EU's Antitrust Move Against U.S. Studios

The European Commission's (EU) recent decision to file antitrust claims against six major U.S. film studios is an aggressive approach at dismantling how Hollywood does business. Even so, it comes as little surprise to antitrust experts given the regulatory agency's push to unify consumer access to digital products in the European Union.

The action ' referred to as a statement of objections ' formally opens a case against Sky UK Ltd., an entertainment company that serves the European Union, and six studios: The Walt Disney Co., Paramount Pictures Corp., NBCUniversal Inc., Sony Corp. of America, Warner Bros. Entertainment Inc. and Twenty-First Century Fox Inc.

The action follows the European Commission's other recent moves over access to digital content. In May 2015, the EU launched a new digital single market strategy aimed at breaking down barriers that have prevented cross-border sales over the Internet. On June 11, the agency announced a formal investigation into contracts that Amazon.com Inc. has with publishers of electronic books. On April 15, Google Inc. was hit with similar actions over allegedly anti-competitive practices involving search results on its site and its Android mobile operating system.

“As a general matter, we're certainly seeing Europe continuing to be significantly more aggressive in antitrust enforcement than the [U.S. Federal Trade Commission] and Justice Department have been,” says Daniel Crane, associate dean and professor at the University of Michigan Law School. “Particularly in technology and high-tech, and often with American defendants, Europeans have been more aggressive.”

In the latest action, the commission claims that the U.S. studios have imposed anti-competitive restrictions in contracts with Sky UK that prevent customers outside the United Kingdom and Ireland from obtaining certain programs available via satellite or online. “European consumers want to watch the pay-TV channels of their choice regardless of where they live or travel in the EU,” says EU Commissioner Margrethe Vestager. Two commission spokespersons didn't respond to a request for comment.

The EU's action is in keeping with its focus on maintaining uniform competition to consumers in the 28 member countries of the EU, particularly as it relates to digital media, say antitrust legal experts. “It's consistent with their goal of creating a seamless market so that anyone in the EU can get access to the services when they want to do so,” says Warren Grimes, a professor at Southwestern Law School in Los Angeles. “What the investigation is trying to protect is a consumer's right to get choices and get the TV they want to get.”

Part of what's fueling the commission's moves is that the EU, founded in 1993, is still in the early stages of its formulation, says Spencer Waller, professor of Loyola University Chicago School of Law. The laws in Europe prohibiting territorial restrictions also are stricter than in the United States, he says, and companies theoretically face up to 10% of their annual sales in penalties ' though the studios would most likely see fines in the hundreds of millions of dollars and could be forced to change their business model, he says.

“They have a virtually per se rule against absolute territorial restraints, where a seller completely forbids the transfer of physical goods or services from one member state or the other,” Waller says. “And that includes bananas, car parts, pharmaceuticals, and, in this case, you're dealing with satellite and paid TV.”

Disney said in an e-mailed statement: “Our approach is one that supports local creative industries, local digital and broadcast partners and most importantly consumers in every country across the EU. The impact of the Commission's analysis is destructive of consumer value and we will oppose the proposed action vigorously.”

An NBCUniversal spokeswoman wrote that the studio was “communicating constructively with the European Commission,” and a Warner Bros. spokesman said it was cooperating with the investigation.

Amanda Bronstad is a Staff Reporter for The National Law Journal, an ALM sibling of Entertainment Law & Finance.

The European Commission's (EU) recent decision to file antitrust claims against six major U.S. film studios is an aggressive approach at dismantling how Hollywood does business. Even so, it comes as little surprise to antitrust experts given the regulatory agency's push to unify consumer access to digital products in the European Union.

The action ' referred to as a statement of objections ' formally opens a case against Sky UK Ltd., an entertainment company that serves the European Union, and six studios: The Walt Disney Co., Paramount Pictures Corp., NBCUniversal Inc., Sony Corp. of America, Warner Bros. Entertainment Inc. and Twenty-First Century Fox Inc.

The action follows the European Commission's other recent moves over access to digital content. In May 2015, the EU launched a new digital single market strategy aimed at breaking down barriers that have prevented cross-border sales over the Internet. On June 11, the agency announced a formal investigation into contracts that Amazon.com Inc. has with publishers of electronic books. On April 15, Google Inc. was hit with similar actions over allegedly anti-competitive practices involving search results on its site and its Android mobile operating system.

“As a general matter, we're certainly seeing Europe continuing to be significantly more aggressive in antitrust enforcement than the [U.S. Federal Trade Commission] and Justice Department have been,” says Daniel Crane, associate dean and professor at the University of Michigan Law School. “Particularly in technology and high-tech, and often with American defendants, Europeans have been more aggressive.”

In the latest action, the commission claims that the U.S. studios have imposed anti-competitive restrictions in contracts with Sky UK that prevent customers outside the United Kingdom and Ireland from obtaining certain programs available via satellite or online. “European consumers want to watch the pay-TV channels of their choice regardless of where they live or travel in the EU,” says EU Commissioner Margrethe Vestager. Two commission spokespersons didn't respond to a request for comment.

The EU's action is in keeping with its focus on maintaining uniform competition to consumers in the 28 member countries of the EU, particularly as it relates to digital media, say antitrust legal experts. “It's consistent with their goal of creating a seamless market so that anyone in the EU can get access to the services when they want to do so,” says Warren Grimes, a professor at Southwestern Law School in Los Angeles. “What the investigation is trying to protect is a consumer's right to get choices and get the TV they want to get.”

Part of what's fueling the commission's moves is that the EU, founded in 1993, is still in the early stages of its formulation, says Spencer Waller, professor of Loyola University Chicago School of Law. The laws in Europe prohibiting territorial restrictions also are stricter than in the United States, he says, and companies theoretically face up to 10% of their annual sales in penalties ' though the studios would most likely see fines in the hundreds of millions of dollars and could be forced to change their business model, he says.

“They have a virtually per se rule against absolute territorial restraints, where a seller completely forbids the transfer of physical goods or services from one member state or the other,” Waller says. “And that includes bananas, car parts, pharmaceuticals, and, in this case, you're dealing with satellite and paid TV.”

Disney said in an e-mailed statement: “Our approach is one that supports local creative industries, local digital and broadcast partners and most importantly consumers in every country across the EU. The impact of the Commission's analysis is destructive of consumer value and we will oppose the proposed action vigorously.”

An NBCUniversal spokeswoman wrote that the studio was “communicating constructively with the European Commission,” and a Warner Bros. spokesman said it was cooperating with the investigation.

Amanda Bronstad is a Staff Reporter for The National Law Journal, an ALM sibling of Entertainment Law & Finance.