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EU MEDIA LAW: HOW DOES THE EU COMPETITION AUTHORITY SHAPE MEDIA POLICIES?

EU MEDIA LAW: THE PROBLEM OF COMPETENCE

Article 6 TFEU: • The Union shall have competence to carry out actions to

support, coordinate or supplement the actions of the Member States. The areas of such action shall, at European level, be:

• (a) protection and improvement of human health; • (b) industry; • (c) culture (MEDIA); • (d) tourism;• (e) education, vocational training, youth and sport; • (f) civil protection; • (g) administrative cooperation.

EU MEDIA LAW: THE PROBLEM OF COMPETENCE

• Article 2(5) TFEU:

• In certain areas and under the conditions laid down in the Treaties, the Union shall have competence to carry out actions to support, coordinate or supplement the actions of the Member States, without superseding their competence in these areas.

EU MEDIA LAW: THE PROBLEM OF COMPETENCE

• BUT, ON THE OTHER HAND, Article 3(1) TFEU: The Union shall have exclusive competence in the following areas: • (a) customs union; • (b) the establishing of the competition rules

necessary for the functioning of the internal market;

• (c) monetary policy for the Member States whose currency is the euro;

• (d) the conservation of marine biological resources under the common fisheries policy;

• (e) common commercial policy.

EU MEDIA LAW: THE PROBLEM OF COMPETENCE

• Article 2(1) TFEU:

When the Treaties confer on the Union exclusive competence in a specific area, only the Union may legislate and adopt legally binding acts […]

• BUT, in these cases, Article 167(4) TFEU also applies: 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.

EU MEDIA LAW: THE PROBLEM OF COMPETENCE

• MEDIA FROM A CULTURAL POINT OF VIEW:

• LIMITED COMPETENCE: The EU cannot adopt legally binding acts, MS entitled to formulate media policies as they wish.

• MEDIA FROM AN ECONOMIC POINT OF VIEW

• EXCLUSIVE COMPETENCE: Only the EU can adopt legally binding acts. • And, in area of culture,

must take particularities into account.

EU MEDIA LAW: THE PROBLEM OF COMPETENCE

• EXAMPLE:

• BBC is based in the UK but may broadcast in Italy. How? AVMS Directive, country of origin principle. THAT’S OK FOR THE EU TO REGULATE (ECONOMIC ACTIVITY)

• What if Italy decides that it wants strict rules on the protection of minors (e.g. child pornography) or on advertising? THAT’S OK FOR THE MS TO REGULATE (MEDIA POLICY TO PROTECT PUBLIC INTEREST)

EU MEDIA LAW: EU COMP LAW AS A CASE STUDY

• Why ?

• EU has exclusive competence to establish competition rules• AND• The EU competition authority, the Commission,

handles the vast majority of transactions of interest to media industry, e.g. mergers, State aid cases, agreements that may affect trade in the EU and multinationals abusing their dominant position.

THE ISSUE OF COMPETENCE: SUMMARY

• EU has undisputed competence to regulate media companies as economic entities

• BUT, EU has limited competence to regulate media organizations as actors vital for preservation of democracy, promotion of cultural diversity, etc.

• IN MANY CASES, tensions arise and conflicting interests come to the fore, e.g. PROMOTION OF ECONOMY v. DEMOCRACY, etc.

• EU COMP law excellent example due to the volume of transactions and importance of decisions.

EU COMPETITION LAW: THE BASICS

• Article 101 TFEU: AGREEMENTS BETWEEN COMPANIES THAT MAY RESTRICT COMPETITION (agreements on the licensing of football rights)

• EU Merger Regulation: CONTROL OF M&As (media concentration and pluralism/freedom of expression)

• Article 102 TFEU: ABUSE OF A DOMINANT POSITION (the Google case)

• Articles 107, 106(2) TFEU: State aids (to public service broadcasters)

AGREEMENTS ON THE LICENSING OF FOOTBALL RIGHTS

• SPORT AS PART OF CULTURE

• Falls under national policy: Forum of social interaction, function of social integration, means of promoting inter-cultural dialogue, etc.

[See Commission (EC), White Paper on Sport COM (2007) 391 final, 11 July 2007]

• SPORT AS AN ECONOMIC ACTIVITY

• Bosman ruling of 1995: out-of-contract footballers may leave their clubs without the clubs receiving a transfer fee.

