For everyone worrying about Man Yoo busting up the collective bargaining for TV rights

Get your cold wet towels out and read this summary of the relevant case law from 1999.

In the matter of the Restrictive Trade Practices Act 1976; and; In the matter of an agreement between the Football Association Premier League Limited and the Football Association Limited and the Football League Limited and their respective member clubs; and; In the matter of an agreement relating to the supply of services facilitating the broadcasting on television of premier league football matches and the supply of services consisting in the broadcasting on television of such matches

Restrictive Practices Court

[1999] UKCLR 258

HEARING-DATES: 28 July 1999

28 July 1999

CATCHWORDS:
Agreement regarding sale of broadcasting rights - Restrictive Trade Practices Act 1976 - Application to supply of services - Meaning of "restriction" - Public interest - "Gateways" - Tailpiece

HEADNOTE:
The case arises out of the duty of the Director General of Fair Trading (the Director) under the Restrictive Trade Practices Act 1976 (the RTPA), to refer to the Restrictive Practices Court agreements containing certain restrictions. The three agreements referred to the Court, which were complex and contained in a large number of documents, related to the establishment and rules of the Football Association Premier League Ltd (the Premier League), to agreements between the Premier League with British Sky Broadcasting Ltd (Sky) and the British Broadcasting Corporation (the BBC) relating to the broadcasting on satellite and terrestrial television of Premier League matches. Primarily these contained "exclusivity clauses" in favour of the two broadcasters. An additional rule of the Premier League, Rule D.7.3 was also under consideration. This provides that "No League Matches shall be televised or recorded or transmitted by satellite or cable or any similar method without the written consent of the Board". The various agreements and their terms are set out in the factual analysis in the judgment.

The Court had first to determine whether the agreements in question contained "restrictions" within the meaning of s 11(2) of the Act (see para 4(2)), and if such restrictions were found to exist, to determine whether they fell within the "gateways" set out in s 19 (see para 4(7)). Three gateways, (b), (g) and (h) were invoked by the respondents. If a restriction passes through any relevant gateway the Court then had to apply the "tailpiece" of s 19 in that the restriction "is not unreasonable having regard to the balance between those circumstances and any detriment to the public or to persons not parties to the agreement". In the event of a restriction failing to clear these hurdles the Court would be required to make a declaration to that effect. Further it has the power to grant injunctive relief, although under s 26 of the Competition Act 1980 which remains in force in relation to this proceeding, the Court may suspend such a declaration and, by implication, refrain from granting injunctive relief pending the consideration of any revised agreement. Because the consideration of the public interest issues, and the appropriate remedies requires more than a simple legal analysis the Court undertook a substantial review of the facts (paras 8-120) and heard the views of several parties.

HELD -

Registrable restrictions

Following Re Ravenseft Properties Ltd's Application [1978] 1 QB 52 (and earlier case-law) the Premier League clubs had by "accepting the regime in respect of television contracts imposed by the Rules and the contracts made ... curtailed a freedom which they once had", and that the inability of an individual club "by itself to sell the television rights to any particular match does not affect this point" (para 133).

Generally it would be untenable for parties to form an association subject to an anti-competitive regime prescribed by the rules of that organisation, "and then claim that they have not individually accepted restrictions because they are not entitled to trade within the area to which the regime applies" (para 134). Following the approach taken by Lord Wilberforce in Esso Petroleum Co Ltd v Harper's Garage (Southport) Ltd [1968] AC the Court was obliged to apply "such a specific and technical statute as [the RTPA] ... in accordance with its terms construed in accordance with the established principles of construction", recognising in doing so that this could lead to the sorts of anomalies which have resulted in the imminent repeal of the Act (para 143).

Services

Following Ravenseft, certain engagements which are not the application of a process of manufacture or contracts of service are outside the definition of "services" in s 20 RTPA even though the statutory definition does not expressly exclude them. In particular the grant of an interest in land (including a licence to enter land) and the grant of a licence to exploit intellectual property, such as a copyright licence, do not by themselves amount to the provision of "services" for the purposes of the Act (para 148).

