Irish Competition Authority Decisions

1. Notification was made on 3 October 1991 with a request for a certificate under Section 4(4) of the Competition Act, 1991 or, in the event of refusal by the Competition Authority to issue a certificate, a licence under Section 4(2) in respect of a standard agreement between Irish Music Rights Organisation (IMRO), UK Television Companies and other copyright holders and cable relay and MMDS (Multipoint Microwave Distribution System) operators relating to the licensing of re-transmission and re-broadcast of foreign broadcast television programmes. Notification of this agreement was also made by BBC Enterprises Ltd to the EU Commission in December, 1991. Following an examination of this notification by the EU Commission amendments were made to the notified agreement which were submitted to the Authority in December, 1992. Notice of intention to issue a licence was published in the Irish Times on 11 November 1994. One submission was received by the Authority.

2. The notified agreement relates to the licensing, by IMRO, UK television companies and other holders of copyright in TV programmes, of the re-transmission, by cable companies and MMDS operators to subscribers of television programmes broadcast from outside the State.

3. The parties to the notified agreements are IMRO and the following companies

Television Companies BBC Enterprises Limited, companies within The Independent Television Association (representing UK independent regional television broadcasters/licensees), Channel Four Television Corporation, [1] The Welsh Fourth Channel Authority.

Other Copyright Holders Association De Gestion Internationale Collective Des Oeuvres Audiovisuelles (AGICOA), Authors' Licensing and Collecting Society Limited (ALCS), Design and Artists Copyright Society Limited (DACS) and Phonographic Performance (Ireland) Limited (PPI).

Cable Relay Companies Cablelink Ltd, Cablelink (Waterford) Ltd, Cablelink (Galway) Ltd, Cork Communications Ltd, Westward Cables Ltd, Horizon TV Distribution Ltd, Suir Nore and Independent Wireless Cable Ltd. Similar agreements have since been concluded with a number of MMDS(multipoint microwave distribution systems)operators within the State.

IMRO

4. IMRO is an Irish registered private company limited by guarantee, not having a share capital. IMRO is a collecting society and its main activities are the licensing of performing rights for musical works in the State and the collection of royalties. At the time of notification it was a wholly owned subsidiary of the UK Performing Right Society (PRS) which controlled the composition of the Board of Directors of IMRO. Under an agreement with PRS, IMRO administered the PRS performing rights in musical works in the State by the issue of licences for public performances, domestic radio and television broadcasts as well as cable re-transmission of foreign television services and collected royalties arising from these activities. IMRO distributes its license income less operating expenses to PRS. The income and expenditure account of IMRO for the year ended 31 December 1991 showed that total licence revenue amounted to IR£4.8m consisting of IR£2.6m. from broadcasting and IR£2.2m. from public performance. Total administration costs amounted to IR£1.0m. leaving IR£3.8m. for royalty payments for transmission to PRS.

5.(i) BBC Enterprises Limited

BBC Enterprises Limited, London, is the wholly-owned commercial trading subsidiary of the British Broadcasting Corporation, (BBC), which is engaged in the production, supply and distribution of television programmes and programme related products.

(ii) Independent Television Association

Independent Television Association (ITVA), is an organisation representing the Independent Television companies in the UK. The companies represented by ITVA are Anglian Television Group plc, Border Television plc, Central Independent Television plc; Channel Island Communications (Television) Ltd; Grampian Television plc; Granada Group plc; HTV Group plc; LWT (Holdings) plc; Scottish Television plc; Tyne Tees Television Holdings plc; Ulster Television plc and Yorkshire Television Holdings plc. ITVA also represents the new Channel 3 licensees (now GMTV, Meridian, Carlton and West Country).

(iii) Other Television Companies

The other television companies which are signatories to the agreement are Channel Four Television Corporation, Sianel Pedwar Cymru (formerly named The Welsh Fourth Channel Authority).

Other Copyright Holders

6. AGICOA represents the producers and distributors of films and television programmes acquired by broadcasters for inclusion in their broadcasting services, where the relevant rights have not been acquired by the broadcasters . ALCS is engaged in the licensing of the public performance, broadcasting and transmission to subscribers to diffusion services of literary and dramatic works. DACS is engaged in the licensing of the broadcasting and transmission to subscribers to diffusion services of artistic works. PPI is an organisation representative of record companies engaged in the licensing for gain of the public performance of sound recordings in the State.