[Case C-415/93 URBSFA ASLB v Bosman [1995] ECR I-4921]

RELATIONSHIP BETWEEN MEDIA AND FOOTBALL

• IMPORTANCE OF BROADCASTING FOR FOOTBALL ASSOCIATIONS:

• Exclusive broadcasting rights is an important source of revenue for sports organizations and clubs.

• TV coverage ensures exposure for a league (new sponsors, new supporters, etc.).

RELATIONSHIP BETWEEN MEDIA AND FOOTBALL

• IMPORTANCE OF FOOTBALL MATCHES FOR MEDIA COMPANIES:

• Sports content is decisive for media operators to create an attractive ‘bouquet’ of programs for their audience. What happens if a TV channel does not offer matches? E.g. the German Premiere, the French TPS, etc.

• High AD revenues: Ability to attract young men (they have a less fixed spending pattern as compared to other people but watch TV less than others)

• For more details on the relationship between sports and TV see van Rompuy and Lefever (2009), pp. 243-247 (distributed material)

FOOTBALL MATCHES = PREMIUM CONTENT

• PREMIUM CONTENT = KEY TO COMPETITION

• COMMISSION INVESTIGATIONS

• JOINT SELLING AGREEMENTS (football associations sell jointly)

• JOINT BUYING: THE EBU Eurovision system (broadcasters acquire jointly)

JOINT SELLING AGREEMENTS – THE GENERAL RULE

• The general prohibition Article 101(1) TFEU:

• The following shall be prohibited as incompatible with the internal market:

• all agreements between undertakings, decisions by associations of undertakings and concerted practices

• which may affect trade between Member States

• and which have as their object or effect the prevention, restriction or distortion of competition within the internal market

ARE JOINT SELLING AGREEMENTS CAUGHT BY ART. 101(1)?

• Agreements between undertakings: Professional football clubs and their associations engage in economic activities. • Trade in the common market must be

affected: Even when rights to NATIONAL sports events are concerned (e.g. German Bundesliga)• Have as their object or effect the restriction of

competition: Joint selling agreements restrict competition between clubs in the market for premium content.

JOINT SELLING AGREEMENTS – THE EXCEPTION

• BUT, exception under Art. 101(3) TFEU:

• The provisions of paragraph 1 may, however, be declared inapplicable in the case of any agreement which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit.

JOINT SELLING AGREEMENTS – UEFA CHAMPIONS LEAGUE

• Agreement coordinated pricing policy of UEFA media rights

• UEFA broadcasting rights were sold on an exclusive basis in a single bundle to one broadcaster per territory.

• Why did it violate Art. 101(1) TFEU? • As a result of the agreement, clubs no longer compete in

the sale of broadcasting rights Market foreclosure• Rights are sold on an exclusive basis to one broadcaster Other broadcasters cannot access premium content• Price-fixing agreement Eliminates price competition

between football entities

JOINT SELLING: UEFA CHAMPIONS LEAGUE

• MODIFICATIONS TO THE AGREEMENT: • a reduction in UEFA’s exclusive right to sell

(football clubs should be allowed to sell certain media rights in parallel with UEFA);• unbundling of the media rights by splitting

them up into several different rights packages that would be offered for sale to different third parties;• the offering of all media rights to the

market, (e.g. internet and mobile telephony);

JOINT SELLING: UEFA CHAMPIONS LEAGUE

• media rights are offered for a period of a maximum of three years.

• BUT, • UEFA will have a right to provide video content

on the Internet one and a half hours after the match finishes. Live streaming will not be made possible because of the technical development of the Internet at this stage, which does not permit the maintenance of a satisfactorily high quality. This will of course change over time, making it necessary to revisit the embargo in the foreseeable future.

IS THIS STILL THE CASE?

SUMMARY - JOINT SELLING AGREEMENTS

• Sports, and especially the relationship between sports and media, is very tricky in terms of competence.

• BUT, counting on the economic activities of broadcasters/football associations, Commission found its way to regulate relevant arrangements.

• Joint selling/joint buying agreements fall under Article 101(1) TFEU but may be exempted under 101(3) TFEU if exclusivity restrictions (territory AND term) are lifted or reduced.

EU MERGER CONTROL AND MEDIA CONCENTRATION

• Media concentration: Not just a European phenomenon (result of both economics of media markets and politics)

• Why is it important? Negative effects on pluralism / democracy:

• “It would be dangerous for any person to control too much of the media because of his or her ability to influence opinions and set the political agenda” (Lord McIntosh – Ofcom 2010)

• Concentration of ownership “may result in a skewed public discourse where certain viewpoints are excluded or underrepresented” (European Commission, 2007)

MEDIA CONCENTRATION – NATIONAL POLICY TRENDS

• BUT, economic interests have prevailed.