Under Clause 2.2(b) of the Sky Agreement (set out in para 155) which related to "the right at any time during the term to transmit or make any terrestrial broadcast of any Premier League match" and similar provisions in the other agreements, a right to use copyright material for the purpose of making a broadcast or a right for the notional grantee to make a broadcast using his own equipment was not a service within the terms of the Act. However, the prohibition set out in para (a) of Clause 2.2, which related to the right to attend matches for the purposes of filming them did relate to the supply of services, and so brought the negative obligation within the terms of s 11. Thus, "someone who is present with a camera for the purpose of taking photographs of the spectacle which he intends to exploit commercially is just as much the recipient of a service as a spectator who is there to enjoy the spectacle ephemerally with his own senses" (para 166), and "the position of a broadcaster is identical to that of the photographer" (para 167).

The conduct to be refrained from is not the grant of a right to enter land, but the grant of a right to attend a match ... attendance at a match involves the receipt of entertainment services" (para 172).

Services supply association

The obligations accepted in relation to football entertainment services were accepted by each club because, having regard to the objects and activities of the Premier League, Premier League was a services supply association under s 16 of the RTPA (para 183).

Two or more parties accepting restrictions

Rule D.7.3 brought the rules of the Premier League within the terms of the RTPA, by virtue of the fact that at the moment that the original members of the Premier League accepted Rule D.7.3 they were free, or prospectively free, from any equivalent restraint under the Football League rules and entitled to exploit the television rights in their matches in whatever way they thought fit. Clubs which joined the Premier League on promotion at a later date were also free, at the moment when they joined, either to join and become bound by Rule D.7.3 or to opt not to join. The fact that no football club becoming entitled to promotion would have been likely to reject it did not affect the legal analysis that in accepting promotion a promoted club gave up a freedom which it could otherwise have enjoyed (para 191). The Rule, being "part of the constitutional regime under which the Premier League operates" was clearly accepted by two or more parties (para 194).

Public interest

The 1976 Act does not proceed on the basis of whether an organisation is, or operates as, a cartel. It is unsafe to evaluate Rule D.7.3 and the exclusivity clauses in terms of whether or not the Premier League may be said to be a cartel and dangerous to argue that, as cartels typically operate against the public interest by restricting production in order to maintain prices, that is what the Premier League must be regarded as doing (para 206). The quality of the Premier League as the most competitive and challenging league in the world was based in part on a rough equality, promoted in part by the sharing between clubs of a major source of revenue such as the proceeds of the sale of television rights (para 215). Collective selling could not take place without some such protection as that afforded by Rule D.7.3; the striking down of Rule D.7.3 will, at least in economic terms, nullify collective selling under Rule D.7.1 (para 218).

The court accepted it as "manifest that any given package of television rights will be likely to realise a higher price if sold on the basis that the purchaser has broad exclusivity" (where one person has the right to broadcast a particular League Match and no other person can broadcast any other League Match) (para 230). Collective selling of television rights is likely to achieve a higher price than individual selling of those rights (para 231). If the broad exclusivity and collective selling were replaced by a regime allowing clubs to sell individually their home matches there would be a tendency towards polarisation in the Premier League, and that the large, successful and popular clubs may well receive more than they currently do from the collective arrangements; the weaker, less successful and less popular clubs are likely to find that they receive considerably less (para 235). The redistribution of television income between the clubs, remains an extremely important factor in the creation and preservation of competitive balance, which is a vital factor in maintaining the quality and interest of Premier League football (para 239). A distinction must be drawn between broad exclusivity in relation to live broadcasts, and in relation to recorded material, as the latter can be so arranged that it does not significantly impinge upon another broadcaster's offering of similar material (para 294).

Although a limitation of broadcasts may be necessary in order to protect attendance at grounds, such a tendency must not be exaggerated (para 229). However, it was "inherently probable that if football matches are shown on television to a significantly greater extent than hitherto there will be a tendency towards a reduction in attendance at matches" (para 228).

