ECJ Advocate General finds that territorial exclusivity relating to the transmission of football matches breaches EU Law

United Kingdom

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On 3 February EU court Advocate General Juliane Kokott (AG Kokott) published her Opinion on the interpretation of EU law in two joined cases which essentially concern the right of the FA Premier League (FAPL) to stop the live transmission of league matches in British pubs using foreign decoder cards1. AG Kokott's findings are not legally binding, but if adopted by the Court of Justice of the European Union (ECJ) could potentially have significant consequences for the FAPL and other rights-holders which rely on revenues derived from broadcasting rights, especially revenues from "commercial" subscribers such as pubs and clubs. The very strict and categorical approach which the AG has taken in her interpretation of EU law has come as a surprise to most commentators – in essence she considers that EU free movement principles trump a rights-holder's ability to control the commercial exploitation of its broadcast rights.

In brief summary, AG Kokott concludes that territorial exclusivity cannot be justified by any of the arguments submitted by FAPL and therefore amounts to a restriction on the freedom to provide services cross-border (a fundamental principle under EU law) and also breaches competition law. If the ECJ accepts her arguments, broadcasters would be unable to prevent viewers (and, in particular, pubs and commercial premises) from using cheaper cards from another EU Member State to access their channels.

As a result, rights-holders selling rights on an exclusive country by country basis in the EU would no longer be able to guarantee that exclusivity would be preserved – so effectively rendering the rights non-exclusive.  The implications are therefore profound and sports right-holders and other rights-holders alike may ultimately need to change their marketing strategies (for example selling on an EU-wide basis). No doubt many would also seek to lobby the EU and individual Member States for a change to EU legislation.

Background

The proceedings date back to 2005, when pub landlady Karen Murphy was prosecuted under English copyright law for showing live FAPL games using a Greek satellite decoder card instead of an authorised UK BSkyB subscription.  FAPL together with the Greek broadcasters responsible for transmission of matches in Greece also brought separate civil actions in the English High Court against the suppliers of equipment and satellite decoder cards to pubs and bars which make it possible to receive non-BSkyB satellite channels carrying live FAPL matches. The High Court has, in each set of proceedings, referred several legal questions to the ECJ on the interpretation of EU law (these proceedings are currently 'on hold' until the final judgment is handed down). Essentially these questions seek to resolve whether a rights-holder like FAPL can "segment" the market for broadcasting services and satellite decoder cards along national borders.

The specific questions require an examination of whether measures to enforce exclusive broadcasting rights infringe the EU's fundamental freedoms (which protect the freedom to provide services from one EU Member State to another) or its competition laws. In addition, the questions referred concern the interpretation of a number of European directives.

See our October update here in which we reported the key arguments presented to the ECJ by the parties involved, several EU Member States (including the Czech Republic, France, Italy, Spain and the UK) and the EU institutions.

The AG's legal assessment

AG Kokott considered that resolution of the cases in the main proceedings is essentially dependent on the application of freedom to provide services contained in the Treaty on the Functioning of the European Union (TFEU). She concluded that the efforts by FAPL, as the rights-holder, to prohibit third parties not contractually linked to them from watching and showing those programmes in Member States other than those intended constitute a "serious impairment of the freedom to provide services". Under well-established EU case law restrictions on the freedom to provide services can be justified if they pursue a legitimate objective, are justified by overriding reasons of public interest and are suitable for securing the attainment of that objective without going beyond what is necessary. We briefly describe below the justifications presented by FAPL and AG Kokott's conclusions.

AG Kokott examined whether the 'protection of industrial and commercial property' might be a possible justification for the restriction i.e. whether live satellite transmissions of football matches by their nature require the internal market to be partitioned. In contrast to the historic approach of the ECJ to broadcasting rights, she concluded that the protection of industrial and commercial property (in this case the ability to commercially exploit live transmissions) does not require exclusivity on a country by country basis. She considered that as FAPL generated revenues from Greek subscriptions, FAPL is effectively able to commercially exploit the live transmission rights. Her opinion is that "The possibility, demanded by FAPL, of marketing of broadcasting rights on the basis of territorial exclusivity amounts to profiting from the elimination of the internal market".