7. Cablelink Ltd, Cablelink(Waterford) Ltd. and Cablelink (GALWAY) Ltd are 60% owned by Telecom Eireann. These companies as well as the other cable and MMDS operator companies simultaneously and subsequently licensed under the standard agreements, are corporate bodies engaged in the re-transmission of television programmes, broadcast from inside and outside the State, to their subscribers within the State.

8. The service is the retransmission of UK terrestrial broadcasts through a cable/MMDS service to subscribers homes or premises. Irish operators of cable and MMDS networks, in addition to having to obtain the necessary licences from the Department of Transport, Energy and Communications, also require the authorisation of both the broadcasters and the owners of copyright for the re-transmission within the State of TV programmes broadcast outside the State. Because of copyright difficulties the individual broadcasters based abroad may not themselves alone have the authority to authorise retransmission of all their broadcast works. The conclusion of an agreement involving both broadcasters and other copyright owners is designed to overcome these difficulties by providing a comprehensive blanket licence to the cable operators for the contents of the television programme services, to enable them to lawfully transmit the broadcasts.

9. The market is therefore that for the provision of TV programmes by means of a cable or MMDS service to consumers. Cable and MMDS operators provide a service ancillary to national television by the re-transmission of a range of programmes broadcast from abroad including terrestrial broadcasts from the UK and satellite programmes . The geographic market for cable/MMDS television services is the State or more specifically the areas of the country that are served by the cable and MMDS systems.

10. As television developed since the early 1950's householders and others located on the eastern seaboard and the northern border counties of Ireland were enabled by means of outdoor aerials to receive UK national television programme services due to overspill signals from the UK and particularly from Northern Ireland. Cable television developed as an alternative means of receiving these television programme services with improved reception quality and the elimination of the need for individual outside aerials . The cable networks which developed in the cities and towns along the east coast have been available to cable viewers for over 20 years. Cable television is now available in all major urban areas in the State. In more recent years the Government has authorised the introduction of MMDS operators on an exclusive basis as a means of making available multi-channel TV choice in areas outside the range of the overspill signals and there has subsequently been widespread development of these services. MMDS involves a rebroadcast by the MMDS operator through signals received by a small aerial in the subscriber's premises. In more recent years a further alternative for receiving foreign broadcast television has emerged where consumers can receive signals outside a cable /MMDS system by installing a satellite dish.

11. The number of homes owning at least one television set as indicated by the number of television licences issued to householders is approximately 900,000. About 350,000 of these are connected to cable networks licenced by the Department of Transport, Energy and Communications. According to IMRO/PRS cable operators serving more than 280,000 subscribers in Ireland are now covered by agreements similar to that notified. The value of the annual market for cable television services is estimated at over £30m.

12.(i) Under the standard agreement notified the licensors (i.e. IMRO, the television companies and other copyright holders representing to be the owners and controllers of all relevant copyright) grant to the licensee (the cable company) a non-exclusive licence and authority to transmit or re-broadcast by the technical means known as MMDS to the licensee's subscribers in the State certain defined programme services. The licence is subject to such re-broadcasting being limited to the use of terrestrial equipment and consisting of only simultaneous and unabridged transmissions of the broadcasters unaltered programmes. The programme services are defined as those of BBC1, BBC2, TVAM (now GMTV) and one each from UTV/HTV and Channel 4/S4C. The term of the agreement is 4 years from 1 January 1991.

(ii) Under clause 3, the licence specifically excludes re-transmissions to outside the State and public performance and the licensee is prohibited from making recordings of the programmes or the issue of copies to the public. Clause 4 requires the licensee to ensure that a reference be entered in its standard subscriber agreements that it is unlawful for a subscriber to copy or record any part of the re-transmitted programme services. To overcome concerns of the EU Commission the previous sentence was altered in an amendment to the agreement to read "Clause 4 requires the licensee to ensure that a reference be entered in its standard subscriber agreements that it may be unlawful .....".

