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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Independent Television Commission, Ex Parte TV Danmark 1 Ltd, R v. [2001] UKHL 42 (25th July, 2001)
URL: http://www.bailii.org/uk/cases/UKHL/2001/42.html
Cite as: [2001] Eu LR 741, [2001] UKHL 42, [2001] 1 WLR 1604, [2001] EMLR 42, [2001] 3 CMLR 26, [2001] WLR 1604

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Independent Television Commission, Ex Parte TV Danmark 1 Ltd, R v. [2001] UKHL 42 (25th July, 2001)

HOUSE OF LORDS

Lord Slynn of Hadley Lord Nolan Lord Hoffmann Lord Hutton Lord Hobhouse of Wood-borough

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

REGINA

v.

INDEPENDENT TELEVISION COMMISSION

(APPELLANTS)

EX PARTE TV DANMARK 1 LIMITED

ON 25 JULY 2001

[2001] UKHL 42

LORD SLYNN

My Lords,

1. I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Hoffmann. For the reasons he gives I too would allow the appeal and dismiss TV Danmark's application for judicial review.

LORD NOLAN

My Lords,

2. I have had the advantage of reading in draft the speech of my noble and learned friend Lord Hoffmann. For the reasons, which he gives, I also would allow the appeal and dismiss the application for judicial review.

LORD HOFFMANN

My Lords,

3. This appeal is about the right of the European citizen to watch his national football team on television. More particularly, it concerns the duty of the United Kingdom under European law to refuse to allow a UK television company to exercise exclusive rights to broadcast live coverage of Denmark's World Cup matches on the ground that too few Danes would be able to watch them.

Pay-TV and free-to-air TV

4. The background to the European legislation on the subject is the advent, over the last 15 years or so, of television broadcasts by cable or satellite, generally known as "pay-TV", which can be received only by subscribers to the service. In order to persuade people to pay to watch television, it is necessary to offer them programmes which would not be available for free on ordinary public broadcasts ("free-to-air" television). The most effective attractions are recent feature films and popular sporting events. So the growth of pay-TV has largely depended upon its ability to acquire the exclusive rights to films and sports broadcasts.

5. Until the appearance of pay-TV, competition in Europe for the rights to live television broadcasts of sporting events was not particularly vigorous. Most national free-to-air broadcasters belonged to a buying cartel called Eurovision which bargained collectively for the rights to events of international interest. National free-to-air broadcasters often negotiated jointly or collectively for the rights to events of national interest. The fees paid to sports organisers were correspondingly low. Competition from pay-TV for exclusive rights drove up prices to unprecedented levels.

6. The competition was greatly to the benefit of the sports organisers and players. But there was alarm in a number of member states at the prospect that pay-TV broadcasters might be able to outbid the national free-to-air broadcasters for sporting events like the Grand National or the Tour de France which virtually the entire nation was used to watching on free-to-air television every year. The possibility that anyone who did not subscribe to pay-TV might be deprived of the opportunity to watch such events resulted in political pressure which led, first, to domestic legislation in the United Kingdom and then to a European Directive on the subject.

The UK domestic system

7. This is contained in Part IV of the Broadcasting Act 1996. Section 97 gives the Secretary of State for Culture, Media and Sport the power to draw up a list of sporting or other events of national interest. The current list includes the Olympic Games, the Grand National, the Wimbledon Finals, cricket Test matches played in England and Six Nations Rugby matches in which a home country is playing.

8. By section 99, a term in a contract granting rights to televise a listed event is void so far as it purports to preclude the grant of similar rights to another broadcaster. A sports organiser cannot therefore contractually bind itself to grant exclusive rights. But this provision does not actually require the sports organiser to grant such rights to more than one broadcaster and it would often be in its economic interest not to do so. Section 98 cannot therefore ensure that a listed event is shown on free-to-air television. The mechanism by which Parliament has attempted to achieve this result lies in other provisions of Part IV.

