ECJ finds absolute territorial exclusivity in broadcasting of Premier League matches contrary to competition law

On 4 October 2011, the European Court of Justice (“ECJ”) gave judgment in joined cases C-403/08 Football Association Premier League Ltd, NetMed Hellas SA, Multichoice Hellas SA v QC Leisure, David Richardson, AV Station plc, Malcolm Chamberlain, Michael Madden, SR Leisure Ltd, Philip George Charles Houghton and Derek Owen and C-429/08 Karen Murphy v Media Protection Services Ltd (the “Judgment”). The Judgment gives guidance on applicable rules on conditional access; free movement of goods and services; competition law and copyright law.

The cases at hand are two separate proceedings before UK courts. The Football Association Premier League (“FAPL”), which is the governing body of the English football Premier League, grants broadcasters an exclusive live broadcasting right for Premier League matches on a territorial basis. In order to safeguard the exclusive rights of the other licensees, each licensee is required to take measures to ensure that its broadcasts cannot be viewed outside its allocated territory. Broadcasters are therefore required to encrypt their signals so that they can only be received and viewed using a decoder card. Broadcasters are also expected to prevent these cards from being supplied outside their respective territories. The UK proceedings concerned an attempt to circumvent this exclusivity, with undertakings in the UK having imported foreign (in this case, Greek) decoder cards and satellite broadcasting equipment and having offered them to pubs in the UK at more favourable prices than those offered by the broadcaster with territorial exclusivity for the UK. The undertakings involved were prosecuted for breach of a UK copyright law that makes it a criminal offence, or a breach of copyright, to import decoder cards. At the same time, FAPL brought several civil-law actions concerning the use of foreign decoders.

Illicit devices under Conditional Access Directive

The ECJ stated that the foreign decoders used in the cases at hand do not qualify as “illicit devices” under the Conditional Access Directive (98/84/EC) because these decoders have been manufactured or placed on the market with the authorisation of the service provider and do not allow access free of charge to protected services.

Moreover, the ECJ held that the Conditional Access Directive does not preclude national legislation preventing the use of foreign decoding devices because such devices fall outside the scope of the Conditional Access Directive which deals only with illicit devices.

Free movement of goods and services

Although the UK rules precluding the use of foreign decoders do not run counter to the Conditional Access Directive, the ECJ found that these rules are nevertheless unlawful since they fail to comply with the rules concerning the free movement of goods and services in the Treaty on the Functioning of the EU (“TFEU”).

According to the ECJ, the sale of foreign decoders is only secondary to the provision of satellite transmission services. Here, the national legislation has the effect of preventing persons resident outside the Member State of the broadcast from gaining access to those services.

Consequently, the legislation concerned constitutes a restriction on the freedom to provide services that is prohibited by Article 56 TFEU. The FAPL still tried to demonstrate that such a restriction can be objectively justified but the ECJ dismissed the FAPL’s arguments to that effect. The ECJ did not share the FAPL’s position that restrictions on the free movement of services would be justified (i) by the need to protect intellectual property rights (IPRs); and (ii) by the objective of encouraging the public to attend football stadiums.

The ECJ considered that football matches are not protected by copyright under applicable EU rules, but it is permissible for a Member State to put in place specific national legislation to protect sporting events. Still, to qualify as an objective justification for a restriction of the freedom to provide services, the measure must protect the specific subject matter of the IPR. Hence, it must not go beyond what is strictly necessary for protecting the IPR at hand. Here, the specific subject matter of the right pertains to the possibility to exploit commercially the protected work, i.e., to receive appropriate remuneration. In determining what remuneration is “appropriate”, the ECJ held that account should be given to the actual audience, potential audience and the language version. However, as regards the premium paid by the broadcaster in order to be granted territorial exclusivity, the ECJ held that absolute territorial protection results in artificial price differences between the partitioned national markets. Such partitioning and the ensuing price differences were regarded to be “irreconcilable with the fundamental aim of the TFEU”. Accordingly, the ECJ held that the payment of such a premium goes beyond what is necessary to ensure appropriate remuneration for the right holders. The restriction which consists in the prohibition on using foreign decoding devices cannot be justified in light of the objective of protecting IPRs.

As regards the objective to encourage the public to attend football stadiums, the ECJ held that contractual provisions between the rights holder and the broadcaster suffice to pursue this objective. Hence, UK legislation precluding the use of foreign decoders is not absolutely necessary and therefore it cannot objectively justify the restriction of the freedom to provide services contained in Article 56 TFEU.

Restriction of competition

The ECJ held that an exclusive license agreement between the IP rights holder and the broadcaster is aimed at partitioning national markets. According to the ECJ, the clauses at issue result in an absolute territorial exclusivity which eliminates all competition between broadcasters. Hence, the ECJ held that these agreements have an anticompetitive object and are prohibited under Article 101(1) TFEU.
Copyright issues

Although the ECJ held that football matches do not qualify as copyright protected “work” under the Copyright Directive (2001/29/EC), it did consider that the broadcast of a football match contains elements that may benefit from copyright protection. In particular, FAPL can assert copyright ownership in the opening video sequence, the Premier League anthem, pre-recorded films showing highlights and various graphics.

The ECJ held that the reproduction right extends to fragments of the works within the memory of a satellite decoder and on a television screen if such fragments contain elements which are the expression of the authors’ own intellectual creation. Each unit composed of the fragments reproduced simultaneously must be examined to determine it contains such elements.

However, Article 5(1) of the Copyright Directive provides that reproductions which are temporary, transient or incidental are exempt from the reproduction right. The ECJ held that the acts of reproduction within the memory of a satellite decoder and on a television screen fulfil the conditions laid down in Article 5(1) of the Copyright Directive and may therefore be carried out without the authorisation of the copyright holders concerned.

The Judgment forms a landmark decision as it opens the door for cross-border (passive) sales of pay-TV decoders and jeopardises the granting of exclusive territorial broadcasting licenses.