• “[w]hilst the need for a plurality of media sources remains clear, we are committed to a deregulatory approach to media markets. From a commercial point of view, further liberalization would benefit existing and potential new investors, providing for further consolidation, greater efficiency, more scope for investment, and a more significant international presence” UK Department for Culture, Media, and Sport (“DCMS”), Consultation on Media Ownership Rules (2001)

MEDIA CONCENTRATION – THE EUROPEAN STORY

• 1990 and 1992: EP Resolutions on Media Concentration• 1992: Commission issues Green Paper on

pluralism and media concentration in the Internal Market • July 1996: Commission submits first draft -

REJECTED• March1997: Commission submits second draft

(with different name) – REJECTED• Commission’s official position now: it would not

be appropriate to submit a Community initiative on media concentration and pluralism.

EU MERGER CONTROL – MEDIA CONCENTRATION

• Merger Regulation the ONLY instrument to address media concentration in the EU.

• Commission’s role in prohibiting media concentration VERY LIMITED (1): • From 1994 – 1998: Prohibited 5 mergers (25% of all

merger operations). • 1998 - ALL MERGERS HAVE BEEN PERMITTED: –

ECONOMIC INTERESTS PREVAIL IN EU PRACTICE

EU MERGER CONTROL – MEDIA CONCENTRATION

Commission’s role in prohibiting media concentration VERY LIMITED (2):

• Mainly concerned with: • PRICES • ACCESS TO PREMIUM CONTENT (Hollywood films

and football matches) • NO DECISION CHECKING OPINION-FORMING POWER

POST-MERGER

EU MERGER CONTROL – MEDIA CONCENTRATION

• The ORNAMENTAL exception to the rule:

• Article 21(4) EC Merger Regulation: “Member States may take appropriate measures to protect legitimate interests other than those taken into consideration by this Regulation and compatible with the general principles and other provisions of Community law. Public security, plurality of the media and prudential rules shall be regarded as legitimate interests within the meaning of the first subparagraph”.

EU MERGER CONTROL – MEDIA CONCENTRATION

• Art. 21(4) MR – The Newscorp/BSkyB example: • Concentration was argued to give Rupert Murdoch

a dangerous level of control of the UK media.

• Commission allowed the merger:• The focus in merger control is whether there is

the ability of the merged entity to profitably increase prices on defined antitrust markets post-merger. • Media concentration - pluralism concerns are

for the UK authorities to address.

SUMMARY MEDIA CONCENTRATION

• Trend in national law to deregulate the media because of pressure from powerful media lobbies, to strengthen national competitiveness, etc.

• An EU Directive on pluralism never passed and EU Merger Regulation the only instrument that is used against media concentration.

• BUT, Commission focuses mainly on prices, turns head away from democratic concerns.

• Art. 21(4) has played an ornamental role: Does that mean that powerful media lobbies have won?

ABUSE OF A DOMINANT POSITION – THE BASICS

• Article 102 TFEU: Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

ABUSE OF A DOMINANT POSITION – THE BASICS

• STEPS TO DECIDE AN ABUSE OF DOMINANCE CASE:

• Definition of the relevant market

• Market power assessment

• Assessment of abuse

• Imposition of fines or Commitments

THE GOOGLE CASE

• FACTS: • 11/30/2010: Decision to open a formal investigation was

based on complaints launched by Foundem, Ciao and eJustice: VERTICAL SEARCH ENGINES

• ATTENTION! Google offers several vertical search tools, e.g. Google Product Search, Google Scholar, etc.

• The three complainants argue that Google has abused its dominant position in the general search market by treating them unfavorably in both its paid and unpaid search results while according preferential treatment to its own vertical tools

INSIDE THE BLACK BOX: HOW DOES GOOGLE SEARCH WORK?

• Google is an advertising-based medium

• Delivers two types of results: • Organic / unpaid results: The results that are returned

based on the natural indexing of the website • AND • Paid results/sponsored links: Advertisements

displayed at the top and at the right hand side of Google’s search results page - Description of AdWords platform:• Advertisers create Google Account• Google sells keywords and advertisers must bid• Position the advertisers get = Bid X Quality Score

MAIN COMPLAINT: DOWNGRADING OF COMPETITORS

• 1. Google has been lowering the ranking of the organic search results of our services to favor its own vertical search services.