(iii) Under clause 5 the licensee is required to have regard to the concern of the licensors that a particular channel should be allocated in the cable system for each of the programme services but may allow for sharing of channels at those times when the broadcaster is not providing a programme service. The subscriber is to be advised clearly of the identity and source of each programme re-transmitted. The licensee will transmit as much of the programme services as commercially possible but as a minimum 8 uninterrupted hours of each programme service in every 24 hour period. Such re-transmission shall be simultaneous, complete and unabridged. To overcome the concerns of the EU Commission the amended agreement also includes the provision that the licensee may cease re-transmission of any one or more of the programme services provided 3 months notice in proper terms is given.

(iv) The agreement also provides that the broadcasters will provide information on programmes to the licensee. In exceptional circumstances, the licensors reserve the right to prohibit certain re-transmissions and the licensees reserve the right not to re-transmit such programmes and each are obliged to advise the other party about such instances giving at least 48 hours notice before the programme is due to be transmitted. The licensors agree to indemnify the licensee against any claims or actions brought by a third party against them in respect of the programme services and the licensees must notify the licensors' nominee (IMRO) in writing of any such claims.

(v) Clause 9 provides for the amounts payable by the licensee which includes flat sums payable quarterly in the initial years going on to a royalty basis in 1993 involving a flat annual sum per subscriber to the cable network. The royalty increases each year by reference to the Consumer Price Index. In consideration of these payments the licensors waive any other claims for royalty income from the broadcast material. All payments are to be made to IMRO it being the licensors' duty to apportion the amounts paid between themselves. The licensors are given the right to examine the licensee's records to verify payments.

(vi) Clause 15 of the Agreement provided that if the licensors at any time during the term of the agreement entered into a similar agreement with a third party on terms that on a per subscriber basis are less favourable to the licensors than the terms of the notified agreement, the licensee "shall be entitled to call upon the licensors to review with the licensee the terms as to payment contained herein with the

intent that the said terms should be adjusted to conform to the terms agreed with such third party."

(vii) To overcome the concerns of the EU Commission in relation to clause 15, a new clause "15 bis" was included in the revised agreement, as follows:

"15 bis Additional Broadcaster

If at any time during the term the licensee requests that a broadcaster other than those mentioned in Clause 1 should become a party to this Agreement in order that the licensee may acquire the right to transmit, re-transmit or re-broadcast a programme service of that broadcaster when such programme service is broadcast from terrestrial transmitters situated either in the United Kingdom or in another country for reception in the United Kingdom or such other country respectively but the signals from which transmitters are directly receivable off-air in Ireland then, provided that the licensee notifies the licensors that it is prepared to pay reasonable additional remuneration to the licensors in respect of its acquisition of such right, the licensee together with such other broadcaster shall be entitled to call upon the licensors to review the terms of Clause 1 and Clause 9(a), (b) and (c) of the Agreement accordingly."

Note Clause 1 relates to definitions while clauses 9(a) to (c) relate to the amounts payable and dates of payment.

(viii) Clause 16 provides that the licensee may not assign, sub-license, etc. any of its rights or obligations without the prior written consent of the licensors, such consent not to be unreasonably withheld. The licensee may however assign its rights to a third party holding a licence from the Department of Transport, Energy and Communications provided that the licensee has fulfilled all its obligations to the licensors prior to the assignment and that the licensee procures that the assignee will contract directly with the licensors to perform all the further obligations under the agreement.

(ix) Clause 17 allows the licensors to terminate the agreement in the event of the licensee company going into receivership, managership or liquidation, if the licensee ceases to carry on business or if the licensee is in breach of a material term of the Agreement, in particular those relating to payment arrangements. The licensors or the licensees may also terminate the Agreement in the event of certain legislative changes in the State. Clause 25 provides that as soon as practicable after completion the agreement shall be notified to the EU Commission.

13. The notified agreement was also notified to the EU Commission by BBC Enterprises Limited on 6 December 1991. On the basis of information supplied the Commission came to the conclusion that the Agreement as notified fell within Article 85(1) and in its then form could not benefit from exemption under Article 85(3) of the EU Treaty. The Commission stated inter alia that collective royalty arrangements with the participation of actual or potential competitors clearly fell within Article 85(1). Several amendments to the notified arrangements were agreed between the Commission and the BBC. Some other amendments were made to the notified agreement in order to accommodate changes in the contracting independent TV companies and Channel 3 licensees. Following the amendments to the agreement, the EU Commission issued an interim comfort letter indicating that sufficient prima facie justification had been provided for an exemption to be granted by the Commission pursuant to Article 85(3). A formal decision granting an exemption under Article 85(3) was not considered necessary.

