4 August 2008: Written demand to the EU Commission: Participation of the News Corp in Premiere TV


Referring to the announcement of a fusion (subject COMP/M.5121 – News Corp/Premiere) and the press release published in that context (IP/08/1012), I ask the commission the following questions:


 

• is it aware that the German chain Sport Digital TV certainly covets the technical access to the Premiere subscribers, however, it has not received it for months already? Is this a violation of the obligation that the COM has imposed on News Corp for its participation in Premiere? If yes, what restrictions will News Corp now have to count on?
  
   
• does it know that Premiere takes refugee in the so-called “Premium Sports“ clause and that way can block the access of sports broadcasters to the subscribers basis of Premiere? How is it supposed to be assured that the access to the Premiere subscribers for all suppliers of pay services on third platforms takes place at equal and discrimination-free conditions?
  
   
• does it take into account the fact that there is no CI/CI+ module for the incription system NDS used by Premiere? How does that square with the demands of the commission for the installation of a CI in IDTVs above a screen diagonal of 30 cm? Will the COM therefore oblige NDS to offer the NDS incription technology also on a CI/CI+ module?
  
   
• If not – how can a closed set-top box market in Germany be prevented? How does the COM want to make sure that in the future there will still be a specialised market for Premiere set-top boxes?
  
   
• How it will be insured that third pay TV agents will be really technically able to market their offers to Premiere subscribers? What control mechanisms did the COM demand to that end from the News Corp? How does the COM want to exclude a second Sports Digital TV?
  
   
• How does the commission want to make sure that the offers of third Pay TV agents can also be found by the Premiere subscribers? Are there obligations with view to the order of TV channels (free-to-air and payTV) for the NDS Middleware? Is there a need for reference by Premiere to future new offers by third agents?
  
   
• To what extent the presentation of the public channel in terms of programme place/assortment by Premiere was checked by the COM? Are there obligations on that?
  
   

P-4598/08DE

Answer by Ms. Kroes

in the name of the commission

(12 September 2008)


The questions of the Deputy refer to the decision of the Commission of 25 June 20081 allowing the planned take-over of the German pay TV channel Premiere by the US corporation News Corp under certain conditions.


In the evaluation of mergers on the basis of the EU fusion control instruction2, the Commission can only tie such conditions and obligations to its approval as are required to eliminate the concerns regarding competition raised by the respective fusion discovered by the Commission and to restore the competitive situation before the fusion. The Commission on the basis of the fusion control instruction lacks any authority beyond that.


In the present case, there was, following the investigations of the Commission, cause for serious concerns regarding the compatibility of the fusion with the Common Market. Premiere is the market-dominating supplier of pay TV for viewers in Germany and Austria and offers its TV channels via satellite platform, cable and internet. In the framework of the agreements existing already before the merger between Premiere and its external technical supplier, third Pay TV suppliers in Germany at this point under certain conditions have access to the satellite platform of Premiere. Owners of the corresponding Premiere set-top boxes can, therefore, also receive programmes by Premiere competitors. Moreover, Premiere has granted by contract to its technical supply agent a sub-licence for the incription of the programmes of other pay TV agents with the help of the incription technology used at this point by Premiere.


A short time before the registration of the fusion plans with the Commission, Premiere had announced, however, that it wanted to replace its existing technology for programme-incription with that of the News Corp daughter News Digital Systems (NDS). In the light of its investigations, the commission had grounds to assume that this change of incription system was agreed in close connection to the take-over of Premiere by News Corp and that way can be evaluated as consequence of the merger.


Following the investigations of the commission, the change of incription system would complicate the access of third agents to Premiere's satellite programme in particular because Premiere's current technical service agent, on the basis of the existing agreements with Premiere, was not in possession of a sub-licence for the incription of the programmes of other pay TV agents with the NDS technology, and for the granting of this licence would depend on the collaboration by News Corp.


Moreover, the market investigation by the Commission had yielded that the supplier of the Premiere incription technology does have the possibility, by way of Smart Card management, to complicate the access of other pay TV agents. The service agent of the incription system up to now used by Premiere is a company independent of Premiere, for which there seems to be no visible economic incentive to obstruct Smart Card issue to competitors of Premiere. By way of the change of the incription system and the take-over of Premiere by News Corp, this might change insofar as Premiere and NDS after the fusion would belong to the same company, whereby there might arise economic incentives for an obstruction of smart card issues to competitors of Premiere.