9. Section 98 divides broadcasters into two categories, roughly corresponding to pay-TV and free-to-air. The vital section is 101, which provides that a broadcaster in one category may not without the consent of the Independent Television Commission ("the ITC") broadcast a listed event unless it is also broadcast by one in the other category. The practical effect of this provision is that a pay-TV broadcaster who wishes to broadcast a listed event on a de facto exclusive basis has to obtain the consent of the ITC.

10. Section 104(1) requires the ITC to draw up a code of guidance which, among other things, gives guidance as to the matters which it will take into account in determining whether or not to give consent under section 101 and section 104(2) requires the ITC in exercising their powers to have regard to the provisions of the code. I shall in due course come back to some of these provisions.

The European Directive

11. Similar anxieties in other member states about the accessibility of sporting events of national interest led to the adoption of a Directive on the subject. This was 97/36/EC, adopted by the European Parliament and the Council on 30 June 1997. It inserted into the Directive which harmonises a number of aspects of the regulation of television broadcasting (89/552/EEC, generally known as the Television Without Frontiers Directive), a new Article 3a:

12. It will be seen that paragraph 1 gave member states a power to legislate to protect the dissemination of what they regarded as events of major importance for their societies. Four have taken advantage of this power. Italy, has designated the Formula One Italian Grand Prix, and the San Remo music festival and some other events. Germany has designated various football competitions. Denmark's designated events include World Cup football matches in which Denmark is playing. The United Kingdom, as we have seen, had anticipated the Directive and simply notified the terms of Part IV together with the ITC code of guidance and the Secretary of State's list of events.

13. Paragraph 3, on the other hand, imposes a duty upon every member state to ensure "by appropriate means" that its own broadcasters do not exercise an exclusive right to televise an event designated by another member state in such a way that a substantial proportion of its public of the possibility of watching. To enable the UK to comply with this duty, the Secretary of State amended Part IV by regulations made under the European Communities Act 1972: the Television Broadcasting Regulations 2000. He inserted a new section 101B which requires the consent of the ITC to the exclusive broadcasting of events designated by other member states, analogous to the consent required under section 101:

14. Section 101B does not of course constitute compliance with Article 3a(3). Whether we comply or not depends upon how the ITC exercises its power to give consent. The power is therefore by no means unfettered. As a matter of European law, it must be exercised so as to ensure that we comply with the Directive.

The bidding for the Danish World Cup qualifying matches.

15. The issue has arisen because on 5 June 2000 a UK broadcaster called TVDanmark 1 ("TVD") entered into a contract with UFA Sports GmbH ("UFA"), which distributes television rights for World Cup football matches, for the exclusive right to televise five qualifying matches for the 2002 World Cup in which Denmark was playing away. These were designated events under the Danish legislation. TVD is a new entrant to the market, having commenced business on 1 January 2000. It is based in the UK, but transmits programmes to Denmark by cable and satellite. Although its subscription charge is low enough for it to count under Danish law as a "free-to-air" broadcaster, it is at present available to only about 60% of the Danish public, which is insufficient to satisfy the Danish criterion for not preventing a substantial proportion of the public from watching. TVD therefore required consent under section 101B.

16. UFA formed its own opinion of the market value of the exclusive rights and offered them simultaneously to a number of Danish broadcasters including two (DR and TV2) which satisfied the criteria for free public broadcasting. Everyone was treated equally and had a fair opportunity to bid. DR and TV2 made a joint bid but offered only 60% of what UFA regarded as the fair price. TVD also offered less, but substantially more than the public broadcasters. UFA said that they would rather have sold the rights to broadcasters who could reach the larger audience. But they owed a duty to their principals to obtain a reasonable market price.

The ITC code

17. When section 101B was added by regulation to the 1996 Act, the regulations also required the ITC to include guidance in its code as to the matters which it would take into account in determining whether to grant consent under that section. It did so by saying that the criteria and matters it would take into account would be "similar to" those which it took into account under section 101: see paragraph 26 of the ITC Code on Sports and other Listed Events, revised January 2000. It is therefore necessary to look at some of the guidance given in relation to domestic listed events.

