The Court of Justice annulled the commitment decision of EU Commission where the Authority accepted commitments from Paramount Pictures and found that the Commission failed to properly consider the pre-existing rights of a third party (Canal +) and this amounted to a violation of the proportionality principle. The proportionality principle, that regulates the exercise of powers by the EU, is enshrined in the Treaty on European Union under Article 5. According to this article, the action of the EU must be limited to what is necessary to achieve the purposes of the Treaties. The criteria for the application of the principle are set out in the Protocol (No 2) on the application of the principles of subsidiarity and proportionality annexed to the Treaties.

In the Paramount Pictures case, the Commission had found some clauses of the licensing agreement on audio-visual content between Paramount Pictures and the main pay-TV broadcasters of the EU, Sky and Groupe Canal + SA anti-competitive. For the Commission, some clauses led to an absolute territorial exclusivity and could constitute a restriction of competition as they restored the partitions of national markets and frustrated the Treaty's objective of establishing a single market. Therefore, an investigation was opened into possible restrictions affecting the provision of pay-TV services under the licensing agreements in question to assess the compatibility of those restrictions with Article 101 TFEU and Article 53 EEA. The assessments of the Commission were also communicated to Groupe Canal + as an interested third party. In return, Paramount offered commitments and stated that it was prepared to no longer comply with or act in order to enforce the licensing agreements clauses concluded between Paramount and those broadcasters leading to the broadcasters' absolute territorial protection. After receiving observations from other interested parties, including Groupe Canal +, the Commission accepted the commitments offered by Paramount and made them binding with a formal commitment decision1. Paramount notified Groupe Canal + of the new measures and its intention to no longer ensure compliance with the absolute territorial exclusivity granted to Groupe Canal + on the French market. Thus, Groupe Canal + brought an action before the General Court of the EU and requested that the decision be quashed on the ground that those commitments only involved the Commission and Paramount and cannot be relied on against Groupe Canal +. This request was dismissed by the General Court in 2018.

However, in 2020, the Court of Justice annulled the decision at issue. The Court provided new clarification concerning the relationship between the respective prerogatives of the Commission and the national courts in the implementation of EU competition rules:

  • The Court hold that it was on adequate grounds and without any error of law that the General Court rejected the arguments of Groupe Canal + seeking to demonstrate that the relevant clauses were lawful. The clauses were designed to eliminate the cross-border provision of broadcasting services for the audio-visual content and conferred on broadcasters absolute territorial protection guaranteed by reciprocal obligations. Thus, the General Court was able to validly find that such clauses are, without prejudice to a possible decision definitively establishing the existence or absence of an infringement of Article 101 (1) TFEU, likely to give rise to competition concerns for the Commission.
  • The Court emphasized the preliminary nature proper to the assessment of the anticompetitive nature of the conduct at issue in the context of a decision adopted under Article 9 of Regulation No 1/2003. The General Court rightly held that Article 101 (3) TFEU is applicable only if an infringement of Article 101 (1) TFEU has been established beforehand.
  • The Court approves the fact that the General Court considered that clauses could raise competition concerns for the Commission concerning the whole of the EEA, without being subject to the obligation to analyze the concerned national markets one by one. As the clauses were intended to partition national markets, the General Court rightly recalled that such agreements could jeopardize the functioning of the single market, which is one of the main objectives of the Union, regardless of the situation in national markets.
  • The Court recalls that the Commission must verify the commitments offered with regard to their effects on competition but also their impact on the interests of third parties. However, the fact that the Commission has made it compulsory for an operator to not to apply certain contractual clauses to its co-contracting party (Canal +), when the latter has not consented thereto, is an infringement of freedom of contract and violates the provisions of Article 9 of Regulation 1/2003.

In this context, the Court considered that the General Court could not refer such co-contracting parties to the national courts to enforce their contractual rights without disregarding the provisions of Article 16 of Regulation No 1/2003 which prohibit those courts from adopting decisions which would go against a previous decision of the Commission. Consequently, the Court concluded that by adopting the decision at issue, the Commission rendered the contractual rights of the third parties meaningless, including the contractual rights of Groupe Canal + vis-à-vis Paramount, and thereby infringed the principle of proportionality, and annulled the decision of the Commission.

Footnote

1. Decision of the Commission of 26 July 2016- Case AT. 40023 – Cross-border Access to pay-tv 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.