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EC puts Sky and Film Studios in the firing line over geo-blocking

The European Commission has today started anti-trust proceedings against Sky UK and six Hollywood film studios for "bilaterally agreeing" to restrictions that stop expats and other EU citizens from accessing Sky pay TV content legally, either via satellite or online.

In the firing line are Disney, NBCUniversal, Paramount Pictures, Sony, Twentieth Century Fox and Warner Bros. Without the restrictions allegedly created by Sky and the film studios, the Commission says "Sky UK would be free to decide on commercial grounds whether to sell its pay-TV services to such consumers requesting access to its services, taking into account the regulatory framework including, as regards online pay-TV services, the relevant national copyright laws."

If the Commission's preliminary position were to be confirmed, each of the companies would have breached EU competition rules prohibiting anti-competitive agreements.

EU Commissioner in charge of competition policy Margrethe Vestager said:
"European consumers want to watch the pay-TV channels of their choice regardless of where they live or travel in the EU. Our investigation shows that they cannot do this today, also because licensing agreements between the major film studios and Sky UK do not allow consumers in other EU countries to access Sky's UK and Irish pay-TV services, via satellite or online. We believe that this may be in breach of EU competition rules. The studios and Sky UK now have the chance to respond to our concerns."

US film studios typically license audio-visual content, such as films, to a single pay-TV broadcaster in each Member State (or combined for a few Member States with a common language). The Commission's investigation, which was opened in January 2014, identified clauses in licensing agreements between the six film studios and Sky UK which require Sky UK to block access to films through its online pay-TV services (so-called "geo-blocking") or through its satellite pay TV services to consumers outside its licensed territory (UK and Ireland).

The Commission's preliminary view as set out in the Statement of Objections is that such clauses restrict Sky UK's ability to accept unsolicited requests for its pay-TV services from consumers located abroad, i.e. from consumers located in Member States where Sky UK is not actively promoting or advertising its services (so-called "passive sales"). Some agreements also contain clauses requiring studios to ensure that, in their licensing agreements with broadcasters other than Sky UK, these broadcasters are prevented from making their pay TV services available in the UK and Ireland.

As a result, according to a statement issued by Commission, these clauses grant ‘absolute territorial exclusivity’ to Sky UK and/or other broadcasters because they " liminate cross-border competition between pay-TV broadcasters and partition the internal market along national borders. The Commission's preliminary conclusion is that, in the absence of convincing justification, the clauses would constitute a serious violation of EU rules that prohibit anti competitive agreements (Article 101 of the Treaty on the Functioning of the European Union)."

The Commission previously also set out concerns as regards licensing agreements between the film studios and other major European broadcasters (Canal Plus of France, Sky Italia of Italy, Sky Deutschland of Germany and DTS of Spain). The Commission has confirmed it will continue to examine cross-border access to pay TV services in these countries.