The General Court dismissed the appeal by Groupe Canal + against the European Commission’s decision accepting Paramount’s commitments in the cross-border pay-TV investigation (T-873/16 Groupe Canal +). It held that territorial restrictions leading to a partitioning of the internal market could be considered as by-object infringements of competition law, thereby rejecting arguments of copyright law and cultural diversity as a justification under the facts in this particular case.

In a July 2015 Statement of Objections addressed to six Hollywood studios and pay-TV broadcaster Sky UK, the European Commission had expressed concerns in relation to certain clauses in the license agreements between the broadcaster and each of the studios. The clauses included an obligation on Sky UK and Ireland to refuse unsolicited requests for subscriptions from EEA-based customers resident outside of those two countries. They additionally included a parallel obligation on the studio to adopt similar conditions on pay-TV distributors in other Member States.

In July 2016, the European Commission accepted commitments offered by Paramount to (i) no longer enforce the clauses in its European distribution agreements; and (ii) refrain from including such clauses in any future distribution agreement in the EEA. Broadcaster Canal+, the exclusive Paramount licensee in France and a third party intervener in the pending pay-TV investigation, challenged the commitments decision two years ago.

In its much anticipated judgment, the General Court found that the European Commission had appropriately assessed the proposed commitments in light of its preliminary concerns, namely that the absolute territorial restrictions in the license agreements could pose a threat to the single market. Moreover, it stated that the agreements could be viewed as having the object of restricting competition.

Canal+ had argued that the clauses were nevertheless justified by principles of intellectual property law as they allowed for an appropriate remuneration of copyright holders on the basis of the national market and distribution window involved.  It claimed that the inapplicability of the clauses would indirectly affect all contractual relationships in the sector and give rise to EU-wide licenses, which would upset the balance in the industry to the detriment of content producers.

The General Court dismissed those arguments and found that intellectual property protection does not mean that such clauses could never be anticompetitive.  In this case, the General Court found that the clauses went beyond what was necessary to protect IP rights.  The General Court also noted the positive opportunities created by the commitments, allowing broadcasters to now provide services to consumers elsewhere in the EEA.

Finally, Canal+ argued that the commitments affected the rights of third parties because they involve a unilateral modification of the license agreement by Paramount.  However, the General Court agreed with the European Commission that it needs only to examine whether the commitments adequately respond to the stated concerns. Paramount’s decision to remove certain clauses from its agreements was seen as a commercial decision taken at its own risk. The General Court points out that the national judge is always available if contracting parties have complaints.