14. IMRO submitted that the intention and effect of the arrangements was to give effect to the rights of the creators/licensors/ broadcasters granted by the Copyright Acts, 1963 and 1987 while securing for consumers their proper share of the benefits. They said that a mechanism had already been provided for regulating the market between copyright owners and the persons requiring licences. This mechanism was provided in Part V of the Copyright Act, 1963, which entrusts these functions to the Controller of Patents, Trade Marks and Designs.

15. Following publication on 11 November 1994 of its intention to grant a licence in respect of the notified agreement, the Authority received a submission from a third party. Nolan and Company, Solicitors, New Ross, on behalf of Trace Lite International Ltd and Padraig Fitzgerald objected to the granting of a licence by the Competition Authority. They stated that a consortium was being established to set up a rival television distribution system to that offered by the cable relay and MMDS operators to deliver the same television programmes to customers in competition to the cable relay and MMDS operators. Equality in dealings with the copyright owners and programme suppliers was essential. They felt that granting a licence for the notified agreement would inhibit them from competing with the cable relay and MMDS operators. The points made by Nolan and Company on behalf of Trace Lite International Ltd and Padraig Fitzgerald are covered in the assessment which follows.

16. Section 4(1) of the Competition Act, 1991 prohibits and renders void all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State, or in any part of the State.

17. The term "undertaking" is defined in Section 3(1) of the Act as "a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service." IMRO, BBC Enterprises Ltd, Channel Four Television Corporation, The Welsh Fourth Channel Authority, ALCS, DACS and PPI are corporate bodies engaged for gain in the exploitation of copyright works and are therefore undertakings. The Independent Television Association signed the agreement on behalf of its members, the independent television companies in the UK, who are undertakings. AGICOA signed the agreement on behalf of its members, producers and distributors of films and television programmes, who are undertakings. The cable/MMDS companies are engaged in the provision of a cable television or MMDS re-transmission service to the general public for gain and are also undertakings. The notified agreement is an agreement between undertakings. The agreement has effect within the State.

18. The notified agreement is stated to be the standard form of several agreements whereby the owners of copyright in television programmes, broadcast from outside the State, license the live re-transmission of TV programmes by cable companies to cable subscribers. For these services, royalties are payable to the licensors. It involves a collective licensing system whereby a number of television companies who are otherwise in competition with one another, and other holders of copyright on broadcast material, have joined together as licensors in these agreements. The agreements also contain a number of restrictive clauses whose effect on competition must be considered.

19. The Authority takes the view that collective licensing arrangements per se, where actual or potential competitors in the market join together for the collective licensing of their separate services for a global fee to be divided on an agreed basis, restricts competition. Such arrangements eliminate the possibility of each television service competing on price against the others for the right to supply re-transmitted programmes via cable or MMDS systems within the State. Such arrangements therefore offend against section 4(1) of the Competition Act.

20. Clause 5 requires the licensee to allocate a particular channel in the cable network for each programme service and that a minimum uninterrupted 8 hours per 24 hours on the cable channel has to be devoted to broadcasts of each particular service. Modern television sets have the capacity to carry 100 or more channels. Since the number of channels covered by the agreement is 4 there remains very substantial leeway to accommodate the rapid development of private satellite broadcasting. The amended agreement gives the licensee the right to withdraw any one or more of the programme services during the term of the agreement, by giving three months' notice in writing and also allows new broadcasters to become parties to the agreement. In these circumstances any possibility of foreclosure of cable channels by reason of the notified agreement does not arise and this clause, as amended, does not offend against section 4(1).

21. Clause 3 of the agreement expressly excludes the licensee from retransmitting programmes capable of lawfully being received by members of the public outside the State or programmes for public performance and from making recordings for issue to the public. This geographical exclusion does not affect competition within the State and does not therefore offend against Section 4(1). Similarly the copyright licence relates to the provision of cable television services and that alone. Copyright in respect of public performance or the making of recordings is not licensed under the agreement and the express exclusion of these activities does not therefore offend against Section 4(1).

22. Under Section 4(2), the Competition Authority may grant a licence in the case of any agreement or category of agreements "which in the opinion of the Authority, having regard to all relevant market conditions, contributes to improving the production of goods or provision of services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit and which does not -

(i) impose on the undertakings concerned terms which are not indispensable to the attainment of those objectives;

(ii) afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question.'

