Amit Rainhartz and Ronnie Preiskel of Preiskel & Co LLP explore the importance of EU competition law and its proper enforcement for the smaller IPTV providers

Restrictive practices

* Joint selling of media rights - for example a national association selling the sports rights for all its individual sports clubs. This type of agreement might be seen as anti-competitive as it results in coordination of pricing etc. on behalf of the individual rights holders and might also result in a restriction of output, where the selling entity withholds from the market certain media rights so as to afford preferential treatment to other media rights.

* The exclusive licensing of media rights to premium content to one broadcaster, typically for several years. This could be seen as restrictive of competition since other broadcasters or service providers, typically the smaller ones with the more limited resources, are foreclosed from accessing this premium content. * The bundling of rights across platforms - for example selling PayTV and IPTV rights in one package to one company. This could preclude anyone without a PayTV presence from acquiring the IPTV rights and could also lead to the purchase of the IPTV rights by a company with no intention of exploiting them.

Striking a balance

Such media rights practices are typically caught by Article 81 of the EC Treaty, which prohibits agreements that unduly prevent, restrict or distort competition in the market (as well as by local competition law). In a number of recent cases the EU and national competition authorities have scrutinised these types of media rights selling arrangements, with the aim of striking a balance between the restrictive outcomes and consumer benefits of such agreements.

To date, the competition authorities have employed various remedies including public tendering obligations and unbundling of media rights into a number of packages. For example, in the recent case involving the rights to the English Football Premier League, the Premier League was forced to sell those rights in six separate packages as a means of preventing BSkyB obtaining exclusive rights again. However, it is still to be seen whether these remedies will prove effective. Competition law also makes it illegal for a company that is dominant in one market to unfairly leverage that market power into another market. For example, a dominant telco would have restrictions on how it was allowed to bundle its telephony services together with IPTV services.

The main course to enforcement of the EC competition rules so far has been for aggrieved companies to complain to the national and EU competition authorities who would then investigate the alleged offence. The advantage of this approach is that for the complainant it is cheap, but it has significant drawbacks since the competition authorities are becoming increasingly selective of the complaints which they choose to pursue and, even if they pursue a complaint, the process can take years to complete, by which time it is normally too late for the complainant. An alternative course of enforcement, which the competition authorities are increasingly promoting, is for aggrieved parties to take private enforcement action by means of making a claim for damages and/or injunctive remedies in the national courts. Currently, the obstacles to private enforcement actions vary from country to country but generally include difficulties in obtaining evidence, calculation of the damages suffered, the burden of proof and the expense involved with conducting legal proceedings. Given that the European Commission is actively promoting private enforcement, it can be expected that the Commission will try to take measures to encourage private enforcement actions in the near future.

To that effect, the Commission is currently conducting a consultation on facilitating damages claims for breaches of EC competition rules, with interested parties invited to make submissions on the issues consulted on until April 21, 2006. Considering the potential for anti-competitive behaviour by the bigger players entering the IPTV sphere, it appears that the composition of players in this market may be determined not only by consumer demand, but also by the effectiveness of enforcement of the competition rules. This in turn will require either the competition authorities to actively and quickly enforce competition law or the IPTV players to bring private enforcement actions to ensure compliance with the rules.

Amit Rainhartz (amit@preiskel.com)

Ronnie Preiskel (ronnie@preiskel.com)