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 an agreement between Irish Music Rights Organisation (IMRO), UK television companies and other copyright holders, relating to the administration of cable television rights on programmes broadcast from outside the State. Separate notification was also made to the Authority of the standard agreement between the parties to the notified agreement and cable television companies relating to the licensing of transmission by the cable networks of the television programmes. This standard agreement is the subject of a separate decision (Decision No. 383, of 16 December 1994). Notice of intention to issue a licence in respect of notification no. CA/6/91E was published in the Irish Times on 11 November 1994. One submission was received by the Authority which was considered in the context of Decision No. 383.

2. The notified agreement relates to the authorisation of IMRO by UK television companies and other holders of copyright in TV programmes to act on their behalf in the administration of agreements with cable companies including MMDS (Multipoint Microwave Distribution System) operators in the State. The agreements concern arrangements for the retransmission of television programmes broadcast from outside the State.

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

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

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

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, 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. The service is the retransmission of UK terrestrial broadcasts through a cable or 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.

8. 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.

9. 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.

10. 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 licensed 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.

(d) The Notified Agreement

11. (i) The notified agreement was made on 27 February 1991 for a term of four years from 1 January 1991, to provide for the administration of certain cable agreements by IMRO on behalf of all the parties to the notified agreement. The preamble to the agreement records that by agreements of even date the parties have licensed to cable operators the transmission to subscribers of programme services and that the parties have agreed the basis on which the revenues arising from the cable agreements are to be divided between them.

(ii) Clause 2 of the agreement sets out the basis on which the revenues are to be allocated between the parties to the agreement while clauses 3 to 6 refer to other matters related to the allocations and the timing of payments. Under clause 7 each party agrees to indemnify each of the others against all claims arising from the transmission of material under the cable agreements with each party accepting responsibility for specific categories of work or subject. Schedule 2 of the agreement sets out each party's responsibilities in that regard e.g. IMRO (musical works), ALCS (literary and dramatic works), DACS (artistic works), AGICOA (cinematograph film), PPI (sound recordings), Television companies (broadcasts).

(iii) Clause 8 of the agreement sets out the duties and responsibilities of IMRO for the 2 years ended 31 December 1992 i.e. to monitor and ensure the compliance by each licensee with the terms of the cable agreement signed by it, to keep the parties to the agreement informed of any failure by a licensee to comply with the terms of its agreement, to inform the parties of any claims against the licensor by third parties and to collect and remit revenues as provided under the agreement. IMRO also undertakes to actively obtain acceptance of other cable companies to operate their services on terms similar to those set out in the cable agreements.

12. EU Council Directive 93/83 EEC of 27 September 1993 relates to the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission. Article 9 requires that "Member States shall ensure that the right of copyright owners and holders of related rights to grant or refuse authorisation to a cable operator for a cable retransmission may be exercised only through a collecting society". Article 10 provides that Article 9 does not apply to the rights exercised by a broadcasting organisation in respect of its own transmission. Article 13 of the Directive states that the Directive shall be without prejudice to the regulation of the activities of collecting societies by the Member States. The preamble to the Directive states that "this Directive does not affect the applicability of the competition rules in Articles 85 and 86 of the Treaty". Member States are required to take the necessary legislative steps to comply with the directive before 1 January 1995.

13. IMRO stated that the notified agreement did not prevent, restrict or distort trade in goods or services in the State, or in any part of the State. They said that when the UK television channels finally reached agreement for legal retransmission in Ireland of their broadcasting, they chose to nominate IMRO as collecting agent, rather than administer their rights themselves, despite the fact that there were fewer than 10 customers involved.

14. Subsequent Developments

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. The points made are covered in the assessment of Decision No. 383 of 16 December 1994.

15. 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.

16. Section 3(1) of the Act defines an undertaking 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. All the parties to the agreement are therefore undertakings. The notified agreement is an agreement between undertakings. The agreement has effect within the State.

17. The notified agreement is connected with the related cable agreements and it forms part of the arrangements for the operation of the cable agreements. Under the agreement all the holders of copyright in the television programmes broadcast from the UK have collectively assigned the administration functions under the cable agreements, to which they all are parties, to IMRO. Essentially it involves the parties agreeing that the cable agreements should be administered collectively with one of them being appointed to act on their behalf as a collecting body in respect of royalties. The Authority takes the view that collective licensing arrangements per se, where actual or potential competitors in the market have joined together for the collective licensing of their separate services for a global fee to be divided on an agreed basis, clearly restricts competition. The arrangements eliminate the prospect of each television service competing against the others in respect of price for the right to supply re-transmitted programmes within the State. Such arrangements therefore offend against Section 4(1) of the Competition Act 1991.

18. Under Section 4(2), the Competition Authority may grant a licence in the case of any agreement or category of agreements which, "having regard to all relevant market conditions, contributes to improving the production or distribution 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 undertaking 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".

19. In its decision in regard to the cable agreements the Authority has decided that the standard cable agreement involving collective licensing satisfies the conditions for a licence under Section 4(2) - Decision No. 383. It is also of the opinion that the notified agreement, which relates to the administration arrangements for these agreements, also satisfies the conditions of a licence for the reasons indicated in paragraphs 23 to 26 of that decision. To provide for collective administration of the cable agreements it seems essential that a collecting society to act for all copyright holders should be appointed for this purpose.

20. 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 are undertakings. The notified 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 all 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 agreement operates for a four year period. It is not considered necessary to attach any conditions to the licence.

21. 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 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 in relation to the administration of cable agreements (notification no. CA/6/91E) notified under Section 7 on 3 October 1991, 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