The European Union on Thursday launched an antitrust case against six major U.S. movie studios and British satellite broadcaster Sky UK, in a move that could profoundly shake up the highly lucrative pay-television market in Europe.
The EU's executive Commission has sent a so-called statement of objections to the companies regarding what it says are "contractual restrictions" preventing EU consumers outside Britain and Ireland from accessing the services of Sky UK.
"European consumers want to watch the pay-TV channels of their choice regardless of where they live or travel in the EU," EU antitrust chief Margrethe Vestager said. "Our investigation shows that they cannot do this today."
The companies involved are all household names and produce some of the most popular – and profitable – movies around.
In addition to Sky, which has cornered a large chunk of the British pay-TV market through its acquisition of sports and movie rights, the Commission sent its objections to NBCUniversal, Paramount Pictures, Sony, Twentieth Century Fox, Disney and Warner Bros.
In a statement, the Commission said it found clauses requiring Sky to block access to films through its online or satellite pay-TV services to consumers outside Britain and Ireland – so-called "geo-blocking."
As well as preventing consumers around Europe from accessing Sky's services, the Commission says contract clauses that grant "absolute territorial exclusivity" also run counter to the ideals of a free market.
It also said it found some contracts requiring studios to prevent their services from being made available in the two countries to companies other than Sky, another potential restrictive practice.
"We believe that this may be in breach of EU competition rules," Vestager said.
In a reaction, the Walt Disney Company said that "the impact of the Commission's analysis is destructive of consumer value and we will oppose the proposed action vigorously."
"Our approach is one that supports local creative industries, local digital and broadcast partners and most importantly consumers in every country across the EU," the Disney statement said. Other U.S. studios either declined to comment or did not immediately answer requests for comment.
The charges, if upheld, run counter to one of the EU's cornerstones – that of removing barriers to trade within its borders. They also raise questions for other European broadcasters.
The Commission, which wields vast powers when it comes to antitrust and anticompetitive practices in the EU, confirmed it is also looking into similar cases including Canal Plus of France, Sky Italia of Italy, Germany's Sky Deutschland and DTS of Spain. Together, the five nations represent over 300 million consumers in the wealthiest trade bloc on earth.
The probes all started at the same time in January 2014, but the U.K. investigation was the first to reach the stage of an official, legal statement of objection.
"We continue to examine cross-border access to pay-TV services in these member states," said Commission spokesman Ricardo Cardoso.
If upheld, the charges could change the way subscription television services are paid for and watched throughout the 28-country EU. With pay-TV stations largely operating within national boundaries, there are potential big repercussions for a market of more than 500 million consumers.
The firms named Thursday now have the right to respond. There is no legal deadline for the Commission to complete antitrust inquiries.
If the Commission decides that antitrust rules have been infringed, companies can be forced to pay a fine which can theoretically go as high 10 percent of gross revenue.
In a statement, Sky acknowledged receipt of the Commission's objections and said it will "respond in due course."
