepare a reasonable understanding to the subject in general and a
platform for further legal analysis by covering most of the legal bodies in
charge.
Secondly, Delimitations narrow down the study by highlighting the central
focus and cutting off peripheral discussions. At the same time, this part
provides with references for further readings.
10
For further reading find " EP and of the Council recommendation on film heritage and
the competitiveness of related industrial activities",2005/865/CE, 9th of Sep 2012, OJ L
323/57
11
For further reading find "Commission Recommendation on the digitalization and online
accessibility of cultural material and digital preservation", 2006/585/EC, 25 th of Aug 2006,
OJ L 236/28
11
Thirdly and as the first part of the main discussion, the focus is on
Competition Law related viewpoint on Audiovisuals and more specifically
on TV Broadcasting and Movie industry. In this part, various Provision and
Directives are put forward and the relations between these legal bodies and
their interactions are discussed. Case studies are also providing with the
rulings of Courts in EU and the Commission's decisions. In addition, EU
attempts to fill the loopholes are highlighted.
Fourthly and as the second part of the main discussion, an extract of fiscal
and non-fiscal EU supports to the industry will be presented and their
effectiveness on the industry will be discussed.
Finally and on the Conclusion Part, the question is asked once more and
with a better perspective. The answer to the question (limited to this thesis
framework) is derived by a deduction from main discussions.
For a better understanding and coherence of the subject, Reasonable
sequence of the discussions is supporting each topic.
12
6 An overview of the Audiovisual industry
with the focus on TV-Broadcasting and
Movie industry
An overview of audiovisual industry and specifically TV-Broadcasting and
Movie industry as the two distinguishable industries in this field set suitable
grounds and examples for the study. Hence, it is beneficial to have a brief
summary of the industries prior to the discussions in this part.
The Overview covers specifications of the two industries and the quality of
their interconnections.
These specifications vary from different stages of the activity and the
likelihood of the businesses. As has been pinpointed by the European
Investment Bank, there are four main stages considerable for these
industries12.
 Developments Stage: Requiring rights (IPR, screenplay etc.),
conducting prerequisite researches necessary for the project,
estimating the budget, expenses etc.
 Production Stage: consisted from two stages of
1. Pre-production stage: gathering the Crew, Technical
Requirements, Financial Resources (budget), the Shooting
of the movie etc.
2. Post-production stage: Editing, Special Effects etc.
 Distribution Stage: promoting and selling the movie by the
distribution company to exhibitors, packaging and transmitting the
TV programme to the viewers by various delivery technologies
 Exhibition and broadcasting Stage: at which the film or TV
programme is shown
As it can be seen, each stage of the life cycle of an audiovisual product or
service is a combination of different activities by different actors [Figures
1& 2 below].
Each of these activities implies separate expenses and risks on the entities.
These risks have to be balanced with the possible profitability of the endproducts or services and their acceptance and popularity by the
consumer/viewer.
It noteworthy that, the level of the appreciation and popularity of an
audiovisual product or service cannot be assessed unless is put in the
market. These uncertainties about the profitability and risks involved have
been a drawback for the industry (regarding its financing and investment).
As an investor, one has to make sure enough about the Return on
Investment of the Capital Invested (ROI). This can be more problematic
when considering the vital need of the Industry for capital investment by
other businesses and more specifically by Banks13.
12
EIB, "An overview of The European Audiovisual Industry", p. 9, Sep 2001, available
from http://www.eib.org/attachments/pj/pjaudio_en.pdf (visited on14-03-2012)
13
Ibid, p.9 & pp.80-81, In this regard The “Institut de Financement du Cinéma et des
Industries Culturelles” (IFCIC) is a national support mechanism in France which
intervenes and guarantees the lending contracts with banks to AV producers
13
Development
Preproduction
Production
Postproduction
Rights
Library/asset
Management
Packaging
Marketing
Distribution
Figure 114: The Film Industry Value Chain, a combination of different stages
collectively make the movie/film life cycle. Various entities besides the Movie
producer are selectively interfering in this process. The last three stages (in
dark shadow) specifically represent the possible interference of other
businesses as right holders/collecting societies, Distributer,
Cinema/Broadcasting stations etc.
The abovementioned financial deficit for the competitiveness of the industry
rests on the nature of Audiovisuals.
In a comparison with the U.S. made Audiovisuals, it is recognisable that
Apart from the various strategies taken by the U.S. to balance the risks, the
U.S. audiovisual Industry relies more on the so-called "Studio system"15.
Although the term has been used historically to refer to the practices of large
motion picture studios from1920-196016, it resembles the Integration of
different stages in the value chain and their collection under one Name and
one corporation (through Vertical Agreements, Mergers or other forms of
concentration). By taking this policy, the industry can fade away high risks
by distributing it through up-stream and down-stream stages. This model
may imply the traditional economies of scale.
Additionally, other advantage is obtained by the industry by forming a
concentration and that is the economies of scope.17
The term refers to the advantages earned by putting the same product
through different ways and facilities. Considering the technological
advantages in the industry and possibilities in transferring Data and
receiving it via different platforms and the profitability of such strategy, the
14
Adapted from Zerdick et al.(2000), cited from EIB," An overview of The European
Audiovisual Industry", p. 13
15
Ibid, p.4
16
These studios are also referred as "Major 6" or "big 6" which operate in or around
Hollywood including; Sony, Warner Bros, Disney, Universal, 20th Century Fox, Paramount
17
M.M Pereira, "Vertical and horizontal integration in the media sector and EU competition
law", Lecture at the Law School of the University of Lisbon, 7 th of April 2013, Brussels
14
Exhibition
industry has been motivated enough to place its product in the largest
possible number of different markets.
In relation to the movie industry and its three last stages (Figure 1), the
interferences of other market actors can be shown. These market entities are
providing various services from collecting loyalties for the creator of a film,
marketing the product, distributing and exhibiting it etc. these businesses are
to a large extend interrelated with each other that the prosperity of each one
of them has a direct effect on the others.
TV-Broadcasters as one of the main exhibitors are making the last ring of
the value chain and are having significant roles. They play an intermediary
role by purchasing the Broadcasting rights form "Rights Sellers",
distributors, and broadcasting the film (or other contents) to the
customer/viewer. TV-Broadcasters Regardless of their state18are partly
depended on the likelihood of the Movie industry.
Movie industry is assigning itself a major role as a content provider for TVBroadcasters. The three first rings of the value chain for this industry are
assigned to provide materials to be broadcasted. These materials are to the
big extent provided by the movie Industry.
Content
creation
Production
Postproduction
Programming
Packaging
Transmission
and delivery
Figure 219: Value chain for the broadcasting industry, a combination of
different stages collectively make the TV Broadcasting life cycle. Various
entities besides the Broadcaster are selectively interfering in this process.
The marked stages in dark shadow, specifically, represent the possible
interference of other businesses as Movie/programme producers, Telecom
Operators etc.
Furthermore, Telecom Operators, as Up-stream Industries for TV
Broadcasting, intervene to the value chain. These interventions occur in the
"Packaging" and "Transmission and Delivery" stages.
18
Free Channels relying on Advertisements and sponsorships as the main source of income
or subscribing channels relying on subscription fees etc.
19
M.M Pereira, "Vertical and horizontal integration in the media sector and EU competition
law", p.14
15
Sales
Businesses tend to cooperate closely with each other at up/down levels or
even with their competitors at the same level to harmonize their actions in
the market and in hope for a more profitable business and a bigger market
share. These cooperations are partially permitted as long as they are not
changing the conditions of the internal market and Competition Law.
Harmonisations of actions between undertakings may take the forms of
Mergers, Vertical/Horizontal Agreements etc. These agreements may
temporarily or permanently, set a condition in which risks are balanced with
a more financial strength, better market assessment and more alternative
production plans etc. Different situations regarding these Agreements are
discussed subsequently.
Market players active at different market levels intervene in both industries.
These interventions are significant in connection with Movie industry and
TV-Broadcasting Industry20.
Regarding the cross-economical influences of the two industries and the
high risks involved needed to be balanced financially; the rationale behind
the "studio system" can be seen more clearly.
In a comparison with the U.S., the audiovisual market in EU is more
fragmented. The fragmentation exists at the life cycle of an audiovisual
product or service and from early stages on the value chain.
Financial and non-financial capabilities for businesses are limited as same as
EU's fiscal and non-fiscal supports. Consequently, EU has adopted measures
to allow a closer cooperation of the industries (as a way to compensate
existing limitations) and as much as they are applicable by competition rules
and legal frameworks.
20
In both Figures 1&2 dark squares with white frames illustrate these interactions
16
7 Market definition in Audiovisuals
Similar to other industries, Market in Audiovisuals has certain specifications
that make it unique from other related industries. At the same time, we have
to consider that Audiovisual Market is a broad notion and is consisting of
many subdivided markets.
Market as the playfield of different undertakings in audiovisual sector has to
be defined uniquely in relation to each sector. These different definitions set
a platform for further discussions in the industry. Notably, the discussions
are about abuse of dominancy, Cartels, Merger accusation and market
division. As a general statement, any position held or agreement made by
undertakings are meaningful in relation to a particular market.
The rulings of the European Court of justice and General Courts in EU have
also highlighted this necessity21. Moreover, a concise definition of the
market Including the Geographic Market dimension collectively with
Product Market dimension (both Products and Services Market) frames the
playground for the undertaking. Geographic dimension distinguishes the
geographic zone in which the firm is active in and the product and service
dimension distinguishes the substitutable present competitors22. This
definition will help us to realize competitive constraints that the firm is
facing and the likelihood of the affects it may take or may cause in relation
to that market.
There are various Market Definitions in each industry depending on the
various subsectors. In other words, market definition varies as intersections
of the Value Chain and competition issues vary23.
Since Primary or Secondary Law has not defined markets in this Sector, the
definitions are left for the Community Courts and the Commission24.
The Notice issued by the Commissionexplains the need of the definition and
its quality for competition law purposes. 25
Hence, particularities of this definition are as fallow:
"The structure of the media industry is multidimensional and complex.
Indeed different players such as content providers, right holders, content
distributers, operate in the value chain from the production of content such
as films, pay-TV, programming, and music, to its delivery via theatres, payTV channels or internet portals" 26
21
ECJ, Case 322/81, Michelin v. Commission, 1983, ECR 3461, para.37; CFI, Case T62/98, Volkswagen AG v. Commission, 2000, ECR II-2707, para. 230, cited by R. Capito,
"European Media Law", p. 155
22
Bird&Bird, " Market Definition in the Media Sector-Comparative Legal Analysis", Dec
2002, p 7, available from
http://ec.europa.eu/competition/sectors/media/documents/legal_analysis.pdf (visited on 1603-2013)
23
Ibid, p 69, para 183
24
R. Capito, "European Media Law", Definition in EC Competition Law, p 155, para.8
25
Commission, Notice on the definition of relevant market for the purpose of community
competition law, 97/C 372/03, 9th of Sep 1997, OJ C372/5
26
Commission, Case IV/M.2050, 13th of Oct 2000, Vivendi/Canal+/Seagram, 13th of Sep
2000, CELEX 300M2050, para.14
17
As it can be seen, the role of "trading relationships" between market players
is a general theme of the above saying. These various entities in the market
can be assigned to two general market divisions:
1. Upstream Market in an indirect relation with the end user, for
instance the Market for Acquisition the rights for production,
distribution, publishing etc.
2. Downstream Market in a direct relation with the end user, for
instance the Market for sales of goods or the provision of services
to the final user
Below, there are illustrations of exemplary the Markets. Although, the
Graphs do not encompass all the details of the market, they show the
relationships between separate markets in one sector.
