Pay TV: Court of Appeal sends message to the CAT

In its recent decision in British Sky Broadcasting Ltd v Office of Communications [2014] EWCA Civ 133 the Court of Appeal has sent a strong message to the CAT, criticising the Tribunal for its failure to properly consider the reasons underpinning Ofcom’s original decision to impose licence conditions on British Sky Broadcasting Ltd (“Sky”).

In March 2010, Ofcom published a “Pay TV statement” concerning Sky’s right to broadcast the content of major sporting events, including Premier League football. The statement contained two principal conclusions: first, that Sky had developed a “practice” which consisted of a “strong reluctance” to negotiate wholesale deals for core premium sports channels with retailers. Secondly, that to the limited extent that Sky would enter into any discussion on wholesale pricing, it would be on the basis of a “rate card price”, which was, in effect, a price that would not enable other retailers to compete with Sky’s rates to consumers. Ofcom took the view that this would be likely to reduce incentives to innovate and so be an impediment to competition.

As a consequence of these conclusions, Ofcom declared that it would, pursuant to its powers under section 316 of the Communications Act 2003, impose a number of licence conditions on Sky. That decision was appealed to the CAT.

In a lengthy judgment, the CAT concluded that Ofcom did have jurisdiction under s.316 to impose the licence conditions. However, it held that Ofcom’s primary concern was unfounded and that Sky did, on the whole, negotiate wholesale deals for core premium sports channels with retailers. In light of its findings on this issue the CAT took the view that it was unnecessary to go on to consider Ofcom’s second conclusion, regarding the “rate card price” and the extent to which this may be an impediment to competition.

There were two issues before the Court of Appeal. The first was whether Ofcom had power under section 316 to impose conditions in Sky’s broadcasting licences. The Court adopted a wide construction of the words “in the provision of” and held that it must encompass not only provision to other broadcasters, but also the public on both wholesale and retail bases (at [79]). Hence, section 316 was not concerned solely within competition between providers of content for TV services, but with fair and effective competition more generally.

The second issue related to the CAT’s failure to address, at all, the issue of whether Ofcom was right to conclude that Sky’s practice in relation to the “rate card price” itself constituted an impediment to fair and effective competition. This total failure of consideration was notwithstanding the fact that “[t]he CAT’s conclusion that Ofcom was wrong, on the facts, to find that Sky was not prepared to negotiate for the wholesale of the [core premium sports channels] left open the issue of the price at which these channels could or would be supplied wholesale to competitors” (at [95]). The Court of Appeal considered that “the CAT should have addressed each of Ofcom’s competition concerns in detail” (at [120]) and that the failure to do so constituted an error of law (at [100]-[101]).

The Court of Appeal has remitted the matter to the CAT for further consideration “in order that further findings and conclusions may be made in light of [the] judgment” (at [102]). In circumstances where the Tribunal made no findings on what is now the central issue in the case, it remains to be seen, as a matter of practice, how this will be achieved.

Leave a comment

Filed under Mergers

Comments are closed.