• 2. Google manipulates paid search results by lowering the quality score of our services.

• RESULT? It reduces our visibility on the web search, users ultimately access only Google’s content.

GOOGLE - WHAT DOES THE COMMISSION HAVE TO SAY?

• NO FORMAL DECISION YET BUT FROM PR WE CAN SEE WHERE THE COMMISSION IS HEADED AT:

• RELEVANT MARKET: • General search? • Online search in general? • Something else? • What are the implications?

GOOGLE - WHAT DOES THE COMMISSION HAVE TO SAY?

• MARKET POWER – CONFLICTING VIEWS:

• GOOGLE IS DOMINANT:• Market shares in the advertising markets: 80-90%• Market shares in general online search: 80-90% (In

Italy 92%)• Must we take other factors into account? Where does

Google get its power from? E.g. access to user data.

• GOOGLE IS NOT DOMINANT: • It operates in a new economy market / COMPETITION IS

ONLY A CLICK AWAY!

THE GOOGLE CASE – MARKET AND DEMOCRATIC IMPLICATIONS

• ABUSE – ISSUES TO CONSIDER when discussing Google’s special responsibility.

• POSSIBLE MARKET IMPLICATIONS:

• Drives competitors out of the market, becomes a monopolist and may increase prices as it pleases

• Think of online advertising and how important it has become for companies, especially SMEs!

THE GOOGLE CASE – POSSIBLE IMPLICATIONS FOR DEMOCRACY

• Search is the dominant usage on the Internet by far;

• Communicative abundance = Selection of content more important now than ever before;

• 73% of European households are now connected to the Internet and search engines constitute the main entry gate;

• Consumers believe using search engines is reliable

THE GOOGLE CASE – POSSIBLE IMPLICATIONS FOR DEMOCRACY

• Many Europeans get most of their news on national and European political matters from the Internet (29% and 26% respectively);

• Search engines and the content production industry: Yahoo! News, YouTube’s acquisition by Google, The Huffington Post’s acquisition by AOL

• What if newspapers or candidates are subject to downgrading? Eipstein and Roberston (2013)

THE GOOGLE CASE – PROPOSED COMMITMENTS

• Google offered for a period of 5 years to:• - label promoted links to its own specialized search

services so that users can distinguish them from natural web search results,

• - clearly separate these promoted links from other web search results by clear graphical features (such as a frame), and

• - display links to three rival specialized search services close to its own services, in a place that is clearly visible to users.

• NOT ACCEPTED BY THE EUROPEAN COMMISSION – CASE HAS NOT CLOSED YET.

SUMMARY - ABUSE OF DOMINANCE IN ONLINE SEARCH

• Relevant market: General v. Vertical search. Important issue, fast-moving markets;

• Assessment of market power: High market shares – other valuable inputs, e.g. user data, also matter;

• Assessment of abuse: Open to discussion. For EU standards, Google has abused its dominant position;

• Commitments or a fine? REMAINS TO BE SEEN.

STATE AIDS TO PUBLIC BROADCASTERS

• General prohibition on State aids – Art. 107(1) TFEU:

“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”.

STATE AIDS TO PUBLIC BROADCASTERS

• BUT, the Treaty includes derogations from the general prohibition – the one that’s used here is Art. 106(2) TFEU:

• Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly 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 development of trade must not be affected to such an extent as would be contrary to the interests of the Union.

• BALANCING EXERCISE: Competition not to be affected – Application of EU law must not obstruct the accomplishment of their mission

STATE AIDS TO PUBLIC BROADCASTERS – AMSTERDAM PROTOCOL

• THE HIGH CONTRACTING PARTIES, CONSIDERING that the system of public broadcasting in the Member States is directly related to the democratic, social and cultural needs of each society and to the need to preserve media pluralism,

• HAVE AGREED UPON the following interpretive provisions:• The provisions of the Treaties shall be without prejudice to the

competence of Member States to provide for the funding of public service broadcasting and in so far as such funding is granted to broadcasting organizations for the fulfillment of the public service remit as conferred, defined and organized by each Member State, and in so far as such funding does not affect trading conditions and competition in the Union to an extent which would be contrary to the common interest, while the realization of the remit of that public service shall be taken into account.