Wholesale Market
for raw content
Upstream Market
Wholesale Access
Market to the
infrustructure
Market in
Broadcasting and
TV
- New Digital
Distribution
- Internet Access
Provider
Downstream
Market
Retail Market
- Mobile Operator
- ...
- Cable Operators
- Digital Terrestrial TV
Figure 3: Overview of the Markets in Broadcasting and TV
In Figure (3), Market Players can be assigned to Upstream and Downstream
players. We have to consider that Undertakings at the upstream level may
also interact at the downstream level. The example is an undertaking active
in the Wholesale Access Market that also provides services at the Retail
Market (e.g. Internet Access or Mobile Operators). In a situation like this,
the Commission will scrutinize activities of the Undertaking more strictly
for a case of Margin Squeeze and Abuse of dominancy27.
The Commission and EU Courts have distinguished various Markets On the
Retail level and regarding the contents provided for the end-users
(Audience/Subscriber in this case).
27
ECJ, Case C-52/09, Konkurrensverket v. TeliaSonera AB, 17th of Feb 2011, OJ C103/03
18
Acquisition of
Rights for
Films
TV Broadcasters
including Cable
Operators and
Digital TV
Market for
Broadcasting
Feature Film
Market for
Broadcasting
Make-for-TV
Programmes
Market for
Broadcasting
Winter Olympics
Acquisition of
Rights for
Sport Events
Market for
Broadcasting
Summer Olympics
Market for
Broadcasting
World Cup
Football
Market for
Broadcasting
Regular Football
Events
Figure 4: Overview of the Market in TV-broadcasting at the retail level
Figure (4) partly illustrates subdivided Markets for Cable and Digital TVBroadcasters and the different contents and programmes "On-Air". These
markets are shaped around the Acquisitions of Rights for the produced
contents. It is noteworthy that, TV-Broadcasting has already predefined by
the Commission as a) Cable TV (including Commercial TV-Broadcasters)
and b) Public TV-Broadcaster.
The two figures above show parts of the overall picture of the market. It has
to be mentioned that, other market divisions in relation to different
competitive conditions, perspectives etc. may take place.
Specific Market definitions are collectively creating a base for any
competition related effort by EU Authorities. They also give precise views
for the businesses themselves in relation to their competitors.
19
8 General remarks on EU Competition
Law and Audiovisuals
Competition Law is certainly assigning itself most of the materials in this
section. These vast amounts of resources and discussions are sourcing from
controversial character of Audiovisuals from Competition law perspective.
These discussions are mostly as follows:
 The contradiction of competition law principles (on elimination of
agreements and/or Practices capable of distorting free competition)
and the need for sufficient-size undertakings in the Audiovisual
market
 The contradiction of competition Law principles (on elimination of
exclusive or special rights or State Aid granted to the undertakings
capable of distorting free competition) and the protection of
fundamental rights and principle notions of the EU in this sector.28
Regarding the first bullet point, the main concern for the Commission and
EU authorities is how to keep the balance between the two wants.
From one hand, competition in the relevant market is highly protected by
the competition law. As has been stated by the ECJ, the competition itself is
the subject of the EU competition law and not the competitors. The
statement can be interpreted by the undertakings in a way that, as long as
their approach in the market is responsible toward the competition in the
market, they are standing in the safety zone.
On the other hand and not surprisingly, the Commission and the industry
itself are aware of the need for sufficient size market players and the need
for more concentration. This puts the Commission on a situation in which it
has to face potential and already existing market powers created by different
forms of concentration in the market (namely mergers, horizontal and
vertical agreements) which may distort the free competition. These two
wants have to be balanced in relation to each other.
Regarding the second bullet point, the focus is on the contradiction of
different EU principles and goals related to the industry. These goals are
collectively important for EU policy makers.
From one hand, Pluralism, protection of minorities, equality and
fundamental rights are making a footstone for the democratic Union. These
rights and values are protected by different means on the internal dimension
(by EU institutions and by member states) and on the external dimension
(by international conventions etc.). From the other hand the exclusions and
exceptional treatments toward the industry is in a contradiction with the socalled "market principles" of the EU (including four freedoms and
completion law).
28
H. Galperin, "Cultural Industries in the Age of Free-Trade Agreements", para 1,
Available from
http://www.cjc-online.ca/index.php/journal/article/viewArticle/1082/988; "Trade
liberalization is only one among many of EU's goals including full monetary, partial
political and cultural integration etc."
20
Discussions in this part split into various topics. These topics are the
relevant headlines that assumed to be controversial in the competition law
analysis of the Audiovisual Industry. The division of these topics is
supposed to keep the consistency and simplicity of the discussion.
21
9 Positions held by an Audiovisual
undertaking, abuse of dominant
position
9.1 General remark on abuse of dominancy
Abuse of a dominant position by an undertaking, regardless of its form and
its Market sector, is a form of distortion of Competition in the internal
market.
The distortion happens when three constituent elements are present. These
three elements are:
1. A relevant market (Geographic and Product Market)29
2. A dominant position held by an Undertaking (or a group of
Undertakings)
3. Unjustifiable Abuse of the dominancy
For the coherence of this part, the abovementioned elements are discussed in
order.
EU attempts in audiovisual sector are combinations of supports for the
Industry and prosperity of the cultural values. These attempts are set to be
done by balancing them with negative externalities and through set
limitations and red lines.
One of the red lines in Competition Law is the condition in which a position
held by an undertaking is distorting competition in the relevant market.
These distortions may take place as Refusal to Deal, Unfair Pricing, Market
Dividing (by refusal to supply etc.), Discrimination and other Forms of
Abuse.
Treaty provisions and secondary regulations and directives have prohibited
abuse of a dominant position in the relevant market. In addition, case law
has interpreted the regulations in hand and extended their inclusions.
Treaty provisions regarding this prohibition cover both Exciting Market
Powers and "the Creation of new Market Powers"30.
Article 102 TFEU (ex Article 82 EC) in general is prohibiting a distortion of
Competition by an existing market power or several market powers acting
jointly. This article is in line with Art 3(1) (g) EC on the abolition of
distortion of Competition law. The numeration of Art 102 TFEU is
exemplary and the Abuse can take forms other than the situations mentioned
by this Article.
Moreover, Article 102 TFEU paves the way for the Commission to issue
directives and decisions to improve competition in the Internal Market and
to make sure that member states are complying with their obligations to
"neither enact nor maintain in force any measure contrary to the rules
contained in EC Treaty"31. Meanwhile, the directives on abolition of
29
The Relevant Market has been discussed under the chapter "Market Definition in
Audiovisuals"
30
R. Capito, European Media Law, p 153
31
Ibid, p.154
22
restriction on the audiovisual market are not limited per se to audiovisual
directives. Rather, directives on liberalization of neighbouring industries are
partially used as a base line for further abolitions in this section32.
9.2 Dominant position held by an
undertaking
After framing out the relevant market by defining it33, the next step
necessary to determine an abuse of a dominant position in the relevant
market, is the assessment of the dominancy. The EU's definition of
"dominancy" and the factors necessary for this assessment are making "the
pattern" for the Commission and the EU Courts. In addition, the effects of
holding a dominant position encompass rights and obligations for an
undertaking.
As it has been pointed out by the ECJ in Hoffmann-La Roche v.
Commission34, the dominancy is a state in which a firm possesses the ability
to hinder the maintenance of effective competition. The most reliable factor
to determine this ability is economical and depends on the market share of
the company. Other factors as market structure, the history of the
undertaking etc. can be subsidiary indicators of a possible dominancy.
According to the Commission and the rulings of the ECJ, there are different
margins defined for a market share hold by a company. A market share of
more than 70% by an undertaking is most definitely shows a dominancy of
the firm and the market share less than 10-15% shows that there is a slight
chance for holding it.
It noteworthy that, access to capital, holding an IPR, vertical integrations
and other common trends in audiovisual industry are also indicating factors
of possible dominancy. In fact, most forms of a dominant position in
Audiovisual Industry are in a form of collective dominance of firms.
Although by the wording of article 102 TFEU "An abuse of one or more
Undertakings" clearly covers the situation of a collective dominancy, the
ECJ has been dealing with these cases under Merger regulation35.
Dominant position in itself is not contrary to EU provisions; yet, it makes an
undertaking holding it, vulnerable for strict evaluations. These evaluations
32
In this regard: The Commission Directive 95/51/EC, 18th of Oct 1995, "abolition of
restrictions on the use of cable television networks for the provision of already liberalized
telecommunication services (amending Directive 90/388/EEC)", OJ L256/49
33
An overview of markets in audiovisual industry as it has been defined by EU
Commission and ECJ is presented under the chapter "an overview of the Audiovisual
Industry with the focus of TV-Broadcasting and movie industry". However, the definition
of each subdivided markets are different from each other.
34
ECJ, C 85/76, Hoffman-La Roche v. Commission, 13th of Feb 1979, para 39, available
form http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61976CJ0085:EN:PDF
35
E.g. visit, The Commission, Case COMP/M.3333, SONY/BMG, 19 th of Jul 2004, para 12
et seq., C(2004) 2815
23
may take place specifically when there is a big gap between a market share
hold by an undertaking and its competitors.
However, a dominant undertaking may take measures to maintain its
dominancy without aiming to strengthen it. One of these measures that by
nature are quite common in audiovisual industry is the usage of the
advantages provide by IPR and access to media Content.
9.3 Unjustifiable Abuse of dominancy and
balancing
The last constituent element necessary for an "Abuse of a dominant
position" is the "Unjustified Abusive conduct" of an undertaking.
As stated above, a dominant undertaking holds an obligation to act in a
responsible way. The responsibility concerns the position held by the
undertaking and the competition in the market. Hence, a dominant
undertaking has to avoid any abusive conduct that distorts competition
either in an "exploitative" or "exclusionary" way.36
In this regard, the exploitative abuse means exploitations of consumers in
the relevant market and "exclusionary abuse" means excluding other
competitors (actual or potential) in the relevant market by hindering
competition.
Any anti-competitive conduct by an undertaking has as a result a distortion
of competition in the internal market and will directly or indirectly, ends to
an unfair economic burden for the consumers. As a result, it may be hard to
distinct clearly the general effects of an abusive conduct.
Although, Article 102 TFEU has been interpreted in a way that it mostly
covers "exclusionary" form of an abuse by a dominant undertaking (or
collective dominance) it also includes a situation, which precisely covers
both kinds of abuses.
Article 102 (b) TFEU explains the situation as "Limiting production,
markets or technical development to the prejudice of the consumers". This
form of exclusionary abuse in the industry may take the form of "Refusal to
supply Audiovisual content" to other undertakings and to the prejudice of
the consumer.
Since, this form of Abusive conduct in relation to IPR for media contents is
quite common in the audiovisual Industry and media contents are
connecting factor of the abovementioned industries (movie industry and
TV-Broadcasting)37 its quality and its relation to the "undertaking's
responsible conduct" will be discussed in this part.
Exclusionary abuse in relation to audiovisual contents has been a familiar
trend for dominant undertakings that has access to these contents. The
crucial importance of the provision of the contents for the industry and for
the competitiveness of the market is realized by the industry and by EU
authorities. Case law has been setting interpretations of the relevant
36
37
R. Capito, European Media Law, p.167.
Figures 1&2
24
provisions in this field. These cases have been handled at the community
level and by the ECJ, the Commission and Courts of first instance (for cases
with the same merits but lacking the community dimension e.g. in respect to
their economic influence on the internal market). The applicability of these
decisions and the justifications made by dominant undertakings,
collectively, are making the main discourses in this part.
As mentioned above, Article 102(b) TFEU includes exclusionary abuses.
The crucial importance of the media content for the industry is due to the
situation it has as a raw material for the media sector and the role it plays for
the newly introduced media services.
As has been illustrated above in figure 2, "content production" makes the
first part of a TV-Broadcasting's value chain.