18. In paragraph 9 the ITC emphasised that the Act did not guarantee that a listed event would be broadcast on a free-to-air service. Nor did it prohibit de facto exclusive rights being exercised by pay-TV broadcasters. The question was whether the ITC was satisfied that its criteria had been met.

19. The most important of these criteria are set out in paragraph 13. I quote some relevant passages:

The ITC decision.

20. The ITC was satisfied that the auction process had complied with its criteria as to fairness and transparency. It was also minded to consider that the price paid for the exclusive rights was fair and reasonable. But it first consulted with the Danish Ministry of Culture, which administers the Danish system for the protection of listed events and with the Danish Competition Council.

21. The Danish system, although designed to secure the same objective as the UK system, is in some respects different. The relevant Ministerial Order of 19 November 1998 provides in general terms that exclusive rights to designated events shall not be used in such a way that a substantial proportion of the population is prevented from following them. A coverage of 90% is necessary to satisfy this criterion (in the UK it is 95%). Section 5.1 provides that a broadcaster who has acquired exclusive rights may exercise them only if it is able to make arrangements to ensure 90% coverage through other broadcasters. But, by section 5.2, it need not do so if it can demonstrate that no broadcasters satisfying the criteria were "prepared to enter into an agreement on reasonable market terms". Section 5.3 provides a mechanism for testing whether the other broadcasters are prepared to enter into such agreements or not. They must express an interest within 14 days after receiving a written offer of an agreement to take part in arrangements in accordance with section 5.1, giving various particulars including the requested price. If there is a dispute over whether the price is reasonable, the matter may be referred by the parties or a "judicial or administrative authority" for the opinion of the Competition Council.

22. The Danish system therefore contemplates that a non-qualifying broadcaster who has acquired exclusive rights to a designated event must be prepared to share them with other broadcasters willing to acquire non-exclusive rights at a reasonable price. No doubt, in the interests of certainty, broadcasters contemplating the acquisition of such exclusive rights will want to ascertain in advance whether they are likely to have to share them. In the last resort, however, they may have to resort to a formal offer to satisfy the regulator that they are at liberty to exercise their rights on an exclusive basis.

23. The Danish response to the ITC consultation was to say that the public broadcasters DR and TV2 had never been asked whether they would be willing to share the rights with TVD. All that they had been offered was the right to bid for the rights on an exclusive basis. In the absence of an offer of shared rights, the Danish Ministry of Culture considered that TVD would be exercising its rights contrary to the terms of article 3a(3) of the Directive.

24. The ITC asked TVD whether it would be willing to make an offer of non-exclusive participation to DR and TV2. TVD said that it would not. It was seeking consent from the UK, not the Danish regulator. The UK system, as expressed in sections 101, 101B and the code, was to have regard only to the circumstances in which the broadcaster seeking consent had acquired its rights. If TVD had acquired them in fair competition at a reasonable price, it was entitled to consent. It could not be required to give competing public broadcasters a second chance by an offer of non-exclusive rights. The code contained no suggestion that such a condition might be imposed. As the whole value of the rights to TVD lay in their exclusivity, a requirement that it should grant non-exclusive rights to DR and TV2 meant that it might as well not have bought them in the first place.

25. The ITC decided to refuse consent. In a letter dated 17 August 2000 it said that whatever might be the breadth of its discretion under section 101, it was obliged to exercise its discretion under section 101B in conformity with the Directive. It accepted that it should have regard to the code but this did not mean that it could thereby bind itself to decide in a way which would be contrary to European law. It was not satisfied that allowing TVD to exercise exclusive rights would not prevent a substantial proportion of the Danish public from watching the matches. This was because it was not satisfied that the public broadcasters had had:

Judicial review

26. TVD applied for judicial review to quash the ITC's decision. The main ground upon which it alleged that the ITC had acted unlawfully was that under the UK system, no account could be taken of what TVD did or did not do after it had acquired the rights. The only question, as indicated by paragraph 13 of the code, was whether they had been acquired in fair competition at a reasonable price. As the ITC appeared to be satisfied on this point, it should have granted consent. A second ground was that TVD had a legitimate expectation, based on the code, that it would receive consent if it acquired its rights on fair and reasonable terms.

