Premier League broadcasting rights flagged offside by Advocate General

On 3 February 2011, Advocate General Kokott (the “AG”) of the Court of Justice of the European Union (the “Court”) dealt a major blow to the FA Premier League (“FAPL”)’s attempts to protect its territory-by-territory approach to the licensing of television broadcast rights across the EU.¹ The FAPL is seeking to prevent commercial customers in the UK from using imported decoder cards to show live matches, by-passing the UK licensed broadcaster. Given BSkyB (“Sky”) paid £1.78 billion for the largest packages of these rights, the possibility that cheaper access might be obtained through EU broadcasters is a significant threat to the business models of the FAPL and its UK pay TV partners. 

The importance of the case is clear from the long list of parties who sought to intervene in the Court proceedings in support of FAPL’s position - including Sky, Setanta, Canal Plus, UEFA and an association of Hollywood studios. It is a prime example of the uneasy tension that exists between competition law and the concept of a “free” internal EU market, and the exploitation of intellectual property rights.

The AG’s view is that attempts to prevent the use in the UK of satellite decoder cards purchased in Greece to watch Premier League matches amount to a restriction of the freedom to provide services² and a restriction of competition³. The AG also rejected FAPL’s arguments surrounding the applicability of rights under two EU Directives - the Conditional Access Directive and the Copyright Directive - on which FAPL sought to rely.

The Court’s judgment is likely within the next 12 months. If the AG’s opinion is followed by the Court (as happens in most cases), it will have major ramifications for the licensing of sports and other broadcasting rights, and could severely reduce the value of such rights in the EU⁴. In particular:

• If the Court adopts the AG’s opinion, it could fundamentally change the territorial approach taken to the licensing of premium content across Europe. Faced with the prospect of consumers accessing content from the cheapest provider within the EU, the FAPL and other European broadcast rights holders could be forced to stop licensing live broadcast rights outside the highest paying territory, or grant an exclusive pan-EU licence. This could result in the highest bidder warehousing rights, rather than sub-licensing local exploitation in other EU member states. Broadcasters might also look to adopt other technical measures that restrict access outside of the primary market (e.g. by utilising different technologies for decoder cards in different countries, or by requiring that decoders are connected to a local telephone line). Either way, the AG’s approach may lead to more restricted access to live broadcasts across the EU, rather than encouraging competition across boarders.
• Such a ruling might also have implications for other services such as media downloads (of music, films, or e-books). The AG specifically noted that dealers in the UK declared last year that they are unable to sell e-books to customers not based within the UK. It is clear that the AG sees such restrictions, implemented through the use of national copyright laws, as being anticompetitive and in breach of the free movement of services. The European Commission is likely to have considerable sympathy with this approach, and an endorsement of the AG’s opinion by the Court could precipitate a further assault by the Commission on on-line licensing practices across the media sector.

Footnotes:

1. Advocate General’s opinion in Cases C-403/08; Football Association Premier League Ltd and Others v QC Leisure and others; and C-429/08, Karen Murphy v Media Protection Services Ltd.
2. Treaty on the Functioning of the European Union (“TFEU”), Article 56.
3.  TFEU, Article 101.
4. Media analysts have predicted that if the Court follows the AG’s opinion, Sky could suffer up to £70m per annum in lost revenues from pubs and other venues for showing live Premier League matches.

FAPL grants exclusive licences to media companies to broadcast Premier League matches within a specific geographic area - usually a single country. This reflects the fact that different national audiences are prepared to pay differing amounts for access to live Premier League broadcasts, with the rights to broadcast in the UK significantly more valuable than rights in other member states.

Karen Murphy, a pub landlady, was fined £8,000 by an English Court in 2007 for copyright infringement. She had been showing Premier League matches in her pub using a satellite decoder card from Greek broadcaster Nova which she had purchased via an importer. Because Nova pays a much smaller amount for the right to broadcast live Premier League matches in Greece, Ms Murphy was paying 10 per cent of the fee she would otherwise have paid as a Sky subscriber (£700 per annum versus £7200 per annum). Ms Murphy appealed against the initial court decision to the High Court, which in turn referred a number of questions to the Court in Strasbourg.

Before addressing the key questions on the application of EU law relating to freedom to provide services and competition law, the AG addressed questions in relation to the applicability of rights granted to copyright holders under the Conditional Access Directive and the Copyright Directive. She concluded that FAPL could not rely upon intellectual property rights to prevent pubs using the Greek cards.

The AG dismissed arguments that the protections provided under the Conditional Access Directive⁵ in relation to “illicit” decoder cards allowed FAPL to take action against the Greek decoder cards. In her view, it was quite clear that a card intended for the market of one country was not rendered illicit when it was imported into another country and used to gain access to specific broadcasts in that country.⁶ 

As regards the Copyright Directive⁷, she noted that the copyright holder in a broadcast does not have the right to prevent the showing of live matches in a pub unless the publican charges an entrance fee.

Footnotes:

5. Directive 98/84.
6. However, this finding does not in itself preclude a member state from invoking a national law to prohibit the use of imported decoder devices intended to circumvent exclusive broadcasting rights.
7. Directive 2001/29.