Depending on the type of the broadcaster, these contents may vary from
feature films, made for TV programmes, sport contents etc. Moreover, new
technologies in the field are providing with the possibility of parallel
transfer of media content and other forms of data, faster and with a better
quality. These new services have constantly introduced to the market and
have shaped many new businesses around them. The interactions of
audiovisual industries with each other and with neighbouring technologies
have made a good environment for new players to grow and compete.
However, these interactions have also made the industries too depended to
each other that without one the other may be dysfunctional or damaged.
This will put a considerable risk on the new businesses. Additionally, these
new industries bring considerable amount of facilities and options to
consumers that their removal from the market may deprive consumers from
their benefits (exploitative abuse).
Dominant undertakings on the other hand, may impede the entrance of these
new competitors fearing that "their core revenues will be cannibalized"38.
Access to contents gives a competitive advantage to an undertaking and a
tool to strengthen its position.
Music industry and printed media have assigned to themselves most of the
cases in relation to the exclusionary abuse by refusal to provide content. As
a result, they have had a "collecting society"39, Collective rights
management's organization (CMO) etc. as a party.
In addition, some other cases have been related to the provision of digital
content for Medias40, IPR protection etc.
The discourse about the clash between Anti-competitive behaviour of a
dominant undertaking with access to media content and the necessity of
38
Ibid, p 173
Collecting Societies are playing a middle role between the creator of a copyrighted
audiovisual content and the industries willing to have access to that content. They are in
contractual agreement (trustee) with the right holder and are entitled to make new
agreements with any undertaking that needs the content. They are also responsible for
monitoring these rights for any IPR infringements etc.
40
ECJ, joined cases of C 241/91, C 242/91, Magill TV Guid/ITP& BBC and RTE , 6th of
April 1995, available form http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61991J0241:EN:HTML (12-42013)
39
25
provision of those contents encompasses "objective justifications"41 of
undertakings. However, the quality of the clash and justifications beside the
rulings of the court and the Commission's assessments are relevant to movie
industry and TV-Broadcasting and to the same extends to other
Audiovisuals.
Summary of Ministère Public v. Tournier(Sacem)42
Reference to the court was made under Article 177 of the EEC treaty by the
court d'appel (court of appeal) for the preliminary ruling in the proceeding
pending before the court between Ministtère public and Jean-Louis Tournier
the director of Sociéte des auteurs, compositeurs et éditeurs de musique
(Sacem) on the interpretation of Article 30, 59, 85, and 86 EEC Treaty.
Although the questions cover both competition law and internal market law
and IPR, but for serving the purpose of this essay only the competition law
related questions and justifications is presented (more specifically regarding
Articles 85, 86 EEC Treaty).
Sacem was a national society in charge of copyright management in music
with a dominant position and absolute monopoly in France. Discothèque as
a Content user, which was located in southeastern France, complained on
the ground that Sacem required excessive, unfair or undue payments for the
performance of protected musical work on his premises. Moreover, Sacem's
method of calculating royalties [based on the application of a fixed rate
8.25% to the turnover, including value added tax of the dicothèque in
question] is high and disproportionate in comparison with the same services
in other member states and considering the economical estimation of the
price. The royalties charged consider obtaining access to the whole of
Sacem's repertoire while in fact part of it was needed. Discothèque could not
deal directly with the copyright-management societies in other countries
since other copyright-management societies were bound by "reciprocal
representation contracts" with Sacem and accordingly refused to grant
direct access to their repertoires.
The court of appeal referred five questions to the ECJ for a preliminary
ruling. The questions concerned the amount of royalty charged regarding
Article 86 EEC (102 TFEU) and unfair trading conditions as such
reciprocal trading contracts with other content providers which made them
refuse to deal with the content users not residing in the same member state
and fees higher than ordinary and without any objective justifications and
their compatibility with Article 86 EEC (102 TFEU). On the fifth question, it
asked for the compatibility of national copyright legislation with Article 30
and 59 EEC concerning an infringement of copyright the public
performance of protected musical works by means of sound recordings
without the payment or royalties where there have already been paid to the
author for reproduction in another member state.
41
CFI, British Case 95/04 P, Airways plc v. Commission , 15th of Mar. 2007;
Considering the ECJ' ruling on Hoffmann-La Roche v. Commission, the concept of abuse is
an objective concept. One conclusion that can be made from this saying is that the
subjective intentions of the undertaking are irrelevant more over a counter-argument that
can be used by an undertaking is a legal justification of an abuse,
42
ECJ, Case 395/87, Ministère Public v. Tournier(Sacem), 13th of Jul.1989
26
The court said; Sacem imposes unfair trading conditions where the royalties
which it charges to Discothèque are appreciably higher than those charged
in other Member States, the rates being compared on a consistent basis. .
The court also mentioned that No provision of national legislation may
permit Sacem to charge a levy on products from another Member State...in
accordance with the prohibition of discrimination laid down in the
international conventions on copyright, and to enable copyright
management societies to rely, for the protection of their repertoires in
another Member State, … without being obliged to add to that organization
their own network of contracts with users and their own local monitoring
arrangements, are not in themselves restrictive of competition in such a way
as to be caught by Article 85 ( 1 ) of the Treaty.
Article 85 of the EEC Treaty must be interpreted as prohibiting any
concerted practice by national copyright management societies of the
Member States having as its object or effect the refusal by each society to
grant direct access to its repertoire to users established in another Member
State …Meanwhile, The refusal by a national society for the management of
copyright in musical works to grant the users recorded music access only to
the foreign repertoire represented by it does not have the object or effect of
restricting competition in the common market and less access to a part of the
protected repertoire would entirely safeguard the interests of the authors,
composers and publishers of music without thereby increasing the costs of
managing contracts and monitoring the use of protected musical works .
The court also mentioned that Articles 30 and 59 of the Treaty must be
interpreted as not preventing the application of national legislation which
treats as an infringement of copyright the public performance of a protected
musical work by means of sound recordings without payment of royalties,
where royalties have already been paid to the author, for the reproduction of
the work, in another Member State.
As can be seen from the case above content providers may easily switch
their "uncertain position" in relation to their competitors and new market
actors to a "certain position" by gaining a monopoly or quasi-monopoly and
strengthening it by various Anti-Competitive acts. These Anti-Competitive
acts may include tightening up the customers to the undertaking by means
of agreement, practices or impeding the entrance of new service providers
etc. The possibility of as such market behaviours by movie industry and
other content providers have been a concern for member states and the
Union.
In France, the Competition Council on its decision on the case Filmdis and
other relevant cases in movie industry has set an example of the quality of
the abuse and the legal procedure in the cases alike43.
Filmdis is a film distribution company with a monopoly as a content
provider. The practices of Filmdis consider the distribution of movie content
43
France Competition Council, Decision No 04-D-44, Ciné-Théâtre du Lamentin v.
Filmdis, 15th of Sep.2004, available from
http://www.autoritedelaconcurrence.fr/pdf/avis/04d44.pdf
27
to local cinemas and exhibitors at certain areas in France namely
Guadeloupe, Martinique and French Guiana.
A reference made by one of the exhibitors Ciné-Théâtre du Lamentin to the
France Competition Council on the certain Practices of Filmdis such as
refusal to provide movie content (by providing them later than the agreed
time or refusal to provide them) and abusing its dominant position and
hence, making local exhibitors activities unprofitable.
The rapporteur, Deputy General Rapporteur, the Government Commissioner
and e exhibitors representatives of the Cine-Theatre Lamentin and Filmdis
circuit and Cinésogar SA, agreed at the meeting of 22 June 2004. On the
Decision No 04-D-44 on 15th of September 2004 following the meeting,
France Competition Council stated that the company filmdis had abused its
dominant position by refusal to supply movie content to local exhibitors and
had breached competition law provisions.
In assessing the abuse, the council observed that Filmdis had a quasimonopoly and therefore independent cinemas in the area where
economically depended on it.
Seemingly, the competition council in France considered two constitutive
elements on analysing the situation namely dominant-position and
economic-dependence.
It is noteworthy that in cases like Filmdis the damage is not necessarily
limited to the cinema exhibitors as such, but is also to the movie producers.
As has been stated by the Commission in the joined cases of 60 and 61/8444
before the court, movie exploitation in cinema produces 80% of the revenue
and the income earned via other forms of exploitation (movie castes,
Broadcasting etc.) are small in comparison. As a result, "Cinema showings
were essential for the film industry to remain profitable and thus for the
continued production of films"45 .
The cases Sacem and Filmdis exemplify a common abuse of dominancy in
audiovisual industry by refusal to provide media content at the EU and a
member state level.
Media content has a double value for the EU audiovisual industry, firstly, as
an 'End Product' of media producers. The media content is a package of
economical and cultural values. These values can be in line with EU general
policies on prosperity of the audiovisual industry and safeguarding the
cultural heritage.
Secondly, these products are valuable as raw materials for undertakings
active in different market levels (e.g. exhibitors, broadcasters). Media
content is a key element for continues and survival of the industry. As a
result, access to content produced is a 'sine qua non condition from entering
or staying in business'46.
Consequently, Media content providers' activities as the middle stage of the
life cycle of Audiovisuals is under strict scrutiny by competition authorities.
44
ECJ, Cases 60 and 61/84, CINÉTHÈQUE v FÉDÉRATION NATIONALE DES CINÉMAS
FRANÇAIS Joined, 11th of July 1985
45
Ciné-Théâtre du Lamentin v. Filmdis, Para 16
46
M.M Pereira, "Vertical and Horizontal integration in the media sector and EU
competition law", 7th of Apr. 2003, Brussels, available from <
http://ec.europa.eu/competition/speeches/text/sp2003_009_en.pdf>
28
10 Agreements between Audiovisual
undertakings, concentrations via
Horizontal and Vertical agreements
10.1
General remarks on Horizontal and
Vertical agreements
Mergers of two or more undertakings in any form and via any kind of
settlements are not in themselves contrary to competition law but in a
certain circumstances are limited by EU legislations.
These circumstances may lead to distortion of competition by the new
merged company in the internal market. The distortion of competition
mainly happens to the benefit of the new merged entity and in relation to the
market and its competitors. Basically, a merged undertaking may seek to
strengthen its position and benefiting from it by various forms of abuse
namely, restriction to input market or sale market, limiting inter-band
competition or acting to the big extend independent from its competitors
(e.g. by raising prices).
These kinds of foreclosure or distortion to competition happen when three
main constituent elements are present.
1. Relevent market
2. Conclusion of a concentration by Horizontal or vertical agreement
3. Anti-Competitive attempts by a Merger
Mergers in audiovisual industry are the subject of balances between
different wants. The legislator has to consider these major wants while
regulating the actions in this area.
The unbalance is mainly between supporting the industry with its
profitability and creation of a more efficient market player and the
competition in the market with the risks that these supports and new merged
entity may have.
The prosperity of the audiovisual field by creation of new entities with
bigger investments, facilities, networks and more capable of competing with
other market players inside and outside EU is both required by the EU and
the industry. Meanwhile, the creation of more powerful undertakings by
joining of different market players at different levels of the value chain or
even at neighboring markets or cooperation of dominant or semi-dominant
undertakings at the same level may distort competition in the internal
market.
The legislation in this field is consisted of treaty provisions, secondary
legislations, and case law.
Main treaty provisions regarding mergers as an agreement between
undertakings are Article 101 & 102 TFEU.
Article 101: the following shall be prohibited as incompatible with the
internal market: all agreements between undertakings...
29
Nor does the wording of Article 101 neither 102 specifically identifies
"agreements between undertakings", their qualities or forms.
In fact, Article 102 identifies an individual or a "collective action" of a
group of undertakings in abusing their dominancy, but is not going further
to explain the quality of the collective action. Accordingly, most of the
cases relating to the collective action of two or more undertaking or the
creation of a merger by horizontal and vertical agreements etc. are dealt
with under the Merger regulations.