In the opinion of the Authority, the notified arrangements fulfil the conditions provided for in Section 4(2).

23. Because of the number and diversity of the copyright holders involved in the re-transmitted television programmes the Authority believes that the most effective and efficient way of operating a business of re-transmission of UK terrestrial broadcasts is through the collective licensing system provided under the agreements. The alternative for the cable companies would be the negotiation of an agreement with each of the copyright holders in respect of each re-transmitted programme service. This would involve extra costs for the cable company and the consumer. Prior to the introduction of cable television many viewers on the East coast and Northern parts of the State were accustomed to receiving the signals from the full range of the UK national channels by way of outdoor aerials and would have been unlikely to subscribe to a service which did not include the full UK terrestrial national range. The collective nature of the arrangement which has enabled the provision of the full UK national programme services through cable has thus contributed to the development of cable services and networks. The collective arrangement also provides a blanket indemnity to cable companies against claims for infringement of copyright on retransmitted material which would not otherwise be available. The Authority therefore accepts that the arrangements notified involve efficiencies and have improved the provision of the service.

24. The consumers in question are the subscribers to cable and MMDS systems in the State. Because of the arrangements, the Authority believes that subscribers have a wider selection of television programme services and that they benefit from the competition created between overseas and the local broadcaster. Because of the participation of all those who own copyright in the broadcast material, consumers' rights to receive and enjoy retransmitted programmes are not likely to be hampered by legal disputes concerning the cable or MMDS operators' rights to retransmit.

25. In the Authority's opinion the notified agreement does not impose on the undertakings concerned any conditions which are not indispensable.

26. Following the notification to the EU Commission clause 15 of the agreement was amended by the addition of clause 15 bis as set out at para 12 (vii) above. The amendment allows for the entry of new broadcasters to the agreement at the request of the licencee together with provisions for the amendment of the financial provisions of the agreement. In practice the agreement has not prevented other broadcasters, particularly satellite companies, from negotiating their own re-transmission agreements with the cable companies. Nevertheless the amendment enables the addition of other broadcasters to the notified agreement. Individual consumers can opt for satellite dishes or, in many parts of the country, can have their own television aerial as potential sources of competition. In all these circumstances the Authority considers that the agreements do not afford the possibility of eliminating competition in respect of a substantial part of the services in question.

27. In the Authority's opinion, Irish Music Rights Organisation, BBC Enterprises Ltd, the companies represented by The Independent Television Association, Channel Four Television Corporation, The Welsh Fourth Channel Authority, Association De Gestion Internationale Collective Des Oeuvres Audiovisuelles, Authors' Licensing and Collecting Society Limited, Design and Artists Copyright Society Limited and Phonographic Performance (Ireland) Limited and the cable companies are undertakings. The notified standard agreement between the parties is an agreement between undertakings. The Authority considers that the notified agreement offends against Section 4(1) of the Competition Act, 1991. The Authority considers that the notified agreement satisfies the conditions of Section 4(2) of the Competition Act. It has therefore decided to issue a licence in respect of the notified agreement, and the licence shall apply from 16 December 1994 to 15 December 2004. A ten year licence is appropriate because the notified standard agreement operates for a four year period. It is not considered necessary to attach any conditions to the licence.

28. The Competition Authority has issued the following licence:

The Competition Authority grants a licence under Section 4(2) of the Competition Act 1991 to the standard agreement between Irish Music Rights Organisation, BBC Enterprises Ltd, the companies represented by The Independent Television Association, Channel Four Television Corporation, The Welsh Fourth Channel Authority, Association De Gestion Internationale Collective Des Oeuvres Audiovisuelles, Authors' Licensing and Collecting Society Limited, Design and Artists Copyright Society Limited and Phonographic Performance (Ireland) Limited and the cable companies in relation to the re-transmission and re-broadcast of UK television programmes, notified under Section 7 on 3 October 1991 (notification no. CA/7/91E), on the grounds that, in the opinion of the Authority, all the conditions of Section 4(2) of the Competition Act, 1991 have been fulfilled.

The licence shall apply from 16 December 1994 to 15 December 2004.

For the Competition Authority

Des Wall

Member

16 December 1994