The AG characterised the FAPL’s attempts to delimit national markets as a serious restriction of the freedom to provide services (the sale of decoder cards amounting to sale of “services”, not “goods”), a basic principle of the rules establishing the internal EU market within which services can be freely traded. This meant rejecting FAPL’s argument that the partitioning of the internal market for live football broadcasts was justified in order to protect the value of FAPL’s rights. FAPL argued that copyright law allowed the licensing of its rights on a territory-by-territory basis and conferred the ability to prevent third parties from showing broadcasts in member states other than those intended by the rights holders. The AG objected that enforcement of copyright law on this basis would prevent access to services (i.e. satellite broadcasting) between member states, and that the granting of exclusive licences in distinct national markets would illegally partition the EU-wide internal market.  In doing so, she distinguished the FAPL case from the Coditel cases where the allocation of television rights on a territory-by-territory basis had been enforced by the Court as compatible with internal market rules and competition law.⁸

The AG considered possible justifications for the partitioning of the internal market:

The protection of industrial and commercial property

The AG considered whether the principle of exhaustion of intellectual property rights was relevant in relation to satellite broadcasts of football matches, i.e. the principle that once something has been lawfully sold in a member state with the consent of the rights holder, the right to its commercial exploitation has been exhausted, enabling third parties to purchase the good in one member state and import it into other member states. While this principle has been readily applied in the context of sale of goods (for example CDs and DVDs), its application to distribution of services (in this case the viewing of a broadcast using a satellite decoder card) is novel. This view implies that once a charge has been paid for a decoder card, the right to its commercial exploitation has been exhausted, leaving the purchaser free to use and sell the decoder card in a different member state from the state in which it was purchased, creating a market for the resale of “foreign” decoder cards within the EU. The AG stated that:

“there is no specific right to charge different prices for a work in each Member State.  Rather it forms part of the logic of the internal market that price differences between member states should be offset by trade. The possibility, demanded by the FAPL, of marketing the broadcasting rights on a territorially exclusive basis amounts to profiting from the elimination of the internal market.”

The AG considered that the question of exhaustion of rights in the free movement of services was of fundamental importance, as it included music, film and book downloads. Without the concept of exhaustion of rights, she considered that it would be very easy for right holders to divide the internal market along national lines. For example, she noted that in autumn 2010 dealers from the United Kingdom announced that they could not sell e-books outside the UK owing to copyright restrictions (a position that could be open to review if the Court follows the AG’s opinion).  

This approach, if followed, would therefore have consequences far beyond the world of football. If adopted by the Court, it could force right holders to exploit their most valuable rights in the most lucrative territory before looking to do so in other member states. Alternatively, right holders may prefer to grant a single pan-European licence, rather than looking to exploit rights on a territory-by-territory basis. It is questionable whether this would lead to consumers across the EU gaining access to content - even in relation to a pan-European licence. For example, granting an exclusive pan-European licence to a UK broadcaster would not guarantee that the broadcaster sub-licences broadcasters in other member states.

Closed period

FAPL claimed that, as a matter of principle, it must be able to restrict access to foreign decoder cards to protect closed periods (i.e. the need to delay the broadcast of most Premier League matches to protect local attendance at matches). Although she said that evidence could be presented in the English court to show otherwise, the AG doubted whether closed periods can achieve this purpose, and concluded that this could not justify a restriction on freedom to provide services.

Potential restriction to domestic or private use?

The AG also considered the legitimacy of contractual rules between rights holders and licensees which regulate the distribution of decoder cards for commercial, as opposed to domestic, use (i.e. for a higher subscription charge). Her conclusion on this point offered hope for FAPL in relation to its concerns that it might not be able to prevent decoder cards intended for domestic use in other markets being imported and used in commercial premises in the UK. The concern here is that such cards would be even cheaper and would further erode the value of FAPL’s broadcast rights in the UK.  

The AG’s view was that, although a contractual restriction on using a decoder card in the licensed territory only for domestic use could not justify a restriction on those cards being used in other territories, where an applicable national law provision entitles a right holder to prevent the commercial use of domestic cards, this could constitute a justified restriction of the freedom to provide services.

Footnote:

8. For example, Case 62/79 Coditel I [1980] ECR 881.

The AG noted that the Court has often held that agreements aimed at partitioning national markets, in particular those aimed at preventing or restricting parallel exports, have the object of prevention of competition.  

She then found that the agreement between FAPL and its Greek licence holder, whereby the Greek licence holder is contractually required to prevent its satellite decoder cards from being used outside of Greece, can be presumed to have the same anti-competitive effect as an agreement to prevent or restrict parallel imports - i.e. to divide the internal market along national boundaries, contrary to one of the central purposes of the EU internal market. As such, the AG was of the view that a contractual obligation in the context of exclusive territorial licensing requiring the licensee to prevent the use of decoder cards outside of its territory would breach competition law.⁹ The AG did, however, offer a potential lifeline by noting that such restrictions could be justified if the right holder can demonstrate that the restriction is justified under the exemption criteria that apply to the rules against anti-competitive agreements.  

Footnote:

9. That is, under the criteria set out in Article 101(3) TFEU.