Council regulation 4064/89/EEC on the control of concentration between
undertakings is the first merger regulation adopted on 21st December 198947.
The latest Council regulation following the 1989 regulation is the Council
regulation 139/2004/EC of 20th of January 2004 on the control of
concentration between undertakings that applies now (here in after Merger
regulation or ECMR)48. These regulations accompanied by the
Commission's guidelines on the Assessment of Horizontal Mergers49 replace
the old merger regulations.
Article 1(1) ECMR designate the scope of the regulation. The scope of this
regulation is "all concentrations with a Community dimension as defined in
this Article". Accordingly, the scope of this regulation in audiovisual sector
is limited to the concentration' in the industry with "the community
dimension".
Article 3(1) designates the "conclusion of a concentration" as a change of
control happened out of a merger of two or more previously independent
undertakings by any means. In addition, Article 1(2) ECMR designates the
"community dimension" as an economical importance of the company. In
this regard, merger regulations on Articles 1&2 introduce different
thresholds for this designation50.
In addition to the major legislations regarding concentrations in audiovisual
industry, the complementary legislation will be presented during the
discussion. Considering that the number of mergers in audiovisual industry
has increased amain in recent years, many cases have been dealt in this
regard by the Commission, CFIs or the ECJ. These cases among with the
legislations in this field will help understanding the situations in which a
merger can lead to a distortion of competition. Moreover, the discussions in
this part will help understanding the policies that EU has taken regarding
this phenomenon.
47
The Council, Regulation No 4064/89 EEC , 21st of Dec.1989, on the control of
concentration between undertakings, OJ L 257/90
48
The Council, Regulation 139/2004/EC , 20th of Jan. 2004, on the control of concentration
between undertakings, OJ L 24/1
49
The Commission, Guidelines 2004/C, 5th of Feb. 2004, Guidelines on the assessment of
horizontal mergers under the Council Regulation on the control of concentrations between
undertakings here in after Horizontal Merger Guidelines, OJ 31/03
50
The Council, Regulation 139/2004/EC (ECMR), Article 1(2)
30
10.2
Relevant Market definition
Market definition is a precondition for the assessment of the affects on free
competition by any form of concentration. The purpose of market definition
and the quality of the definition is the same as the definition in the previous
discussion. The only difference in definition in use for the competitive
assessment of concentrations is the future development of the market51.
10.3
Concentration by Horizontal or
vertical Agreements
Conclusion of a concentration subject to Article 1(1) ECMR is the second
constitutive element necessary for the foreclosure of competition in the
internal market. The ways that two or more undertakings merge or
concentrate and the reasons behind the growing attempt of undertakings in
doing so explain the quality and forms of these concentrations.
Article 3 ECMR explains the meaning of concentration as a "change of
control" and on the second paragraph exemplifies the means by which the
change of control happens. Article 3(2) ECMR states that "Control shall be
constituted by rights, contracts or any other means".
The rationale behind undertaking's urge for vertically or horizontally
merging is totally economical. As has been put on the previous discussions,
the conditions of market in audiovisual industry, and the need for capital,
big risks etc. is urging companies to merge.
As an example, a trend toward a vertical integration has been a constant
trend in audiovisuals.52A vertically integrated company by multiplying its
presence over a number of markets and the value chain can hold a control
over the sources of different businesses in the market. This trend is also
referred as the "gate keeper" role in the industry which is apparently very
common in relation to the primary audiovisual content. The same concern
has been brought by the Commission in the case VIVENDI / SEAGRAM53.
The Commission states; one of the concern relating the proposed
concentration refers to the fact that the merging parties belong to different
categories of players. This situation can make the merging entity the world’s
second largest film library and the second largest library of TV
programming in the EEA in terms of content.
Accordingly, it can be said that the main concerns of the EU Authorities in
vertical integration in audiovisual industry is the foreclosure of the Input
Market.
51
R. Capito, European Media Law, p 184
For more reading regarding this visit The Commission, M. M. Pereira, "Vertical and
Horizontal integration in the media sector and EU competition law", 7th of April 2003,
Brussels
53
Commission, Case IV/M.2050, 13th of Oct 2000, Vivendi/Canal+/Seagram, CELEX No
300M2050
52
31
The other concern regarding vertically integrated undertakings in
audiovisual industry is the possible ability of the new merged company to
interchange its market power to the neighboring markets. Considering the
life cycle of the media product form its production to its exhibition and the
interaction of different industries in this life cycle, the occurrence of such an
action is quite possible.
The two abovementioned concerns depict the two major concerns regarding
vertically integrated companies in media sector. At last but not least, any
form of integration, be it through a vertical or horizontal agreement results
in the creation of bigger size companies regarding their assets, capital,
network etc. The existence of these giant corporations with strong
purchasing power can also cause inflation in the market of media contents.
A simple comparison between the royalties to be paid for an access to the
media content in two different time periods acknowledge this inflation. As
an example the price paid for broadcasting rights of the Football World
Cups of 1990, 1994, and 1998 were EUR 241 million. This price for the
same rights paid in 2002 and 2006 was EUR 1, 7 billion.54
Horizontally integrated companies are considered to be the second concern
of EU authorities regarding mergers in audiovisual industry. The second
place in the assessment of these kinds of integration does not reflect their
lack of importance, rather; it reflects their unpopularity in the industry in
comparison with Vertical integration.
Horizontal agreements between undertakings are considered as an indicative
factor for the Commission and narrate possible distortion of the competitive
market. As a result, these forms of integration have to be announced to the
Commission prior to their conclusion in respect to ECMR.
The two of the main Commission's competition law related concerns
regarding these agreements in audiovisual industry can be extracted from
the two of the leading merger cases. Although the cases are not specifically
limited to the interactions of TV-broadcasting and Movie industry, but they
simulate the very concern of the Commission.
In Newscorp/telepiù(comp/m.2876) then Commission states that the
concentration is leading to the creation of a Monopoly and is capable to
distort competition in the relevant market and make a substantial change in
the market structure. As can be seen from this case, the integration of the
two effective market players in the market can lead to the creation of a
monopolistic situation of the newly merged undertaking and can make it
capable to act to a big extend independent form competitive constraints in
the market.
The other main competitive concern regarding horizontal agreements in
audiovisual industry is the risk for creation of a collective dominance
between major market players in the market. This view has been pointed out
in cases such as Sony/BMG55. Regarding the special circumstances of the
market, the Commission stated that the combination of Bertelsmann Music
54
M.M Pereira, "Vertical and Horizontal integration in the media sector and EU
competition law", 7th of Apr. 2003, Brussels, p.2
55
The Commission, comp/m.3333, Sony/BMG, 19th of Jul. 2004, OJ C(2004) 2815
32
Group "BMG" and Sony Music Entertainment considering the discovery and
development of Artists, Marketing and Sale due to the fact that there were
only five market players active in the market and that after conclusion of the
concentration there will be only four, the risk for creation of a collective
dominance between remained undertakings is quite high.
The abovementioned discussions try to explain the conclusion of a
concentration in audiovisual sector, its forms and its reasons. The second
constitutive element for an unjustified distortion of competition to happen is
the agreements between undertakings that in special circumstances fall
within ECMR. Understanding the logic behind this 'growing trend' delves
the way for the better understanding of the industry and partly explains the
Commission's reactions toward them. The next part will focus on the step
after the conclusion of an agreement and will analyse the EU attempts
toward these mergers.
10.4
Competitive assessment of a
Concentration and balancing
The previous parts discussed the mere Act of concentration and its quality.
In addition, the relevant legislation in hand, Merger Regulation and its scope
of application on the merger were partly assessed. More importantly, the EU
concerns of each of the main forms of mergers were presented.
This part focuses on the competitive assessment of a concentration as the
third constitutive element.
In this part, the relevant discussions on the competitive assessment and the
attempts that have been taken by the EU, approval and remedies will be
discussed.
Before going further on analysing the competitive assessment of a merger, it
is profitable to remember the different wants that has to be balanced by the
Commission and by the more general EU legal policy in this field.
The Commission has to make sure that the alleged concentration is not
capable of distorting competition in the internal market. Consequently, the
Commission acts consciously to the industry's special conditions,
consumers' benefits and competitors' businesses. Objective justifications of
the parties having a concentration are also taken into those considerations.
This view has been taken in Commission's notification on accusation of
joint control of VG Media by RTL and ProSiebenSat. 1. 56
Summary of Joint control of VG Media by RTL and ProSiebenSat. 1
'RTL is a part of the Bertelsmann Group. The company supplies television
and radio content, produces its own television programmes and acquires
and licenses television-broadcasting rights.
56
The Commission, IP/02/744, declaration on approval of the accusation of joint control of
VG Media by RTL and ProSiebenSat. 1, 22nd of May 2002, available from
http://europa.eu/rapid/press-release_IP-02-744_en.htm
33
ProSiebenSat. 1 is a part of the Kirch Group and is active in the fields of
free TV and new media.
Under the German Protection of Copyright and Similar Rights Act of
9 September 1965 (the Copyright Protection Act), VG Media, which is
currently wholly owned by the Kirch Group, has been approved as a
copyright management company by the German Patent and Trademark
Office. VG Media’s business activities will consist of protecting media
undertakings’ copyrights and related rights. In connection with cable
retransmission the most important principles of the Copyright Protection Act
are the licensing requirement, the protection requirement…by the German
Patent and Trademark Office. The licensing requirement precludes the
possibility of competitors of the notifying parties suffering any competitive
disadvantage through the creation of the joint venture, as VG Media is
legally required to protect their copyright and related rights if called upon
to do so.
Given the special legal framework governing VG Media’s activities, the
creation of the joint venture is therefore unlikely to lead to any partitioning
of the market.'
Meanwhile, as the field is very interacted with the social and cultural values,
EU audiovisual industry and more specifically concentrated undertakings
with more efficiency in the market can play an important role in
preservation of EU cultural values. However, free competition in the market
and its effects on the prosperity of the internal market is too essential to be
disregarded and a distortion in that market in any form is not necessarily
beneficial for Audiovisuals.
Article 167 (4) TFEU (151(4) EC) states that "the Union shall take cultural
aspects into account in its action in order to respect and promote the
diversity of its culture". Although, these considerations have not been
explicitly announced by the Commission in ECMR, but their considerations
are obligatory for the Commission.
Theoretically, Economical evaluation of an Anti-competitive effect of an
undertaking in its relevant market can provide with a realistic decision on
the notified concentration. However, mere economical evaluation of the
situation, although is attentive to the industry's needs, customers and other
competitors' benefits, is hardly capable enough to fulfil all the wants.
Economical assessment by the EU authorities although not enough, but it
legitimates economic base Remedies to sustain activities of the merged
undertaking.
Article 2 ECMR obliges the Commission to conduct a test to determine
whether the notified concentration is compatible with the common market.
New substantive test in European merger control (SIEC-test) as has been
rephrased by the Council's new Merger regulation on 2004 has to be
adopted.57
On the first look, it may appear that any concentration that falls within
ECMR and has as an effect a distortion of free competition in the internal
57
For further reading on the new merger regulation visit: The Commission, Lars-H Röller
& M de la Mano, "the impact of the new substantive test in European merger control", 22 nd
of Jan 2006, available from
http://ec.europa.eu/dgs/competition/economist/new_substantive_test.pdf (visited on 02-052013)
34
market will certainly be foreclosed. On the contrary, the Commission has
considered a second chance for the concentrated undertaking to skip the
foreclosure. Recital 30 ECMR states that:
"Where the undertaking concerned modify a notified concentration, in
particular by offering commitments with a view to rendering the
concentration compatible with the common market, the Commission should
be able to declare the concentration, as modified, compatible with the
common market...".
