Sale of Tv rights to sport events: the Simbia/CLT-UFA case in Luxembourg

Introduction

In the UEFA Champions League case (Joint selling of the commercial rights of the UEFA Champions League [2004] 4 CMLR 9) the European Commission dealt with the issue whether arrangements for the joint selling of TV rights to sporting events breached competition law. The Commission made it clear that joint selling agreements on exclusive basis restricted competition, strenghtening the market position of the incumbent TV operators and hindering the market entry of new media operators. Eventually, the Commission exempted the joint selling arrangements for UEFA Champions League under the then Article 81(3) TFEU upon the condition that UEFA modified the licensing contracts with TV opertors by, among other things, limiting the scope of exclusivity rights awarded to the latter.
The idea that absolute exclusivity rights for the transmission of sporting events may be in breach of competition law was recently embraced by Conseil de Concurrence de Luxembourg, the Luxembourg Competition Authority (LCA) in the case Simba/CLT-UFA (Decision n. 2015-RP-03 of 5 June 2015, CLT-UFA) The Simba/CLT-UFA case, however, was not about anti-competitive agreement but concerned abusive conducts allegedly carried out by the Luxembourg incumbent TV operator. Eventually, the LCA closed the investigation with a commitment decision, following the underatakings given by the dominant firm to remove the competition problems identified by the acting competition authority.

The facts of the case

Simba, an Internet content provider, complained with the LCA that, among other things, the TV chain, RTL Tele Letzebuerg currently run by CLT-UFA (thereinafter CLT-UFA/RTL TL), prevented it from broadcasting the finals of the 2009-2010 Luxembourg basketball national championship. The complainant contended that CLT-UFA/RTL TL exerted an undue pressure on the Luxembourg Basketball Federation (FLBB) by relying on its ample exclusive rights for the transmission of matches in the licensing agreements of 4 January 2010 concluded between CLT-UFA/RTL TL and FLBB. Acting in this way, CLT-UFA/RTL TL would have prompted FLBB into refusing Simba the authorization for the transmission of the finals of the 2009-2010 tournament.

The decision of the LCA

Consistently with the European Commission approach to the definition of relevant product markets for TV rights to sport events, the LCA distinguished the upstream markets for the sale and acquisition of TV rights from the downstream market on which TV broadcasters compete for advertising revenue depending on audience rates and also compete for pay-TV/pay-per-view subscribers. In the Simba/CLT-UFA case the LCA identified the relevant upstream markets in the distinct markets for the purchase of media rights to the soccer and basketball championships. And it identified the relevant downstream market in the market for the transmission of sport events in Luxembourg language. All the markets were national in scope.
That said, the LCA found that CLT-UFA/RTL TL enjoyed a dominant position in these markets. As hinted before, CLT-UFA/RTL TL was the national TV broadcaster and as such it had a large share in the market for free-TV broadcasting and enjoyed a strong reputation with consumers. Being part of multinational media group, it had access to considerable financial resources. The dominant position of CLT-UFA/RTL TL was also strengthened by some additional factors. In the upstream market FLBB awarded CLT-UFA/RTL TL exclusive TV rights to the national basketball championship. In the downstream market CLT-UFA/RTL TL was an unavoidable partner for those planning to launch an ad campaign on free TVs.
Then the LCA focused on the licensing agreement of 4 January 2010 concluded between CLT-UFA/RTL TL and FLBB. With this contract FLBB granted to CLT-UFA/RTL TL exclusive rights for the registration and transmission on any media on the Luxembourg national territory to every national and international basketball match. The contract also allows FLBB to negotiate the transmission of matches non covered by CLT-UFA/RTL TL with third parties. The LCA reached the conclusion that the CLT-UFA/RTL TL – FLBB agreement signed on the above exclusivity basis negatively affected the competition in two aspects. First, the contested agreement might have horizontal restrictive effects on competition as sport clubs may coordinate their pricing and commercial policies regarding the sale of media rights. Second, the agreement conferred on CLT-UFA/RTL TL a substantial market power with the ensuing risk to eliminate competition from other media operators, thereby preventing the market entry of new operators.
The report of LCA counsellor in charge of the investigation indicated that the competition restrictions brought about by the agreement may be compensated by some efficiencies in the shape of a better media coverage of the matches. This statement, however, was then disregarded by the LCA. Crucially, the LCA ruled that a dominant firm that entered into an exclusive purchase agreement amounted to an abuse of its dominance. According to the decisional practice of the European Commission, unfair or discrimatory trading conditions are often imposed to pursue a foreclosing strategy aimed at competitors (Case T-65/89 BPB Industries and British Gypsum v Commission [1993] ECR-II 389. In this case the dominant undertaking applied different terms to similar transactions on one market to strengthem its position in another market). And a dominant firm entering such restrictive agreement may fall within the prohibitions of both Article 101 and 102 TFEU.
In Simba/CLT-UFA case, however, the LCA opted to examine the contested conducts on the basis of Article 5 of the Luxembourg Competition Act of 23 October 2011, corresponding to Article 102 TFEU. The evidence collected by the LCA in the investigation corroborated its fears CLT-UFA/RTL TL might abuse its dominant position by foreclosing its competitors. Indeed, according to the LCA, CLT-UFA/RTL TL convinced FLBB to disallow Simba to trasmit on the internet the finals of the basketball national championship. That, notwithstanding that CLT-UFA/RTL TL did not broadcast the matches. It must be stressed that, according to the terms of the 2010 agreement, FLBB had the right to negotiate with other media operators the transmission of sporting events in which CLT-UFA/RTL TL was uninterested. Similarly, the LCA found that CLT-UFA/RTL TL presurrized the Luxembour Football Assoacition (LFA) to deny a competing TV chain leave to differed transmission of some football matches and related highlights.
Therefore, by the letter of 15 April 2015 the chairperson of the LCA informed CLT-UFA/RTL TL that it might have abused its dominant position infringing Article 5 of the Luxembourg Competition Act. Correctly, the LCA took the view that the UEFA Champions League exemption decision was of no benefit to the dominant firm in this case. The scope of exclusive TV rights granted by FLBB to CLT-UFA/RTL TL was much wider than that of the exclusivity granted by UEFA to the awardee TV operators. The LCA clearly expressed its concern about the width of the exclusive TV rights of CLT-UFA/RTL TL. It stressed that the exclusive TV rights in licensing agreement of January 2010 should not include the right to differed transmission of matches or the highlights of matches as well as the right to upload on the internet the registration of matches played the day before.
Accordingly, CLT-UFA/RTL TL gave the undertaking to amend the licensing agreement of 2010 by reducing the scope of the exclusivity of TV rights FLBB awarded to it. First, the contract will not include the exclusive right to differed transmission and upload on the internet of the registration of matches that have been live transmitted by CLT-UFA/RTL TL the day before. Second, the other opertors can transmit matches whose highlights have been broadcast by by CLT-UFA/RTL TL the day before. 
The LCA considered the commitments proposed as suitable to resolve the competition problems the abusive conducts of CLT-UFA/RTL TL gave rise to. Therefore, it accepted and made binding the set of commitments offered by the dominant firm and closed the proceedings without an infringement decision.

Conclusion

The source of the LCA competition concerns was the excessive scope of the exclusive TV rights awarded to the dominant TV operator. Being a dominant buyer, the holder of such TV rights might foreclose competitors. That said, the LCA accepted the set of commitments proposed by the dominant firm in that it held that such commitments were aimed to limit the scope of exclusive rights originally enjoyed by CLT-UFA/RTL TL. In addition, the commitments should then favour the market entry of competing TV operators as well as of media operators of new generation.










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