Belgian Competition Authority Dismisses Complaint against Major American Film Studios on Virtual Print Fee

On 2 December 2014, the College of Prosecutors (Auditoraat / Auditorat) of the Belgian Competition Authority (Belgische Mededingingsautoriteit / Autorité belge de la Concurrence) ("BCA") rejected the complaint introduced by Handling Co NV against Sony Pictures Releasing NV, Twentieth Century Fox NV, Universal Pictures International Belgium NV, The Walt Disney Company (Benelux) BVBA and Warner Bros. Studios Leavesden Limited (collectively referred to as "the Majors") with regard to the "virtual print fee" ("VPF") (See, VBB on Belgian Business Law, Volume 2014, No. 12, available at www.vbb.com).

The Majors had decided to contribute financially to the digitisation of European cinemas through specific agreements with intermediaries. These intermediaries, called "integrators", financed, installed and maintained the digital projection equipment in return for the payment of a VPF by the Majors. The integrators received this VPF and retained ownership of the digital equipment as long as they had not recouped their investment and made a sufficient margin. As soon as they had made the agreed profit, the cinema exhibitor would become the owner of the equipment and the Majors would stop paying the VPF. However, Handling Co digitised its cinema at its own expense without the assistance of an integrator. As a result, the Majors refused to pay a VPF to Handling Co, which the latter considered to be contrary to Article IV.1 and Article IV.2 of the Code of Economic Law (Wetboek van Economisch Recht / Code de droit économique).

The College of Prosecutors found that the Majors' refusal to pay the VPF was objectively justified. This is because having recourse to the integrators allowed economies of scale and efficiency gains: the Majors did not have to negotiate, conclude or manage agreements with numerous cinema exhibitors. In addition, the VPF did not constitute a retribution for the projection of a movie using digital technology but rather the contribution to the costs of digitisation. Such contribution system was unconditionally accessible to all cinema exhibitors, including Handling Co. Therefore, the Majors' refusal to pay the VPF did not qualify as an anticompetitive concerted practice prohibited by Article IV.1 of the Code of Economic Law.

The College of Prosecutors found no abuse of dominance either. First, none of the Majors' market share exceeds 25%. This means that they cannot be considered dominant separately. Second, the College of Prosecutors found that the conditions for collective dominance were not met since the market was not sufficiently transparent to enable each of the Majors to determine the others' behaviour quickly. Third, Handling Co had not proven the existence of an abuse since the agreements concluded with the integrators were open to all cinema exhibitors.

The College of Prosecutors finally noted that the VPF contracts between the Majors and the integrators had already been scrutinised by the European Commission. The European Commission's initial concern that these contracts might impede the access of small film distributors to digital cinemas had been addressed by the Majors, which changed the terms of the contracts. As a result, the European Commission closed the case in 2011.

The College of Prosecutors therefore decided to dismiss Handling Co's complaint and in turn close the case.