This view is legislated by Article 8(2) ECMR that states:
"The Commission may attach to its decision conditions and obligations
intended to ensure that the undertakings concerned comply with the
commitments they have entered into vis-à-vis the Commission with a view to
rendering the concentration compatible with the common market".
In Newscorp / Telepiù58 the Commission took the view that defining
specifically the conditions and the frame work of the notified concentration
instead of foreclosure of its activity is more beneficial for consumers,
potential competitors and the market.
Summary of Newscorp / Telepiù
Newscorp is an international company active in production of motion
pictures and TV programming and Content distribution etc.
Telepiù also operates as a pay-TV broadcaster and has been solely
controlled by Vivendi Universal S.A.
Stream operates only in digital technology, transmitting its signals via
satellite and, to a lesser extent, via cable.
On 16 October 2002, the Commission received a notification of a proposed
concentration of the abovementioned companies. The proposed
concentration involves the acquisition of sole control by Newscorp of
Telepiù and Stream with the aim of pursuing the combination of their
business.
pursuant to Article 4 Commission concluded that the notified operation fell
within the scope of the Merger Regulation and that it raised serious doubts
as to its compatibility with the common market.
On the assessment of the effects of the concentration the Commission noted
on point that "the merger will lead to substantial horizontal overlaps in a
number of markets which are vertically related".59
It also has an effect, the creation or strengthening of a dominant position in
the Italian Pay-TV market regarding that the concentration will lead to the
creation of a near monopoly in the pay-TV market in Italy.
It also has an effect the creation or strengthening of a dominant position in
acquisition markets, Horizontal effects in upstream affected markets by
acquisition of contents, acquisition of exclusive broadcasting rights on
premium films.
58
The Commission, , Case No COMP/M.2876, Newscorp / Telepiù, 2nd of Apr.2003,
Brussels, C (2003) 1082 final
59
Ibid, No. 78
35
The Commission noted under point 4 on Overall Conclusion on the
Horizontal and Vertical effects of the concentration that Newscorp will have
the monopoly as a pay-TV supplier in Italy...and if the concentration
concluded Newscorp will have access to the most attractive and most
comprehensive content. Moreover, no other undertaking will have the
essential content to establish an alternative.
The Commission further considers that an authorization of the merger
subject to appropriate conditions will be more beneficial to consumers than
a disruption caused by a potential closure of Stream.
'In this respect, the Commission's findings show that, although it is true that
TV-broadcasters, especially pay-TV platforms, need to buy a variety of TV
content, from the demand-side viewpoint, that is to say, from a TV operator's
perspective, these contents are not substitutable (a feature film and a madefor TV program do not have the same value in terms of attractiveness to
consumers).
52. from the supply-side, rights to TV content are traded under different
pricing structures and do not have the same economic value. In addition,
suppliers of specific content are not able to switch production between
different types of contents.
55. The markets affected by the present transaction on which the
concentration creates or strengthen a dominant position with regard to the
demand-side (the acquisition of the rights)'.
On point 325 the Commission concluded that considering the commitments
by Newcorp on the notified concentration's future actions on provision of
Media content etc. The concentration would not create or strengthen a
dominant position on the market for the supply of pay-TV services, and on
the markets for the acquisition of exclusive rights to premium movies,...and
as a result of which effective competition would be significantly impeded in
the common market or in a substantial part of it. The concentration should,
therefore, be declared compatible with the common market.
Concentration between undertakings, mergers or any other form of
acquisition as a business strategy is not contrary to competition law.
Although in specific circumstances it may lead to distortion of the free
competition, but as a business decision, it is more likely to produce positive
effects for the whole market.
The two scenarios above on abuse of a dominant position by a single
undertaking and Anti-competitive effects of a concentration of two or more
undertakings have tried to illustrate the most common competition law
issues in audiovisual industry. The challenge is regarding the keeping of
balance between the contradiction of competition law principles on
elimination of agreements and/or Practices capable of distorting competitive
market and the need for more efficient undertakings ready to play more
importantly in the market.
Disadvantages and advantages of the abovementioned scenarios were
discussed to provide with a better concept of the decision-making for both
businesses and EU policy makers.
36
Unlike the previous titles, next parts will focus mainly not on the businesses'
market behaviours and EU's responsive approaches toward them, but on the
two of EU's most prominent "supports" to the industry.
In respect to section 5.3 and on the next part, this study tries to analyse the
contradiction of competition Law principles on elimination of supporting
schemes (in a form of exclusive and/or special rights or State Aid granted to
undertakings). Interventional supports are capable of distorting competitive
market and the protection of fundamental rights and principle values related
to culture and audiovisual products and services. The quality and their
relations with the industry will be discussed in the next chapters.
37
11 Public TV-Broadcasting, exclusivity and
special rights granted
11.1
General remark on exclusivity and
speacial rights
Exclusivities and special rights granted by member states to their national
institutions have always been controversial from the competition law point
of view. These special treatments outside the framework set for private
sector put one side on a competitive advantage toward the other one.
However, it seems that free competition and market allocation is not
necessarily a guarantee for the attainment of all the commercial and noncommercial social goals.
After the introduction of the first private/commercial Broadcasters
during1960s in Europe as "pirate satiations" and subsequently as legal
commercial Medias, the dominancy of public broadcasters faded away. The
entrance of these new competitors with new legal bodies regulating them
has brought new discourse besides the typical public broadcasting
framework.
A society has to have specific qualifications to be democratic. One of these
qualifications is the provision of unbiased information to all citizens
regardless of their social status or geographical position. Without a doubt,
Media has been one of the main sources of information in each society.
Consequently, its role is undeniable as a tool for that discourse.
Accordingly and on one hand, national regulations on public broadcasting in
EU have been historically "directed primarily toward the attainment of
cultural policy goals"60. The fundamental principles regarding the
democratic discourse of European societies and provision of unbiased
information for citizens have been assumed a driving force behind the
attainment of public broadcasting services.
On the other hand, the coming into force of the new order has brought new
concerns and obligations on the industry. Private broadcasters in a same
way as other service providers are subject to EU market principles and more
specifically competition law. Additionally, the inclusion of the industry as a
whole to competition law, subjoins public broadcasters to the same legal
framework.
The inclusion may contradict in some cases with the public institution's
primary tasks and the application of those assigned tasks. This contradiction
has to be balanced in a way most suitable for all the stakeholders.
60
R. Craufurd Smith, Culture and European union Law, Oxford University press, 2004,
p.261
38
11.2
Legislation
The definition of a public broadcaster is provided by the transparency
Directive (Directive 2006/111/EC)61. As Article 2(b) of the said directive
states:
‘Public undertaking is any undertaking over which the public authorities
may exercise directly or indirectly a dominate influence by virtue of their
ownership of it, the financial participation therein, or the rules which govern
it.’
The main treaty provision in this part is Article 14(ex Article 16TEC) and
Article 106 TFEU (ex Article 86 TEC).
Article 14 and 106 both are recognizing the role for Public services
including Public TV-Broadcaster.
Article 14 states:
'Without prejudice to Article 4 of the Treaty on European Union or to
Articles 93, 106 and 107 of this Treaty, and given the place occupied by
services of general economic interest in the shared values of the Union as
well as their role in promoting social and territorial cohesion, the Union and
the Member States, each within their respective powers and within the scope
of application of the Treaties, shall take care that such services operate on
the basis of principles and conditions, particularly economic and financial
conditions, which enable them to fulfil their missions...'
Additionally, the first part of Article 106 puts obligations on member states
as it states:
'Member States shall neither enact nor maintain in force any measure
contrary to the rules contained in the Treaties...'
This has to be read in a way that member states granting special rights (e.g.
a monopoly of TV-broadcaster) are obliged to follow Articles 18, 101 and
109 TFEU rulings on discriminations and free competition.
Second part of Article 106 puts obligations on the undertakings benefiting
from special treatments and exclusive rights etc.
'Undertaking...shall be subject to the rules contained in the Treaties, in
particular to the rules on competition, in so far as the application of such
rules does not obstruct the performance, in law or in fact, of the particular
tasks assigned to them...'
The so called "public undertakings" as in this case public TV-Broadcasters
have to consider treaty provision and EU principles to the same extend as
61
The Commission, Directive 2006/111/EC, 16th of November 2006, Directive on the
transparency of financial relations between Member States and public undertakings as well as on
financial transparency within certain undertakings, OJ L 318/17
39
other undertakings. The exclusion provided is regarding the actions, which
are necessary for the performance of the tasks assigned to them.
As it is understandable by the wording of this article, the inclusion of a
"task" refers to the minimal inclusion of public tasks. This interpretation of
article 106(2) TFEU is in line with the court's observation on the
proportionality of the actions with the provision of the tasks assigned to
these undertakings.
Other leading legal instrument in respect to Audiovisuals and TVBroadcasting is the protocol on public broadcasting which is annexed to the
EC treaty by the treaty of Amsterdam62. This protocol has an interpretative
role for the TEC Treaty and encompasses considerations on fundamental
role of Public Broadcasting in provision of an independent media that
answers the public cultural and social needs. The protocol clearly considers
"the member states' competence" to define and organize their public service
broadcasting institutions. 63
In other words, legislating in this part has to be in line with the Union's
different wants and member states' competences.
11.3
Exclusivity and/or special rights
granted to Public TV-Broadcaster and
balancing
In discussing public TV-Broadcasting, the focus is on the public approaches
(at Member state level and EU level) toward the industry. The exclusion of
Public TV-Broadcasters from Competition Law settlements, the necessity of
establishing public Broadcasting undertakings and justification for special
Treatments, have been controversial.
Leading justifications by public authorities and arguments questioning them
are shaping the discussion in this part.
Cultural Diversity, pluralism, freedom of expression and other Fundamental
Citizen Rights are protected by many means. In this regards, the most
prominent legal protection is the Charter of Fundamental rights of the EU
(especially after its Constitutionalisation by the Lisbon treaty). Other legal
instruments protecting it vary from United Nations' Universal Declaration of
Human Rights64, the Council Decision on the conclusion of the Convention
on the Protection and Promotion of the Diversity of Cultural Expressions65,
62
Treaty of Amsterdam, the protocol on Public Broadcasting, 10th of Nov. 1997, OJ C 340
R. Capito, European Media Law, p 202
64
Universal Declaration of Human Rights, Full Text, available from
http://www.un.org/en/documents/udhr/index.shtml
65
The Council, 8668/1/06 REV 1, 11th of May. 2006, Decision on the conclusion of the
Convention on the Protection and Promotion of the Diversity of Cultural Expressions
European Culture Portal, available from
http://ec.europa.eu/culture/portal/action/diversity/pdf/st08668.EN06.pdf
63
40
Copenhagen Criteria66, Statute of the Council of Europe and its main
instruments67. Having in mind the abovementioned consideration, as a
citizen, one is subject to different fundamental rights. These rights may be
neglected easily and where there is no guarantee protecting them.
Private TV-Broadcasters are funded by advertisement fees and other sources
of income except for public supports. Consequently, their policies are pretty
much in line with investors' demands. Regardless of the credibility of
funders to social values, this very nature of private TV-Broadcaster has
raised the risk of disregarding the public benefit to maximize profitability68.
Exemplarily, in the state of perfect competition where the economic base
decisions are the rational common trend, an undertaking may find it
economically unprofitable to provide with services in certain geographic
areas or for certain minorities etc. due to the managements' decision.
Meanwhile, the economical dependence of a TV-Broadcaster to its investors
may raise concerns regarding the provision of unbiased information to the
society.
In addition, the lack of appropriate TV-Broadcaster capable enough to fulfil
the social considerations has been emphasized by Member states to justify
the presence of Public undertakings in this sector.