Therefore, the fusion would given Premiere the chance to refuse to its technical service agent the sub-licence needed for the incription of programmes of other pay TV agents with NDS technology as well as to hinder the issue of smart cards to Premiere competitors. That way, there was the danger that on the basis of the fusion, the access of Premiere's competitors to the satellite platform of Premiere as it is hindered at this point by the existing agreements between Premiere and Premiere's technical service agent would be complicated and the market-dominating position of Premiere on the German pay TV market would have been reinforced.

The goal of the promises made by News Corp in the framework of the fusion control procedure is solely and simply to elimate the concerns regarding competition linked specifically to this merger and to restore the competitive situation that prevailed in this respect before the fusion. To this end, News Corp had to incur the obligation with the Commission to make sure that the technical service provider after the fusion might offer access to the Premiere satellite platform in the same way as before, that means to the same conditions under which third pay TV agents need to be granted access according to the agreements that acted already before the fusion between Premiere and Premiere's technical service agent. In order to make sure of this, Premiere concluded with its technical service agent a sub-licence agreement for the incription of other pay TV agents with the NDS technology, on the basis of which third pay TV suppliers need to be granted access to the satellite platform on the same conditions as before the fusion. On the basis of this agreement, Premiere's technical service agent also needs to be given disposal over the same hardware that is needed to integrate the incription system of NDS at the head-end of the satellite platform of Premiere. Beyond that, this agreement also obliges NDS to the immediate supply of NDS smart cards to the technical service agents. These commitments ultimately oblige News Corp to conclude an agreement with the technical service agents, where appropriate financial sanctions are stipulated for the case that NDS does not follow up on its obligation to the immediate delivery of NDS smart cards.


The keeping of promises by News Corp, NDS and Premiere is supervised by a control trust agent which will report in regular intervals to the Commission. News Corp, on the basis of the agreement, is committed to provide the trust agent any kind of support and information required for him to fulfil his/her task. If, on the basis of the reports by the trust agent or on the basis of other kinds of hints, there should arise indications that News Corp, NDS or Premiere infringe against its commitments, the Commission may take appropriate temporary measures to restore or to maintain effective competition.


The Commission knows that Premiere in the past has invoked the so-called “Premium Sports“ clause in order to refuse Sport Digital TV or other competitors the access to the Premiere satellite platform. Should News Corp also in the future refuse competitors access to its satellite platform with reference to this clause, News Corp would thereby infringe against its obligatory commitments if Premiere was already obliged by contract before the fusion to grant Sport Digital TV access to its satellite platform. Whether the corresponding agreements provide for such an obligation will among other things have to be examined by the trust agent.


With regard to the other questions raised by the Deputy, the Commission draws attention to the fact that sense and purpose of the obligatory commitments incurred in the fusion control proceedings do not serve a general regulation of the market, but only the restoration of the competitive situation as it would present itself without the fusion under examination. The Commission is not authorised, in the framework of the fusion control procedure, to any measures beyond those that might guarantee the access to Premiere subscribers to all suppliers of pay TV services on third platforms on equal conditions free of discrimination. Therefore, the Commission is also not authorised, in the framework of the fusion control proceedings, to oblige NDS to offer the NDS incription technology on an CI/CI+1 module.


As far as the commission knows, from the corresponding agreements, already existing before the fusion, between Premiere and its technical supply agents, moreover, there arises neither an obligation with respect to the ordering of TV channels for the NDS middleware (used by Premiere already before the fusion), nor an obligation with respect to the presentation of the public legal channels with respect to programme place/sorting by Premiere, and also no need to reference by Premiere to future new offerings of third agents. In this sense, the commitments made by News Corp in the fusion control proceedings by News Corp also do not contain any such obligations.


In conclusion, the Commission draws attention to the fact that the competition law of the Community outside the framework of the fusion control instructions, in the framework of Article 82 EC, foresees the prevention of a market-dominating position by a company. The concerned have the right to lodge complaints in this respect. The authorisation of a fusion does not pre-empt an investigation under Article 82.


Furthermore, the Commission points out that in the framework of the ECN it cooperates closely with the member states' competitive agencies. Article 82 EC also acts immediately in the law of the member states. Since Premiere can be received mainly on the territory of the Federal Republic, the Federal Cartel Agency in that respect would also be an appropriate agency to examine abidance by Article 82 EC .


Finally, the Commission may also attract the attention of the Deputy to the fact that a non-confidential version of the whole text of the decision by the Commission can be found on its website under: http://ec.europa.eu/comm/competition/mergers/cases/index/m102.html#m_5121.

1http://ec.europa.eu/comm/competition/mergers/cases/decisions/m5121_20080625_20212_en.pdf


2Instruction (EC) No. 139/2004 of the Council of 20 January 2004 on the control of firm mergers (“EC fusion control instruction“), ABI L 24, 29 January 2004.


1Common Interface/Common Interface Plus