27. The application came before Mr Jack Beatson QC, sitting as a deputy High Court judge. He rejected the submission that the ITC could not have regard to whether TVD was willing to share the rights after it had acquired them. The Directive was concerned with the "exercise" of exclusive rights in such a way that a substantial proportion of the public was deprived of the possibility of following a listed event. Of course it might be that the reason why the public was deprived of that possibility was not the way the broadcaster was exercising its rights but the fact that no public broadcaster had been willing to acquire any rights on reasonable terms. But that causal question had to be asked as at the moment of broadcast and could not in principle exclude from consideration everything which had or had not happened since acquisition. The ITC could have decided that there had been compliance with the Directive but they were also entitled to hold the contrary view. The discretion under section 101B had therefore been lawfully exercised. The judge decided that TVD could not have had a legitimate expectation that the ITC would exercise its discretion in a manner contrary to the terms of the Directive and that it had done enough to put TVD on notice that the absence of an offer to share the rights would be taken into account.

28. The Court of Appeal (Kennedy, Waller and Jonathan Parker LJJ) [2001] 1 WLR 74 reversed the judge's decision. The court's reasoning appears to have been made up of three elements.

29. First, they pointed out that the Directive was binding upon member states "as to the result to be achieved" but left the national authorities the "choice of form and methods": see article 249 of the EC Treaty. The object of article 3a(3) was to prevent exclusive rights from being exercised so as to deprive a substantial proportion of the public of the possibility of watching designated events. But they said that this was not an unqualified object. Recitals to the Directive indicated that it was also intended to promote competition, prevent broadcasting authorities from achieving dominant positions and allow free movement of services. The United Kingdom was therefore entitled to implement the Directive with due regard to these objects as well. A free market in sports rights was promoted by a system which had regard solely to the way in which exclusive rights had been acquired ("regulation at the point of acquisition"). This was the correct interpretation of the code and the ITC was not entitled to have regard to post-acquisition matters: see Kennedy LJ at p 83, Waller LJ at p 84 and Jonathan Parker LJ at p 85.

30. Secondly, the code allows a free market. If a broadcaster has had the opportunity to bid for exclusive rights at a fairly conducted auction and lost, the ITC is bound to be satisfied that he has had the opportunity to acquire the rights on reasonable terms.

31. Thirdly, once there has been a fair auction, it cannot be said that a substantial proportion of the public has been deprived of the possibility of watching. The auction provided such a possibility.

The appeal

32. The ITC appeals to your Lordships' House. The Secretary of State for Culture, Media and Sport petitioned for leave to intervene on the grounds that the Court of Appeal had misinterpreted article 3a(3) and exposed the United Kingdom to an action by Denmark or the Commission in the European Court of Justice. Your Lordships heard submissions from counsel on behalf of the Secretary of State in support of the appeal. The BBC and ITV also petitioned for leave to intervene in order to submit that the Court of Appeal's views on the importance of a free market had also misinterpreted the domestic regime. Your Lordships received written representations on behalf of the two networks.

Construction of the Directive

33. In my opinion the result which article 3a(3) requires member states to achieve is perfectly clear. It is to prevent the exercise by broadcasters of exclusive rights in such a way that a substantial proportion of the public in another member state is deprived of the possibility of following a designated event. The obligation to achieve that result is in no way qualified by considerations of competition, free market economics, sanctity of contract and so forth. The fact that reference is made to these matters in the recitals to the Directive explains why the scope of article 3a is limited in the way it is. Its terms represent a compromise between the policies in question and the interests of the general public in being able to watch sporting events for free. Member states are limited in the sporting or other events they may reserve for their public broadcasters. Only those of "major importance for society" can qualify. Premier League football matches, for example, are subject to a free market. Furthermore, national measures enacted pursuant to Article 3a(1) must be approved by the Commission under paragraph 2 as "compatible with Community law". So the balance between the interests of sports organisers and pay-TV broadcasters in maintaining a free market and the perceived interest of the citizen in being able to watch important sporting events has already been struck in the terms in which article 3a has been framed. It should not be revisited in deciding how a member state should comply with its obligations under article 3a(3).