Although, in a free market economy the market will adjust itself to demands
and consequently, if there is a demand for any of the social rights the market
allocation has to be adjusted or justified to reflect those demands/rights69,
but the situation is sensitive enough not to wait for the industry deciding on
it.
In response to the common trend in the industry, Public TV-Broadcasters
have typically been vertically integrated. Additionally, to make sure that the
content will be available in all the territory, public broadcasters may enjoy
the access to the whole of the national territory and infrastructures needed.70
Such advantages bestowed by the market strategy, exclusions from
competition law and rights granted by Member states, have put these
undertakings subject to various questions and criticisms.
One of the questions raised from the Competition Law point of view is
whether there are some other means less restrictive than Public TVBroadcasters.
66
EU commissioner for enlargement and neighborhood policy, Copenhagen Criteria, 14 th of
May.2013, Copenhagen, Political Conditions, available from
http://europa.eu/legislation_summaries/glossary/accession_criteria_copenhague_en.htm
67
The Council, CETS No. 001, 5th of May. 1949, Statute of the Council of Europe, Article
1, available from http://conventions.coe.int/Treaty/en/Treaties/Html/001.htm
68
This attitude has been challenged by scholars of Corporate Social responsibilities (CSR)
stating that Businesses' profitability is more likely to be attained in a long run by being
credible to society. For further reading see Radu Mares, "the Dynamics of Corporate Social
Responsibilities, 2008, Boston, Chapters 2,3 and 5
69
T. Prosser, The Limits of Competition Law, Oxford Studies in European Law, Public
Service Broadcasting: A special Case, p 207
70
R. Craufurd Smith, Culture and European union Law, Oxford University press, 2004, P
174
41
More specifically Commercial TV-Broadcasters as the main competitors
facing the competitive deficit have raised this question. Many arguments
supporting the question have been as follows:
As it is the case in Audiovisual Industry, the old technology has merged
with the telecommunication technology and hence, has evolved a new
phenomenon. This new phenomenon makes vast options available for
citizens, notably, the growth of subscribing channels and so-called nonlinear TV Programmes (on-demand TV programmes). The vast number of
subscribing channels and the extended availability through different
platforms, can easily cover all citizens at different geographic areas,
different values etc. By this meaning market-allocation in free competition
can adjust automatically to protect common citizenship rights.
Consequently, there will not be a place for limiting the application of
Competition Law nor the ruling on the case of Italy v. Sacchi71.
Although there is an increasing number of subscribing channels, but public
TV-Broadcasters are still keeping their classic popularity.
As it appears from table (1), the current situation is "sort of mixed
oligopoly" where the competition is between private and public operators'.72
1995
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherland
Portugal
Spain
Sweden
UK
EU
Public
2
4
2
2
5
10
3
4
3
0
3
2
4
3
3
50
Private
0
0
3
2
22
19
6
0
9
1
10
2
10
9
62
155
2000
Total
2
4
5
4
27
29
9
4
12
1
13
4
14
12
65
205
Public
3
6
3
2
4
14
5
3
15
0
4
3
8
9
11
90
Private
2
12
4
5
79
54
13
3
54
1
20
8
70
14
102
441
95/2000
Total
5
18
7
7
83
68
18
6
69
1
24
11
78
23
113
531
Public
8%
8%
8%
0%
-4%
7%
11%
-6%
38%
6%
8%
15%
25%
30%
12%
Private
25%
67%
6%
20%
29%
23%
17%
32%
43%
0%
15%
32%
48%
9%
10%
23%
Total
20%
35%
7%
12%
25%
19%
15%
8%
42%
0%
13%
22%
41%
14%
12%
21%
Table (1): Number of National TV Channels* in the EU73
*: national channels (terrestrial, cable, and/or satellite): not including digital bouquet, local
or regional channels and windows, or channels for foreign markets.
As can be seen from table (1) the growth in numbering of public TVBroadcasters parallel with the increasing of Commercial TV-Broadcasters ,
strengthens the hypothesis that the growth is responsive to the growth of
commercial TV-Broadcasters. Hypothetically, if t the abovementioned
71
ECJ, Case 155/73, Italy v. Sacchi, 30th of Apr. 1974, ECR409
EIB, "An overview of The European Audiovisual Industry", P. 59
73
European Audiovisual Observatory (1996, 2000), Cited in EIB, P. 59; For further
information visit, A. Lange, "Some data to compare public and private TV programming
(Figures in the "framework of the conference on public media services at the digital age)",
July 2008, available from
http://www.obs.coe.int/online_publication/expert/data_public_vs_private_tv.pdf.en
72
42
criticisms were persuading enough for Authorities in EU, then the case
would be very different.
Treaty provision and the Court's interpretations of the related Articles and
the inclusion of Public TV-Broadcasters to the treaty provisions, have
demystified uncertainties in this field.
Although, Public TV-Broadcasters are shaped under state regulations and
consequently may be fall outside the inclusion of Treaty provisions, but the
Court in Case Italy v. Sacchi took the view that; "In the absence of express
provision to the contrary in the Treaty, a television signal must, by reason of
its nature, be regarded as provision of services."
As a result other treaty provision on Internal Market Law and Competition
Law are directly applicable to these undertakings. In addition, the court
stated that the "cultural" element is not constitutive enough for exclusion
from Article 101 and 102 TFEU74.
Considering the Courts rulings and treaty provisions, it seems that the only
argument remained for Public TV-Broadcastings is in the case that the
application of treaty provisions obstructs the operation in law or in fact, the
particular task they are assigned to them. This argument has been taken
occasionally by member states whenever public TV-Broadcasters and the
exclusive and special rights assigned to them have been challenged.
It noteworthy that, all the derogations from treaty provisions has to be
narrowly interpreted and is only limited to proportionate national measures.
Accordingly, the Commission and the Court while assessing the measures
may approve the exclusion only if the measure taken is suitable to meet the
objectives and is in the manner least restrictive to competition law.
The parallel importance of Competition Law and cultural and social
consideration, make the EU approve the limited derogations from Treaty
Provisions to fulfil other objectives. This view, although criticized by the
industry, guarantees the provision of unbiased information to the citizens
and subjects member states for that provision.
The same kind of attitude is recognizable in the legilations relating to the
national supports in the form of State Aid and the subject of Article
107TFEU (Ex 87 EC).
74
R. Craufurd Smith, Culture and European union Law, Oxford University press, 2004
43
12 State financial Aid to Audiovisuals
12.1
General remarks on State Aid
granted to TV-Broadcasting and Movie
Industry
As in chapter 7, more or less the same discussions are affirmative here. The
discussions relating to State Aid to Audiovisual Industry and more
specifically to Movie and TV-Broadcasting Industries are mainly
concerning the admissibility and necessity of State Aid as a type of public
intervention.
EU and member states considerations on the protection of cultural heritage
and cultural identity and the importance of audiovisual industries as one of
the main cultural platforms have made legislators at both levels to grant
fiscal helps to the industry. These economical supports at the member state
level are in the form of a State Aid and granted to market players at specific
sectors.
Particularly, State Aid in audiovisual industry is mainly designed to protect
the broader public concerns, firstly, by protecting cultural aspects and
secondly, by protecting the businesses themselves.
Evolution of State Aid in both industries has happened during different time
gaps. As in state aid for public TV-Broadcasters, the set time gap can be
chased back to 1970s. As has been discussed before, economical and
technological developments in the industry made it possible for
commercial/private sector TV-Broadcasters to enter the market. The
entrance of the new competitors and the free competition with its inherent
risks involved delved the way for further public interventions in the form of
State Aid.75
Additionally, State Aid system directed toward the Movie Industry has
started during 1920s with Italy and the UK being pioneers in that field. By
the end of 1950s, this system has been already widespread in EU. 76
Not surprisingly, protections and interventions in the market in form of state
Aids granted, subject member states' attempts to competition law criteria.
The inclusion of these measures and available derogations from the Treaty
Provisions will be discussed in this chapter.
12.2
Legislation
The main Treaty provisions regarding State Aid are Article 107 and 167
TFEU (ex Article 87 and 151EC). As Article 107 on point 1states:
75
The Commission, Communication on the application of state aid rules to public service
broadcasting (text with EEA relevance), 2001, available from
http://ec.europa.eu/competition/state_aid/legislation/broadcasting_communication_en.pdf
76
EIB, The European Audiovisual Industry: An overview, 2001, P. 58
44
'1. Save as otherwise provided in the Treaties, any aid granted by a
Member State or through State resources in any form whatsoever which
distorts or threatens to distort competition by favoring certain
undertakings or the production of certain goods shall, in so far as it affects
trade between Member States, be incompatible with the internal market.'
Through Article 107 TFEU, the state aid granted by a member state "in so
far as it affects trade" in the Union, is contrary to Competition law.
However derogations available for Aids granted to the audiovisual
industry are under number of provisions mainly Article 107 (3), 106 (2)
and 93 TFEU. Article 107(3) TFEU states:
'3.The following may be considered to be compatible with the internal
market:
(d) Aid to promote culture and heritage conservation where such aid does
not affect trading conditions and competition in the Union to an extent that
is contrary to the common interest.'
Additionally, Article 167 TFEU (ex Article 151 TEC) obliges the Union
to contribute to the "flowering of the cultures of the Member States" and
of EU. As the Article 167 (2) & (4) states:
'2. Action by the Union shall be aimed at encouraging cooperation between
Member States and, if necessary, supporting and supplementing their action
in the following areas: …artistic and literary creation, including in the
audiovisual sector...
4. The Union shall take cultural aspects into account in its action under
other provisions of the Treaties, in particular in order to respect and to
promote the diversity of its cultures. '
Meanwhile secondary legislations and case law sets out the framework for
the Aid granted to the audiovisual Industry. The 2001 Commission
Communication on the application of State Aid rules to public service
broadcasting1is of a major importance. In addition, the so-called cinema
communication77 provides with special rules assessing the cinematographic
works and other audiovisual products.
77
The Commission, Communication COM(2004) 171 final, 30th of Apr. 2004,
Communication on certain legal aspects relating to cinematographic and other audiovisual
works, OJ C 123/01
45
12.3
State Aid granted to TVBroadcasting and Movie Industry,
balancing
Another approach taken by Member states to support parts of the industry
and specific goods or services is through Aid granted to those sections.
Similarly, these forms of funding system have been granted to the
audiovisual sector and specifically to TV-Broadcasting and Movie Industry.
State Financial Aid granted to the industry is in line with the treaty
provisions on protection of member states cultural values and the EU's
broader cultural concerns. However, the injection of capital to parts of the
Industry, actually and potentially, distorts Competition in the Union.
The selected undertakings can strengthen their market position regardless of
the competitive restraints and their position in the market. As a result, the
strengthening of their market position puts other competitors at a
competitive disadvantage.
Competition law concerns on state aids directed to the TV-Broadcasting
industry are limited to the public sector. Member states have been granting
financial State Aids to public TV-Broadcasters with the same justifications
for granting them exclusivity or special rights. These forms of supports are
controversial in two senses. Firstly and considering the objectives of the
financial state aid support, the concerns is whether the funding is going
beyond what is necessary to achieve the objectives. In this meaning, the
concern is about the proportionality of the State Aid granted (with
evaluating its necessity and its amount).
Regarding the derogations available under the treaty provisions, member
states may argue in all the State Aid cases before the Commission and the
Courts that the specific financial help is necessary for the achievement of
the said cultural goals. This argument has to be assessed for its accuracy.
The second concern is the possibility that the Aid granted is "misdirected".78
Meaning that, the goal set for the granted undertaking is not having a public
service nature. Hence, the Commission's approach assessing the set
programme justifying the State Aid has changed quite often. The changes
are in respect to the fact that the Commission's decisions have to be in line
with ECJ and CFIs rulings on the scope of the public interest. Moreover, the
political pressures by member states are undeniable. 79
Parts of the State financial Aid in each member state is directed to the
Movie Industry. Both EU and Member states have granted fiscal helps to
the movie industry and cinematographic products. These helps are mainly in
accordance with the level of cultural importance and special characters of
film products as artistic works entailing cultural messages.