STATE AIDS TO PSB – CONFLICTING INTERESTS

• PROPONENTS: • Provision of

impartial information• Cultural diversity• Freedom of

expression• Protection of media

pluralism

• OPPONENTS: • Detrimental to

competitors (in constant search of ad revenues)• No need for PSB: the

market caters to every taste• New services do not

accomplish public mission

STATE AIDS TO PSB – THE COMMISSION’S PRACTICE

• Role of the Commission in determining public television policies very important: System of notifications

• Broadcasting Communication: Soft-law instrument laying down the conditions under which MS may give money to public television. • 2001: First BC• 2009: Revised to regulate provision of new media

services by PSBs

THE BROADCASTING COMMUNICATION – CONDITIONS

• The public service remit must be defined in a clear and precise manner (definition);• The undertaking in question must be explicitly

entrusted by the Member State with the provision of that service and there must be an effective monitoring mechanism in place to ensure that the public service obligations are complied with (entrustment and supervision) and • State financing must not exceed the net costs of

the public service mission (proportionality).

THE BC – CLEAR AND PRECISE DEFINITION

• MS free to define the remit (falls within their competence): BUT, this is usually very broad (legacy of the monopoly era) and leaves room for abuse.

• Commission entitled to check for MANIFEST ERRORS (e.g. e-commerce, merchandising, etc.)

THE BC – CLEAR AND PRECISE DEFINITION

• VERY BROAD REMIT: e.g. RAI Contratto di Servizio, Art. 1(1):

• The public service mission is to ensure to the universality of users a wide range of programming and a balanced and varied offer of transmissions, of all kinds, in order to meet, with reference to national and European context, the democratic, social and cultural needs of the community, to ensure the quality of information, pluralism, including cultural and linguistic diversity, as understood in the framework of the broader Italian national identity and still reiterating the value of indisputable national cohesion (translation from Italian)

CLEAR AND PRECISE REMIT - EXAMPLES

• BBC News 24: the service “would help to meet the democratic and social needs of a society […] by allowing the coverage of a wider range of events and a more in-depth analysis of the events” – WITHIN COMPETENCE LIMITS

• Dutch PSB and sports broadcasting: “broadcasting sports programs, within a limit of around 10% of total broadcasting time, does not constitute a manifest error. Sports can be part of the public service mission of broad- casters and a proportion of 10% of broadcasting time dedicated to sports is not inconsistent with the remit of offering a balanced and varied programming mix” – EXCEEDING COMPETENCE LIMITS

EFFECTIVE SUPERVISION - EXAMPLES

• Effective control exercised by an external body independent from the management of the PSB.

• Ad hoc payments to RAI and to RTP: public service performance was based on annual reports produced by the internal board of auditors.

• Tide turned with Irish RTE / TNAG case: “[t]he RTÉ Authority's reporting obligations and the preceding responsibility of ensuring that RTÉ complies with its legal obligations would not, in the Commission's view, be sufficient to ensure effective supervision, since the RTÉ Authority is not a control body independent from the RTÉ but rather an integral part of it”.

• Subsequently, authorities established Broadcasting Authority of Ireland.

PROPORTIONALITY PRINCIPLE

• Commission checks whether the amount of public compensation exceeds the net costs of the public service mission.

• How?• Separate accounts between public and non-public service

(transparency directive) – New RAI Servizio di Contratto (2013-2015)

• External body checking whether overcompensation has taken place, e.g. in Austria, to guarantee that the public broadcaster does not sell advertising below the market value or purchase premium sports rights above the market price

PSB AND NEW MEDIA SERVICES

• Very contentious issue

• But, Commission decided it is allowed upon certain conditions forming what is known as the Amsterdam test: • Public Value Assessment: Up to the MS according to the

society’s needs• Market Impact Assessment: the existence of similar or

substitutable offers, editorial competition, market structure, market position of the public service broadcaster, level of competition and potential impact on private initiatives.

• Open consultation with interested stakeholders, e.g. citizens, competitors, etc.

STATE AIDS TO PSB - SUMMARY

• Competition is fierce but MS continue to fund PSB

• Commission’s BC attempts to ensure transparency and legal certainty for competitors – 3 criteria:• Clear and precise definition: Difficult to strike a balance,

sometimes Commission exceeded competence limits• Effective supervision: External, independent body to

check compliance with public service obligations• Proportionality: No overcompensation, separate accounts

and body to check how money is spent.• Amsterdam test: PVA, MIA and public consultation.

KO N S TA N T I N A . B A N I A @ E U I . E U

MANY THANKS FOR YOUR ATTENTION!