34. The question which article 3a leaves for the decision of a member state is whether exclusive rights are in fact being exercised in such a way as to deprive the public of the possibility of watching. They are not being so exercised if the public would not have had that possibility anyway. This is the decision which section 101B leaves to the judgment of the ITC and I shall return in a moment to what seem to me the relevant considerations. But section 101B does not, as I have said, give effect in itself to our obligations under article 3a(3). It enables the ITC to do so by conferring a discretion which the ITC must exercise to achieve the result required by the Directive.

35. The argument that the public is given the possibility of watching the event if the public broadcasters are given the possibility of buying the rights at a fair auction is in my opinion wrong. The Directive requires the public to have the possibility of following the event in the sense that a member of the public may watch it if he chooses to switch on his television set. If the match is not being shown on any programme to which he has access, he does not have that possibility. The reason may or may not be the way in which the party who has acquired exclusive rights is exercising them, but that is a different question.

The free market

36. The Court of Appeal appear to have been influenced by their view that in domestic cases the ITC's criteria as stated in the code for giving consent under section 101 was to require no more than a fair auction in which the public broadcasters had a reasonable opportunity to bid. In my opinion, that is an over-simplification. Indeed, if that were the beginning and end of the matter, Part IV of the 1996 Act would serve very little purpose and Parliament might as well have left the allocation of listed sporting events to market forces in the same way as Premier League matches.

37. It is true that paragraph 13 of the code contemplates a process of bidding for de facto exclusive rights and lays down criteria for the fairness of the bidding process. But the ITC also makes it clear that it will have to be satisfied that the public broadcasters had the opportunity to acquire the rights on "fair and reasonable terms." It can be said that the market price for the rights is what they will fetch on the open market and prima facie an opportunity to buy at the market price is an opportunity to buy at fair and reasonable terms. But this principle, if generally applied, would, as I have said, make the whole regulatory machinery in Part IV fairly pointless. The code makes it clear that the ITC will form a view of the value of the rights "to the broadcasters," in other words, what that category of broadcasters could reasonably be expected to pay for them. Of course the ITC may consider that the answer should be the same for both categories; the public broadcasters are not without resources and market power and the ITC may take the view that the rights in question should simply be left to fair and open competition. But the clear purpose of Part IV is, if necessary, to protect the public interest in free access to important sporting events against market forces. The ITC is engaged in a delicate balance of the interests of broadcasters, sports organisers and the general public.

38. The code has to be read in the context of the regulatory scheme created by Part IV and in my opinion it does not necessarily require the ITC to give consent to a broadcaster who has bid highest in a free and open competition. Nor does it give rise to a legitimate expectation that in such circumstances consent will be given.

Exercise and acquistion

39. The Court of Appeal (adopting Mr Carr's terminology) contrasted regulation of sports television rights at the "point of acquisition" with regulation at the "point of exercise". The former was said to be the UK system and the latter the European system for which the ITC was contending. But the contrast between the two systems seems to me to have been greatly exaggerated. Both Part IV and the Directive are concerned with the exercise of exclusive rights to designated events. Section 101 provides that a broadcaster in one category shall not "include in [its] service live coverage of the whole or any part of a listed event" on a de facto exclusive basis without the consent of the ITC. Section 101B, echoing the Directive, provides that a broadcaster shall not "exercise rights to televise the whole or part of an event which is a designated event" without the consent of the ITC. So the statutory result to be achieved is the same. It is true that the code says that the ITC will ordinarily make its decision under section 101 by reference to the terms on which the rights were acquired. But once it is recognised that this does not necessarily require the ITC to accept the outcome of an auction as a fair price, there seem to me no hard and fast line which limits the matters which the ITC can take into account in deciding whether the price offered to the public broadcasters was fair or not.