The "matching offer" restrictions accepted under the Sky Agreement and the BBC Agreement, (which provide that each member club will not until the end of the 1996-1997 season supply to any person other than Sky (or the BBC in the BBC Agreement) programme material services for the purpose of making satellite broadcasts of Premier League matches intended for viewing within the specified territory unless an offer to supply such services on the same terms shall first have been made to Sky (or the BBC) for acceptance within a specified period) do not pass through any of the gateways (para 421).

Once an agreement under which a restriction has been accepted has been referred to the court, even after a restriction accepted under it has become spent, the fact that the restriction has ceased to have effect does not relieve the court from the need to consider whether or not it is in the public interest (para 421).

A restriction accepted by each member club, to the effect that it will not, without the consent of the board of the Premier League provide football entertainment services by playing in any football match outside England and Wales, does not pass through any gateway (para 435).

Gateway (b)

If Rule D.7.3 were abrogated this would lead to the collapse of collective selling, which is the best, albeit not the only, means of providing television broadcasts of matches which are representative of the Premier League championship as a whole, which in turn is what the public, in the form of broadcasters and viewers, wish to have. This would diminish a benefit or advantage now enjoyed under the present arrangements (para 315).

There exists a wide variety of improvements which have been carried out by Premier League clubs the provision of which amounts to the provision of a benefit to the public. These include items such as bars, restaurants and other amenities, all of which are intended to make it more attractive to spectators to attend matches and support the club in more general ways (para 326).

The maintenance of strong playing squads which include some of the best players in the world provides a substantial benefit to the public as spectators and supporters of football; this benefit would be diminished to a significant extent if the income of the clubs were reduced in the way that the Court anticipated would happen if Rule D.7.3 and the exclusivity clauses were abrogated (para 334).

The clubs' income will be expended in the future, as it has been in the past, in ways which provide benefits to the public. The significant fall in the income of the clubs which would follow upon the abrogation of either Rule D.7.3 or the exclusivity clauses would substantially impair the ability of the clubs to provide the same level of benefits as they would provide if there were no such fall (para 337).

The encouragement of competitive balance is better served by the present scheme for the distribution of television revenue than by a hope that a new scheme can be put in place which will replicate or improve upon the present scheme. The public benefits more from the certainty and simplicity of the existing scheme than it is likely to benefit from the uncertainties and difficulties which would result from the weakening or destruction of that scheme (para 347).

Payments to the Football Trust and the Football League, as well as those to the PFA, are made out of the Premier League's domestic television revenue; the Premier League does not have the resources to make payments on the current scale out of other revenue. It is likely that these payments would be terminated, or at least scaled down substantially, if Rule D.7.3 were abrogated and central selling of television rights became impracticable or raised much less revenue, or if the exclusivity clauses were struck down and television companies were prepared only to pay a significantly lower price for television rights in Premier League football. The distribution of television income outside the Premier League is advantageous from the point of view of the public. It is desirable that resources generated by professional football should be invested to an even greater extent than at present in the lower levels of the game. The removal of the restrictions would deny to the public a benefit or advantage not only in the form of the diminution of the present level of support now provided for football outside the Premier League but also in the form of a reduction in the prospect that, now that the expenditure required to meet the requirements of the Taylor Report has largely been met within the Premier League, the level of support for the lower levels of the game will be increased (para 348).

The diminution in the ability of the Premier League to control scheduling would not deprive the public of specific and substantial benefits or advantages (para 349).

By limiting the number of matches shown on television the Premier League currently has the ability to limit this tendency. Although there may be a spill-over effect on attendances at other matches, the loss of ability on the part of the Premier League to limit this or the other consequences of a fall in attendances does not amount to the denial to the public of specific or substantial benefits or advantages (para 350).

It may be said that the public interest in having a strong and attractive Premier League competition is best served by preserving the ability of the Premier League to arrange which matches are to be shown on television and when they are to be played. A diminution in this ability is detrimental, but not so detrimental as to constitute the loss of a "specific and substantial" benefit or advantage (para 352).

The emergence of talented players who are qualified to play for England would not necessarily be impaired by a reduction in the resources of Premier League clubs (para 355).

