On 26 July 2016, the Commission made legally binding the commitments offered by Paramount Pictures ("Paramount") as it considered that they adequately addressed its concerns regarding specific contractual clauses restricting passive sales.

In July 2015, the Commission had expressed concerns that Paramount and Sky UK had breached the competition rules by entering into licensing agreements containing (i) clauses that required Sky UK to block access to Paramount's films through its online pay-TV services (geo-blocking), or through its satellite pay-TV services to consumers outside its licensed territory (UK and Ireland); and (ii) clauses that required Paramount to prohibit or limit broadcasters residing or located within the EEA but outside the UK and Ireland from making their retail pay-TV services available in response to unsolicited requests from consumers located in the UK and Ireland (see VBB on Competition Law, Volume 2015, No. 7, available at www.vbb.com).

In the Commission's view, these clauses amounted to territorial restrictions on passive sales in breach of Article 101 TFEU.

The issue of geo-blocking is at the forefront of the Commission's Digital Single Market Strategy, as is shown by the proposal for a Regulation on addressing geo-blocking and other forms of discrimination based on customers' nationality, place of residence or place of establishment presented by the Commission on 25 May 2016. Through this proposal, the Commission is hoping to put an end to what it considers as unjustified geo-blocking.

Because the main feature of audiovisual services is the provision of access and use of copyright protected works, these services have been excluded from the scope of the proposed Regulation. The situation of audiovisual services is particular as rights to audiovisual works are licensed on a territory-by-territory basis with the consequence that access to such works is often blocked on unlicensed territories. Given the territoriality of copyright, geo-blocking is an essential means of protecting against IP infringement.

The issue of geo-blocking of digital content protected by copyright may be addressed by the Commission in its reform of EU copyright rules since the Commission seeks to allow subscribers to digital content services to access their services in any EU country. The revision of the Satellite and Cable Directive could also provide some possible solutions.

In this context of legal uncertainty as to the interplay between IP and competition with regards to geo-blocking, Paramount undertook to offer the following commitments to address the Commission's concerns:

  • When licensing its film output for pay TV to a broadcaster in the EEA, Paramount will not apply contractual obligations that prevent or limit a pay TV broadcaster from responding to unsolicited requests from consumers within the EEA but outside of the pay TV broadcaster's licensed territory (No "Broadcaster Obligation").
  • When licensing its film output for pay TV to a broadcaster in the EEA, Paramount will not apply contractual obligations that require Paramount to prohibit or limit pay TV broadcasters located outside the licensed territory from responding to unsolicited requests from consumers within the licensed territory (No "Paramount Obligation").
  • Paramount will not seek to bring an action for the violation of a Broadcaster Obligation in an existing agreement that licenses its film output for pay TV.
  • Paramount Pictures will not act upon or enforce a Paramount Obligation in an existing licensing agreement.

Paramount's commitments cover the standard pay-TV services as well as subscription video-on-demand services, and apply to online and satellite broadcast services.

The Commission's investigation into the other five film studios (Disney, NBCUniversal, Sony, Twentieth Century Fox and Warner Bros) continues as these companies still dispute the Commission's allegations.

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