78
79
R. Capito, "European Media Law", p.228
Ibid
46
At the member state level, the Competitive concerns regarding State Aid
granted to the movie industry are focused on the two very common models
of granting them.80
1. Automatic Financial Support System: In this model, the sum of
money is calculated on the box-office revenues of a film and
then will transfer automatically to the producer or distributor to
help them to finance their next movie.
2. Selective Funding System: this model is a form of a "soft loan"
given to the producer for the future revenues.
As can be seen, the Automatic system is aiming for the sustainable
competitiveness of the movie industry by rewarding for the success of the
movie and using it for launching another project. Meanwhile, the Selective
system is aiming to support the cultural facets of the movie products. This
form of State Aid is mostly covering the creation of movies that are not
necessarily aiming for a top sale.
State Aid helps granted to the movie industry in all the member states are
often a mixture of the two models.
The Commission and the courts in the Union while assessing any forms of
governmental interventions on free competition subject to Article 107
TFEU, have to take in mind the cultural concerns at the member state and at
EU level.
While analysing the legality of a State Aid granted, the Commission and the
Courts have to balance the various considerations.
Thus, Article 107 (3) TFEU has to be read in connection with Article 167
(4) and the obligation on the Union for taking into account "cultural aspects"
and the promotion of "the diversity of cultures". It is notable that this clause
was added to this Article by the Treaty of Maastricht.
Additionally, from the Commission's Cinema Communication81 providing
rules for the assessment of audiovisual products and the Commission's
notices on State Aids granted82, a set framework for this assessment can be
derived collectively. The set framework is more or less a checkpoint list
introducing five steps for the assessment of a State Aid in Audiovisuals.83
1. Legality of the State Aid granted and that it does not contain clauses
that would b contrary to treaty provisions.
80
Ibid
The Commission, Communication COM(2004) 171 final, 30th of Apr. 2004,
Communication on certain legal aspects relating to cinematographic and other audiovisual
works, OJ C 123/01
82
As a cornerstone decision visit, The Commission, State aid No. N591/2005- Sweden,
Prolongation of State aid to support Swedish film production and filmrelated activities (The
Swedish Film Institute Agreement), 22nd of Dec. 2005, Brussels, K (2005)5925
83
The latest extension of the criteria introduced by the Commission's cinema
communication is until the end of 2012. However, the new communication in this regard is
expected to be published shortly. For further information visit, EU, Commission consults
on film support issues, available from http://europa.eu/rapid/press-release_MEMO-12186_en.htm
81
47
2. The aid is directed towards a cultural product
3. The producer must be free to spend at least 20% of the film budget in
other schemes. In other words the Commission accepted
territorialisation of a State Aid in terms of expenditure of up to 80% of
the production budget
4. State Aid intensity (in principle) has to be limited to 50% of the
production budget. However, difficult and low-budget films are
excluded
5. State Aid supplements for specific filmmaking activities (e.g. postproduction) are not allowed.
It appears from the abovementioned criteria and the general theme of the
Courts 'decisions, that in an Undistorted Market, the cultural values and
considerations of the member states weight over the community's
competition law principles. The five steps above evaluate admissibility and
necessity of such public interventions.
The awareness of the outcomes of a State Aid for both the market and the
society helps with a more sustainable growth with least negative
externalities.
48
13 Conclusion
On this part, the main question of this thesis is put forward and with a better
perspective on Audiovisuals and legal policies in charge, a possible answer
is concluded. The better perspective on the topic is derived from the set of
discussions in the three main chapters and the following headlines.
What are the reasons for the absence of competitive and equivalent
European Audiovisuals in the EU Market, which is dominated by American
made Audiovisuals?
This question leads to an in-depth analysis of the legal policies in charge.
The answer, limited to the subject of this study, is a deduction of the set
discussions as follows:
1. Having regard to the Movie Industry overall sketch and that:
- An Overview of the Movie Industry shows different businesses
active at different stages of the value chain.
- Each stage from the development to the distribution and
exhibition are connected and influencing each other.
- Movie Industry is a risky business by nature. This innate quality
and uncertainty around the ROI rate, has made rigid any
investment needed for the industry.
- The industry's tendency to concentrate, to be dominant and/or
any other mean to strengthen the market position inspired from
the U.S. Studio System is recognizable.
2. Having regard to the TV-Broadcasting Industry overall sketch and
that:
- An overview of the TV-Broadcasting Industry shows interactions
of different businesses at different stages of the value chain.
- These businesses may be active at the Up-stream or Downstream market for TV-Broadcasting.
- The value chain shows the intermediary role of the TVBroadcasting Industry as between Content producers (e.g. Movie
Industry) and customers and the society.
- The fragmented state of the industry is recognizable.
- The Industry's fragmentation and the risks involved are enough
motivations for the industry to Concentrate, to hold a dominant
position and other ways of strengthening its state.
3. Having regard to the Market structure and that:
- Markets in Audiovisuals are very much connected to each other
in a way that the likelihood of each one actively and potentially
influences the other one.
- The interactions of the Up-stream markets and Down-stream
markets in TV-Broadcasting and Movie industry are
recognizable.
4. Having regard to the positions held by audiovisual undertakings and
more specifically the abuse of dominancy and that:
49
-
Dominancy in the market is not contrary to the EU provisions
yet; it obliges the undertaking holding it to act responsibly to the
competitive market and stakeholders.
- The abolition of distortion of competition law subject to Art 3
and 102 TFEU concerns the trend taken by the industry for
possessing a dominant market power.
- The aim for having an upper hand in the industry can be met
through various arrangements.
- The common scenarios in having a dominant position in
audiovisual market are applied by having an ultimate access to
media content capital and, owning an IPR, Integrations etc.
- According to Cases Sacem and Filmdis, a dominant undertaking
with an access to media content may refuse to supply other
businesses with the needed media content.
- Abuse of dominancy may take the forms of exploitative abuse
and/or exclusionary abuse.
- Considering the role of media contents as the raw material for
the industry and for the new businesses in the market, we can see
the sensitivity of any possible impediment in the access to media
contents.
- Considering the Case Filmdis, in the case of a quasi monopoly
undertaking, the damages are not limited to the mere exhibitors.
Similarly, the consideration of the nature of Audiovisuals
approves this concern.
- The Commission's notice on the Cases 60 and 61/84 on the role
of exhibitors shows their importance for the movie industry.
- Audiovisual products are having double characters as
economical (e.g. raw material for exhibitors) and cultural.
- The cultural quality has made audiovisuals subject to social
concerns and fundamental rights as a citizen.
- The economical assessment of an abuse of dominancy can
provide with a better assessment of the factual influences.
- Introducing a safety zone for a dominant undertaking, (a gap
between 10 or 15% to 70% of the relevant market share) is more
considerable to the realities of the industry.
- As has been stated by the court, the competition law protects
competition in the market and not the competitors.
- A dominant undertaking in Audiovisuals is tolerated as long as it
is acting responsibly and attentively to the market.
5. Having regard to the concentrations in Audiovisuals by vertical or
horizontal agreements and that:
- Being attentive to Audiovisual's nature and the market dimension
means that the EU realizes the rationale behind the urge for
concentration in the industry.
- An efficient size companies with higher risk-taking ability makes
a good opportunity for a more efficient industry with an
equivalent competitiveness.
- The main treaty provisions are Articles 101 and 102 TFEU and
the general rules on competition law.
50
-
-
-
-
-
-
-
-
-
-
The two articles are trying to control the growing trend toward
concentrations in Audiovisuals. Moreover, article 167(4) obliges
the union to take into account cultural aspects while regulating
the area.
ECMR, in line with the treaty provisions, is the main legal body
regarding horizontal and vertical agreements.
The business's trend to concentrate is an attempt to easing up the
hefty expenses and uncertainties by extending through the value
chain and possible neighbouring markets. This network will
provide the business with stronger economical position in
relation to its competitors.
A concentrated undertaking with an extended market presence
and a stronger and market position, is more likely to impede
competition actively or potentially for its competitors.
Economical considerations urging the industry for joining the
forces are not necessarily in line with the competition law
principles.
According to Case Vivendi/ SEAGRAM , vertically integrated
audiovisual undertaking may take "the gate keeper" role by
having control over the sources of different businesses.
The main concerns regarding vertically integrated audiovisual
undertakings are a possible foreclosure of the input market and a
possibility of interchanging the market power to other markets.
Giant undertakings raised out of concentrations may cause
inflation on the market for media content. In that sense, it may
also cause an exploitation of end-users of media contents.
Concentrated audiovisual undertakings with a stronger market
positions, and the results of business decisions, are more likely to
help gaining competitiveness in relation to the U.S. made
Audiovisuals. Meaning that, the positive externalities of such an
undertakings are undeniable. Theses externalities are beneficial
for the whole industry and consequently for preservation of the
European cultural heritage.
According to RTL Case, a concentrated undertaking may raise
the risk of partitioning the market.
The mere economical assessment of a concentration can hardly
balance all the wants and principles.
Hence, article 2 ECMR has introduced a "new substantive test"
and criteria to assess a concentration.
As in the case of Newscorp/telepiù, a second chance is given to a
concentrate undertaking fallen under ECMR and in a risk for
foreclosure. The possibility is available in a form of commitment
by the undertaking to assure it is not going to distort actively or
potentially free competition in the market.
Although EU and the industry are aware of the need for
concentrations and its positive externalities but, free market
principles and treaty provisions are too essential to be
disregarded.
51
-
Apparently, the balancing of different wants and values are still
the main "want" in this section. EU authorities and legislations
are supporting the businesses limited to the treaty provisions.
6. Having regard to Public TV-Broadcasting and exclusivities and
special rights granted by Member states and that:
- The balancing of all the wants and principles and various facets
of any attempts taken in Audiovisuals is not limited to the
measures taken by the businesses rather, it covers all the
measures at the member state or EU level including public
interventions.
- Public TV-Broadcastings are assigned by member states, in
accordance with their territorial competence, to fulfil social
values and cultural concerns. However, they are subjected to
treaty provision too. The case Sacchi is remarkable in this sense.
- Their public role and the tasks assigned to them justify their
derogation from competition law principles. However, these
derogations have to be balance with negative externalities of
public interventions and distortion of competition law and
possible damages to other competitors and end-users.
- Considering the definition of public undertakings provided by
Article 2(B) of the Transparency Directive and the interaction of
article 14 and 106 TFEU, we can conclude that member states
limited to the tasks assigned to public TV-Broadcasters, can
derogate from treaty provision.
- Yet, those undertakings have to consider treaty obligations on
Article 18, 101, 109 TFEU.
- Amsterdam Treaty emphasises on the Public and the
humanitarian aspects of public TV-Broadcasters roles.
Additionally, other legal instruments on the EU level (e.g. the
charter) and/or international conventions on the cultural
diversity, freedom of expression, minorities' rights, citizen' rights
etc. are affirming the role.
- The statistics issued by The European Audiovisual Observatory
shows that Public TV-Broadcasters are continuing to be active
parallel to private/commercial sector.
- Private TV-Broadcasters are funded by many sources rather than
Public supports. The business model of a Cable-TV may oblige
the Broadcaster and the managements to refuse to provide
services whenever that provision is not economically beneficial.
- Public broadcasters on the contrary, are hardly limited by the
managers' economical business decisions. The tasks assigned to
them are justifying the public supports they benefit from.
- Private TV-Broadcasters argue that the technological advantages
in the field and accessibility and adjustability of TV-channels to
all citizens alternate the existence and justifications of PublicBroadcasters.