AG Kokott accepted that there may be counter-arguments that if FAPL (and, of course, other rights-holders) are no longer permitted to market broadcasting rights on a national basis, it may be forced to adopt other commercial approaches which would have negative consequences for EU consumers.

In the case of FAPL she notes that if it is unable to prevent the use of cheaper decoder cards from other Member States, it might choose to offer transmission rights in the most lucrative EU market only (i.e. the UK, where English football is clearly of more interest to viewers and therefore more valuable than in Greece) or make the service offered conditional on the charging of prices similar to those in the UK (a practice itself vulnerable to competition law concerns). She suggests that consideration should be given as to whether alternative marketing models can be developed or whether restricting the commentary to certain language versions might create a sufficiently effective practical delimitation of the markets in order to continue to serve the different national markets at different prices, though it is unclear why this is more acceptable under EU law than simple territorial exclusivity.

FAPL also submitted arguments that territorial exclusivity (and a prohibition on the importation of decoder cards) is necessary and justified in order to ensure that football matches are not accessible during the 'closed period' of two and a half hours which is sanctioned by UEFA and adopted by many national football associations. The purpose of having a closed period is to ensure that spectators are not deterred from attending local football matches and/or participating in matches which might otherwise coincide with broadcasts.

Clearly there is a risk that the windows protected in the country in which the decoder card is issued may differ from those in which the card is used, or there may even be no such protection. However, the AG called into question this justification because of the FAPL's economic interests and also noted that she considered it to be "doubtful" whether closed periods are capable of encouraging attendance and participation in matches. She noted that it may be possible to provide evidence in the High Court that conditions apply in English football which mandatorily require protections by means of closed periods. However, she added that such evidence would have to show that live transmissions have substantial detrimental effects on attendance at matches and/or participation in football matches in order for the enforcement of the closed periods to prevail over the adverse effects on the internal market.

The AG also considered the significance of contractual restrictions on decoder cards only for domestic or private use, but not for commercial use, for which a high subscription charge is payable. In her opinion, such a contractual restriction could not justify a restriction on the freedom to provide services. However, she noted that a Member State could in principle set out rights which allow authors to object to the communication of their works in pubs.

The High Court also sought clarification as to how competition law, specifically Article 101(1) of the TFEU, applies to the licence agreement. The AG referred to case law (particularly involving the pharmaceutical sector) which has established that contractual agreements or arrangements which aim at partitioning national markets through the prevention or restriction of so-called parallel trade from cheaper territories) have the object of restricting competition. In her opinion a contractual obligation requiring a broadcaster to prevent its satellite decoder cards from being used outside of its licensed territory is comparable to an agreement to prevent parallel trade. She concluded that such restrictions are incompatible with Article 101(1) (breaching competition law) and it is not necessary to show that such anti-competitive effects have actually occurred.

The High Court also referred questions in order to determine whether the showing of live transmissions of football matches in pubs infringes the terms of the Copyright in the Information Society Directive. The AG considered that there are no comprehensive rights which protect the communication of a satellite broadcast to the public (including at commercial premises) where no entrance fee is charged.

What next?

The parties involved do not have the opportunity to respond to the AG's Opinion. The ECJ judges must now decide whether or not to follow it, in whole or in part. Although statistically the ECJ is likely to follow the AG's Opinion, this is not always the case. The final judgment is likely to be handed down in mid-2011 and the High Court must then apply the judgment to the specific proceedings.

1 Cases C-403/08 and C429/08 Football Association Premier League Ltd and Others v QC Leisure and Others and Karen Murphy v Media Protection Services Ltd, Opinion of Advocate General Kokott, delivered on 3 February 2011.