Geo-blocking investigation: European Commission publishes online and broadcast commitments proposed by Paramount

In an unexpected development, the European Commission today published for consultation commitments proposed by Paramount, one of the Hollywood studios involved in the Commission’s on-going investigation into the use of geoblocking restrictions, which prevent broadcasters from making content available to consumers in other EU countries (read more here). Paramount is the first studio publicly known to have offered commitments in an attempt to settle the Commission’s investigation early.

What is noteworthy is that these commitments have been published relatively late in the Commission’s investigatory process – some nine months after the Commission issued its Statement of Objections (the document which sets out the Commission’s case against the studios) on 27 July 2015, and three months after the Commission’s oral hearing in Brussels. Indeed, the Commission’s final decision is expected in the next few months.

In its commitments, Paramount appears to have addressed the Commission’s known concerns. In particular, Paramount is offering:

• not to enforce geoblocking restrictions in existing contracts with broadcasters (i.e. those which prevent broadcasters from responding to unsolicited requests from consumers in other EEA countries);
• not to honour any existing contractual obligation requiring Paramount to prevent EEA broadcasters from responding to unsolicited requests from customers based in another EEA broadcaster’s licensed territory; and
• not to enter into, renew or extend the above types of contractual restriction in future license agreements.

Paramount’s commitments, which would run for five years, cover both standard pay-TV services as well as subscription video-on-demand services, whether provided online or broadcast via satellite.

It is worth noting that the Commission is not normally prepared to accept commitments in cases where it considers that the nature of the infringement calls for a fine. This suggests that the Commission does not consider that the geoblocking restrictions in the studios’ agreements with Sky necessarily deserve to be punished with fines. This may reflect the fact that these restrictions simply reflect established industry practice – all the studios have imposed geoblocking restrictions on broadcasters, justifying their use on the fact that content is often licensed on a country-by-country basis in the EU.

The attractiveness of commitments as a means of settling an investigation is that it avoids having a formal infringement decision in the public domain, which could potentially be relied on by third parties to bring damages claims against the infringer. It also avoids the risk of less palatable remedies being imposed by the Commission. From the Commission’s perspective, settling a case by way of commitments avoids incurring additional time and cost in issuing, and then potentially defending on appeal, a formal infringement decision. In this case, it can also be expected to exert pressure on the other studios to settle early, as they are in a substantially similar position to Paramount.

While pure speculation, the fact that Paramount has offered commitments at this point, after having put forward its response to the Commission’s Statement of Objections and argued its case at the oral hearing in January, suggests that it has concluded that the Commission is bound to find against it. If so, this is a pragmatic step, and one which the other studios can be expected to consider carefully.

Paramount’s proposed commitments are now open to review and comment by interested third parties. A one month deadline has been set for receipt of third party comments.

Subject to the results of the market test, the Commission proposes to accept Paramount’s commitments, in which case it will declare them binding.

To find out more about how the Commission proposes to regulate the digital economy, visit Osborne Clarke’s Digital Single Market hub here.