40. Likewise, it seems to me that the Court of Appeal overstated the uncertainties of "regulation at the point of exercise". Kennedy LJ, for example, said that it would mean that a public broadcaster could require to be given a second (or third) chance to acquire the rights at any time before the broadcast: [2001] 1 WLR 74, 83. The holder of the right would not know whether he could spent money on advertising, would be uncertain as to whether he could recover the price he had paid and so on. All this seems to suppose that unless one altogether excludes from consideration anything which happens after the rights have been acquired, the system is bound to operate in a thoroughly unreasonable way. But this is not the case. The Danish system, for example, enables a pay-TV broadcaster who has acquired exclusive rights to obtain within 14 days an answer as to whether the public broadcasters are interested or not. And one suspects that in practice broadcasters "design around" these formal steps in order to achieve certainty at an even earlier stage. It may be, as the Court of Appeal suggested, that a regulatory system in which a pay-TV broadcaster has to offer to share the rights with a public broadcaster means that any event which the latter wishes to broadcast will be unattractive to the pay-TV broadcaster and that the value of the rights will be depressed. But that is a consequence which inevitably follows from the protection which the Directive was intended to confer upon the public right of access to such events.

The Danish factor

41. The decision as to whether article 3a(3) requires that a UK broadcaster should not be allowed to exercise exclusive rights to broadcast an event designated by another member state is, by virtue of section 101B, a matter for the ITC. It is not bound by the decision which the regulator in the other member state would have made. The words "as determined by that other member state in accordance with paragraph 1" at the end of article 3a(3) refer only to the matters which paragraph 1 says are for the determination of the member state, namely designated events and the question of whether the events should be available via whole or partial live coverage or whole or partial deferred coverage.

42. The ITC's view was that it would accept the Danish law on these matters and also on the question of what amounted to a substantial proportion of the public. Otherwise the decision was a matter for them. That seems to me correct.

43. The ITC also rejected the suggestion of the Danish Ministry of Culture in a letter of 20 July 2000 that it should have no regard to the terms upon which TVD had acquired its rights. In my view that too was correct. It is true that article 3a(3) speaks of exclusive rights "purchased...following the date of publication of this Directive" by the broadcasters and it was suggested that the article only operates once the rights have been purchased. Of course they have to be purchased in order to be exercised. But that does not mean that the circumstances in which they were purchased are irrelevant to whether they are being exercised "in such a way" as to deprive the public of the possibility of watching the event.

44. On the other hand, the ITC obviously paid considerable regard to the fact that under the Danish system of regulation, a non-qualifying broadcaster is required to offer to share the rights with public broadcasters who can offer sufficient coverage. Again, this seems to me to be right. The system of reciprocal enforcement created by article 3a requires that regulation should as far as possible be harmonised, so that the rights of the public to watch an event of national importance in a member state should not be affected by whether the broadcaster is in that or another member state. I say "as far as possible" because the ITC also has to have regard to the interests of UK broadcasters. But the regulatory system of each member state has to be approved by the Commission under article 3a(2) and one would therefore not expect its application to be an unreasonable restriction on the rights of broadcasters in other member states.

45. Any broadcaster in any member state who is considering the purchase of exclusive rights to broadcast in Denmark an event designated under Danish law must, as it seems to me, take into account the Danish system of regulation. That system of regulation will influence the market for such rights in Denmark and prima facie it seems to me right that broadcasters in other member states should have to play by the same rules. That was in my opinion the object which article 3a(3) was intended to achieve. The ITC and Mr Jack Beatson QC correctly interpreted it in that way. In addition, the ITC is entitled to consider that the foreign regulator or arbitral body, such as the Danish Competition Council, acquainted as it is with its national market in television rights, will be best placed to form a view on whether its public broadcasters have refused a reasonable offer at a reasonable price. I would therefore allow the appeal and dismiss TVD's application for judicial review.

LORD HUTTON

My Lords,

46. I have had the advantage of reading in draft the speech of my noble and learned friend Lord Hoffmann. For the reasons which he gives I also would allow the appeal and dismiss the application for judicial review.

LORD HOBHOUSE OF WOODBOROUGH

My Lords,

47. For the reasons given by my noble and learned friend Lord Hoffmann, I too agree that this appeal should be allowed and the application for judicial review refused.