If the exclusivity clauses were struck down competition between broadcasters would be significantly diminished. It is to the benefit of the public that such competition should be vigorous. Its diminution would therefore deprive the public of a specific and substantial benefit (para 363).

Loss of exclusive rights would not necessarily lead to a loss of quality of programmes, nor to the duplication of the costs of broadcasters nor to loss of continuity and coverage (paras 364-366).

Gateway (g)

A restriction accepted by each member club - to the effect that it will supply to any person other than Sky programme material services for the purpose of making a live satellite broadcast within the specified territory of a football match played at the member club's home ground which is not a Premier League match or a match played in certain other specified competitions, unless such services have first been offered to Sky on the same terms and that offer has not been accepted by Sky within a specified period - falls within the scope of the 1976 Act. Without some such restriction the exclusivity clause in the Sky Agreement (which operates in the public interest) could be rendered ineffective or have its effect substantially diluted. The restriction is reasonably required for the maintenance of the exclusivity clause in the Sky Agreement and it passes through gateway (g) (para 425).

Gateway (h)

The RTPA requires the court to consider whether a restriction restricts or discourages competition to a material degree in some aspect of its application, without any attempt being made to carry out a balancing exercise between the pro- and anti-competitive aspects of the restriction. It would be foreign to the scheme of the legislation if gateway (h) were construed in a way which requires such a balance to be struck. An exercise of this kind is not required to be carried out until, if at all, the tailpiece is applied. Gateway (h) is to be narrowly construed and a restriction will pass through it only if the court can be satisfied that it has no restricting or discouraging effect at all on competition (para 382).(fn1)

Neither Rule D.7.3 nor the exclusivity clauses satisfy the requirements of gateway (h) (para 383).

A restriction accepted by each member club, to the effect that it will not, by taking part in matches other than Premier League matches, provide football entertainment services which interfere with the home Premier League matches of other member clubs through offering competition for potential viewers or spectators, restriction passes through gateway (h). There are no countervailing detriments which are of any significance.

A restriction accepted by each member club, to the effect that (subject to certain exceptions) it will not play in any competition other than the Premier League competition without the consent of the board of the Premier League, passes through gateway (h). It does not involve any detriment (para 433).

The tailpiece

Rule D.7.3 and the exclusivity clauses do, either in conjunction with each other or separately, produce disadvantages (such as the fact that fewer programmes comprising Premier League are broadcast, and the choice of programmes is smaller and innovation is restricted), the weight which can be accorded to these disadvantages is limited.

The circumstances which enable Rule D.7.3 and the exclusivity clauses to pass through gateway (b) are the denial to the public of specific and substantial benefits or advantages in the following respects:

(1) loss or diminution of the ability to sell television rights in the Premier League championship as a whole;

(2) loss or diminution of the ability of the Premier League clubs to generate the revenue needed to improve the quality of their stadia, their facilities and their playing squads;

(3) loss or diminution of the ability to secure an equitable distribution of the television revenue and so to improve competitive balance;

(4) loss or diminution of the ability of the Premier League to confer benefits outside the Premier League; and

(5) impeding of competition between broadcasters.

In relation to detriments, only those numbered (1), (2) and (4) have any weight sufficient to cause them to be taken into account and, that weight is not great. It is not possible to carry out any precise balancing exercise, but the preponderance is in favour of the circumstances which enable both Rule D.7.3 and the exclusivity clauses to pass through gateway (b). These restrictions are, on this basis, not unreasonable and must be declared to be not contrary to the public interest (paras 416-418).

As to detriments relating to the restriction on allowing broadcasting of non-Premier League matches by Premier League clubs (considered in para 423), the restriction extends the detrimental effects of the exclusivity clauses from Premier League matches to other matches which involve Premier League clubs playing at home. But the extension is very modest in degree, and does not make it necessary for the Court to take a different view of the balance of benefits and detriments which would render this restriction unreasonable when the restrictions resulting from the exclusivity clauses are not unreasonable (para 426).

Posted By: Old Git on May 13th 2005 at 10:37:17

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