EU Files Antitrust Charges Against U.S. Film Studios


Regulator objects to licensing deals struck with Sky UK

BRUSSELS—Europe’s antitrust regulator took aim at Hollywood on Thursday, filing formal charges against six major U.S. film studios and pay-TV broadcaster Sky UK Ltd. over alleged illegal licensing agreements.

The European Union accused the companies of violating competition laws by using clauses that restrict access to Sky’s services outside Britain, in a move that could recast how pay-TV is sold and viewed in Europe.

The six studios are Walt Disney Co.’s Disney, Comcast Corp.’s NBCUniversal, Viacom Inc.’s Paramount Pictures, Sony Corp.’s Sony Pictures Entertainment Inc., 21 Century Fox’s Twentieth Century Fox and Time Warner Inc.’s Warner Bros. Entertainment.

The charges come amid a broader push by the European Union to eradicate barriers to a single market for digital services in the region. Regulators are focusing in particular on eliminating “geo-blocking,” where companies restrict access to films or other online content outside a particular licensed territory.

The European Commission, the bloc’s top antitrust authority, said Thursday that contracts between Sky and the six studios may have prevented Sky from offering its U.K. and Irish pay-TV services to EU consumers elsewhere. If that preliminary view is confirmed, “the clauses would constitute a serious violation of EU rules that prohibit anticompetitive agreements,” the EU said.

Sky said it had received the commission’s charge sheet and would “respond in due course.”

In a strongly worded statement, Disney hit back at the EU’s move. The studio said its current approach “supports local creative industries, local digital and broadcast partners and most importantly consumers.” It said it would “vigorously” oppose the EU’s analysis, which it said was “destructive of consumer value.”

21st Century Fox declined to comment. 21st Century Fox was until mid-2013 part of the same company as Wall Street Journal owner News Corp. Sky is 39%-owned by 21st Century Fox.

NBCUniversal said it was “communicating constructively” with the European Commission. Warner Bros. said it was cooperating with the investigation. The other studios didn’t respond to a request for comment.

“European consumers want to watch the pay-TV channels of their choice regardless of where they live or travel in the EU,” said Margrethe Vestager, the EU’s antitrust chief. “Our investigation shows that they cannot do this today.”

If pay-television barriers between European countries were to fall, it could complicate the business models of studios and independents producers, which have long counted on selling the rights to their movies country-by-country, with certain titles being more valuable in some European nations than in others.

In Europe, U.S. film studios typically license audiovisual content, such as films, to a single pay-TV broadcaster in each country, or to several countries that share a common language.

The companies involved now have a chance to respond to the EU’s concerns before Brussels reaches a final decision, which can then be appealed to the EU’s top courts in Luxembourg.

The EU opened a formal investigation 18 months ago to examine licensing agreements between major studios and the biggest European pay-TV broadcasters, including British Sky Broadcasting of the U.K., now known as Sky UK Ltd., Italy’s Sky Italia, Sky Deutschland of Germany, Vivendi SA’s Canal Plus of France, and DTS of Spain. (Sky Italia and the majority of Sky Deutschland are owned by Sky UK Ltd.)

Regulators were concerned that clauses granting “absolute territorial protection” to broadcasters might prevent them from providing services across national borders.

The EU said its investigation had identified clauses that require Sky to block access to films through its online or satellite pay-TV services to consumers outside the U.K. and Ireland. Those clauses “eliminate cross-border competition between pay-TV broadcasters and partition the internal market along national borders,” the EU said.

Brussels continues to investigate licensing agreements in other EU countries, the commission said. The EU can fine firms up to 10% of their global annual revenues for violating its antitrust laws, and require changes to their business practices. In practice, fines have been far lower.

Policy makers hope unifying the EU’s fragmented digital market will spawn European digital giants to rival Google Inc. and Facebook Inc.

In May, the EU unveiled its grand plan to achieve that goal. The plan calls for an overhaul of EU telecommunications rules, reconciling tax and copyright rules within the 28-nation bloc, and simplifying regulations for companies that sell goods electronically or send data across European borders.

The reform of copyright rules aims to ensure that consumers purchasing online content such as films, music or articles at home can also enjoy them while traveling across Europe.

There is no legal deadline for the EU to complete antitrust inquiries. Regulators frequently take many months to consider plaintiffs’ arguments before making a final decision.

Since taking office in November, Ms. Vestager has shown few qualms about taking on the biggest companies, in the U.S. and elsewhere. In a single week in April, her agency filed formal charges against Google and OAO Gazprom, pushing forward with landmark cases that her predecessor Joaquin Almunia had held back on for years.

Corrections & Amplifications

21st Century Fox Inc. was until 2013 part of the same company as Wall Street Journal owner News Corp. An earlier version of this article incorrectly said the split occurred last year.

http://www.wsj.com/articles/eu-files-antitrust-charges-against-six-u-s-film-studios-1437646706

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