- Exclusivities and special rights granted, are raising up the risk
for creation of a monopoly, partitioning of the market, abuse of
dominancy etc.
52
-
A democratic society has specific qualifications that have to be
met. One of these qualifications is the provision of unbiased
information to all citizens.
- Free competition and the market allocation is not necessarily
enough guarantees for the protection of fundamental rights and
social values by private/commercial TV-Channels.
- The balance has to be made between different wants and values
including humanitarian and social goals, abolition of distortion
of competition by public intervention etc.
- EU approaches toward these Broadcasters are in a way that it
approves states' interventions limited to special circumstances.
Firstly, the exclusivities and special rights granted have to be
proportionate with the tasks assigned. Secondly, the notion of
'tasks' refers to the minimal inclusion of the public tasks.
- It seems that the EU is conscious about the negativities of public
interventions in the market for the competitors and the whole
business. However, EU will not cease the provision of the
fundamental rights in hope that they will be provided through
market allocation and free competition.
7. Having regard to the State aid supports to Public TV-Broadcaster
and the movie industry and that:
- The balance has to be kept between the EU considerations on the
industry ( its vital need for financial support and capital) and that
injection of capitals to the specific sectors in the industry is
contrary to competition law in a way that it strengthen the market
power of a benefited undertaking in comparison with their
competitors.
- The concerns and justifications regarding the State Aid granted
to Public TV-Broadcasters are pretty much the same as the
notions behind the exclusivity and special rights granted.
- Article 107 TFEU generally considers any form of intervention
in the free competitive market, contrary to treaty provisions on
competition law. However, article 167 TFEU puts as a general
obligation, the contribution to the Union's cultural
considerations.
- Considering the connection between Article 107 and 167, it can
be concluded that Article 170(3) TFEU has to be read with
Article 167(4).
- Derogations from treaty provisions are available for State
Financial Aid to the industry under Articles 107(3), 106(2) and
93 TFEU.
- Regarding the State Aid granted to the movie industry, two
models are applicable: a) Automatic financial and b) Selective
funding system
- The entrance of new private TV-Broadcasters and the new
competitive environment they caused, has partly justified further
helps granted in the form of State Aid.
- From the competition law perspective the question is the
admissibility and the necessity of a State Aid.
53
-
-
-
-
-
-
-
-
Regarding the movie industry, an injection of capital can
support, to the big extend, industries active in the sector in
competition with the dominant market players (e.g. with U.S.
Audiovisuals).
Main Competition law concerns regarding State Aid granted to
the movie industry are a) the proportionality of the State Aid and
b) the concern that the State Aid granted is misdirected.
State Aid granted to the movie industry is meaningful by
considering the cultural values of audiovisual contents.
The policy is in line with the obligation for cooperation on
cultural sector. Additionally and in respect to the movie industry,
the policy is in line with the industries' want on gaining an
equivalent competitive position in relation to other competitors.
State Aid helps granted are following five-step criteria
introduced by the Commission's Cinema Communication and
Commission's notice on State Aid.
The criteria cover the legality, the aim, thresholds introduced for
territorialisation of state aid, threshold introduced for the
production costs and State Aid for specific filmmaking activities.
It appears from the criteria and the Courts' rulings that in an
undistorted market, the cultural values and social considerations
of a member state weights over the competition law principles.
It appears that EU is considerable to the distortions caused by
public interventions in the form of State Aid. However, EU is
also attentive to the industries' sectoral needs for fiscal supports.
It seems that EU is emphasizing on the sustainable growth of the
industry rather than an economical sudden boost. The
sustainability in the industry can be achieved by being conscious
about all the facets of the industry including the externalities of a
State Aid.
Considering the above statements, we can conclude that:
i.
EU's General Theme in accordance with the audiovisual
industry is on keeping the Balance of different and seldom
contradictory wants and values.
ii.
EU's Ultimate Goal is a Sustainable Growth of the industry
rather than a sudden boost in the market share. This
Uncompromising goal can be achievable by being Conscious
of Various Facets of Audiovisuals.
iii. EU's Understanding of Audiovisuals Internalizes the Double
Nature of Audiovisual and is Fundamentally Different from
its U.S Counterpart.
In other words, it can be stated with a complete confidence that the
differential in the audiovisual market share is originated from two different
understandings of the word "Audiovisuals".
54
14 Bibliography
Books:
C. Barnard, "The Substantive Law of EU", Oxford University Press, Third
Edition, 2010
N.G Foster, "EU Treaties & Legislation", Oxford University Press, 2011
O. Castendyk, E. J. Dommering, A. Scheuer, "European Media Law",
published by Kluwer Law and Business, 2008
R. Craufurd Smith, "Culture and European union Law", Oxford University
press, 2004
R.H. Folsom, "NAFTA and Free Trade in the America in a nutshell ",
Tomson West, Third edition, 2008
R. Mares, "the Dynamics of Corporate Social Responsibilities", Martinus
Nijhoff Publishers, 2008
T. Prosser, "The Limits of Competition Law", Oxford University Press,
2005 Public
Articles and reports:
Bird&Bird, "Market Definition in the Media Sector-Comparative Legal
Analysis", 2002
EIB, "An overview of The European Audiovisual Industry", Sep 2001
EP, "The comparative study of the cultural products and services industry
EU-USA", Dec. 2003, Luxembourg
EP, "Fact Sheet on the EU- Audiovisual and media policy ", 2009
European Audiovisual Observatory, "The Imbalance of Trade in Films and
Television Programmes between North America and Europe Continues to
Deteriorate", Press release, 2000, Strasbourg
H. Galperin, "Cultural Industries in the Age of Free-Trade Agreements"
Lars-H Röller & M de la Mano, "the impact of the new substantive test in
European merger control", 22nd of Jan 2006
M.M Pereira, "Vertical and Horizontal integration in the media sector and
EU competition law", 7th of Apr. 2003, Brussels
55
Lectures:
A. Lange, "Some data to compare public and private TV programming
(Figures in the "framework of the conference on public media services at the
digital age)", July 2008
Websites:
http://www.obs.coe.int/about/oea/pr/desequilibre.html (20-05-2013)
http://www.eib.org/attachments/pj/pjaudio_en.pdf (20-05-2013)
http://ec.europa.eu/competition/sectors/media/documents/legal_analysis.pdf
(11-05-2013)
http://www.cjc-online.ca/index.php/journal/article/viewArticle/1082/988
(08-05-2013)
http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61976CJ0085:EN:P
DF (22-05-2013)
http://ec.europa.eu/dgs/competition/economist/new_substantive_test.pdf
(22-05-2013)
http://ec.europa.eu/culture/portal/action/diversity/pdf/st08668.EN06.pdf
(22-05-2013)
http://www.un.org/en/documents/udhr/index.shtml (22-05-2013)
http://conventions.coe.int/Treaty/en/Treaties/Html/001.htm (12-04-2013)
http://www.obs.coe.int/online_publication/expert/data_public_vs_private_tv
.pdf.en (08-03-2013)
http://europa.eu/rapid/press-release_MEMO-12-186_en.htm (22-05-2013)
Legislation:
Consolidated version of the Treaty on the functioning of the European
Union (TFEU), OJ 2012/ C 326
Consolidated version of the Treaty on the European Union (TEU), 9th of
May 2008, OJ 2008 C 115/13
Charter of Fundamental Rights of the European Union, 2010/C 83/02, 30th
of Mar.2010, OJ 2010/C 83/02
56
Treaty of Nice (amending the TEU, TEC and certain related Acts), 2001/C,
10th of Mar.2001, OJ C 80/1
Treaty of Amsterdam, the protocol on Public broadcasting, 10th of
Nov.1997, OJ C 340
Statute of the Council of Europe, CETS No. 001, the Council, 1949
Secondary Legislation:
Directive abolition of restrictions on the use of cable television networks for
the provision of already liberalized telecommunication services (amending
Directive 90/388/EEC), 95/51/EC, the Commission, 18th of Oct.1995, OJ
L256/49
Directive on the transparency of financial relations between Member States
and public undertakings as well as on financial transparency within certain
undertakings, 2006/111/EC, The Commission, 16th of Nov. 2006, OJ L
318/17
Decision on the conclusion of the Convention on the Protection and
Promotion of the Diversity of Cultural Expressions, 8668/1/06 REV 1, The
Council, 11th of May. 2006
Television without frontiers Directive, 89/552EEC, The Council,
1989(revised in 1997), (TVWF)
Audiovisual Media services Directives, 2010/13/EU, EP and the Council,
10th of Ma.2010, (AVMSD)
Regulation on the control of concentration between undertakings The
Council, 139/2004, 20th of Jan 2004
Regulation on the control of concentration between undertakings, No
4064/89 EEC, The Council, 21st of Dec.1989, OJ L 257/90 P 13
Regulation on the control of concentration between undertakings,
139/2004/EC, the Council, 20th of Jan. 2004, OJ L 24/1
Recommendation on film heritage and the competitiveness of related
industrial activities, 2005/865/CE, EP and of the Council, 9th of Sep 2012,
OJ L 323/57
Recommendation on the digitalization and online accessibility of cultural
material and digital preservation, the Commission, 2006/585/EC, 25th of
Aug.2006, OJ L 236/28
57
Recommendation of the European Parliament and of the Council on film
heritage and competitiveness of related industrial activities, 2005/865/CE,
EP and the Council, 16th of Nov 2005
Guidelines on the assessment of horizontal mergers under the Council
Regulation on the control of concentrations between undertakings ,
Guidelines 2004/C, The Commission, 5th of Feb. 2004, OJ 31/03
(Horizontal Merger Guidelines)
Notice on the definition of relevant market for the purpose of community
competition law, 97/C 372/03, The Commission, 9th of Sep.1997, OJ C372/5
Copenhagen Criteria, EU commissioner for enlargement and neighborhood
policy, 14th of May.2013, Copenhagen
Communication on certain legal aspects relating to cinematographic and
other audiovisual works, COM (2004) 171 final, The Commission, 30th of
Apr. 2004, OJ C 123/01
International Law:
Universal Declaration of Human Rights, The United Nations
58
15 Table of Cases
Court of Justice of the European Union
ECJ, Case 322/81, Michelin v. Commission, [1983]
ECJ, Case C-52/09, Konkurrensverket v. TeliaSonera AB, [ 2011]
ECJ, C 85/76, Hoffman-La Roche v. Commission, [1979]
ECJ, Joined Cases of C 241/91, C 242/91, Magill TV Guid/ITP& BBC and
RTE , [1995]
ECJ, C 395/87, Ministère Public v. Tournier(Sacem), [1989]
ECJ, Joined Cases 60 and 61/84, CINÉTHÈQUE v FÉDÉRATION
NATIONALE DES CINÉMAS FRANÇAIS Joined, 11th [1985]
ECJ, C 155/73, Italy v. Sacchi, [1974]
The European Commission:
The Commission, C IV/M.2050, Vivendi/Canal+/Seagram, [2000]
The Commission, C Comp/m.3333, Sony/BMG,[2004]
The Commission, C IP/02/744, declaration on approval of the accusation of
joint control of VG Media by RTL and ProSiebenSat.1 [2002]
The Commission, C Comp/m.2876, Newscorp / Telepiù, [2003]
The Commission, State aid N591/2005- Sweden, Prolongation of State aid
to support Swedish film production and filmrelated activities (The Swedish
Film Institute Agreement), [ 2005]
General Court:
CFI, British Case 95/04 P, Airways plc v. Commission , [2007]
CFI, Case T-62/98, Volkswagen AG v. Commission, [2000]
Member state institution:
France Competition Council, Decision No 04-D-44, Ciné-Théâtre du
Lamentin v. Filmdis, [2004]
59