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House of Lords
Session 2001- 02
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Judgments

Judgments - Regina v. Independent Television Commission, Ex Parte TV Danmark 1 Ltd

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:

    "1. Each member state may take measures in accordance with Community law to ensure that broadcasters under its jurisdiction do not broadcast on an exclusive basis events which are regarded by that member state as being of major importance for society in such a way as to deprive a substantial proportion of the public in that member state of the possibility of following such events via live coverage or deferred coverage on free television. If it does so, the member state concerned shall draw up a list of designated events, national or non-national, which it considers to be of major importance for society.…In so doing the member state concerned shall also determine whether these events should be available via whole or partial live coverage, or where necessary or appropriate for objective reasons in the public interest, whole or partial deferred coverage.

    "2. Member states shall immediately notify to the Commission any measures taken or to be taken pursuant to paragraph 1. Within a period of three months from the notification, the Commission shall verify that such measures are compatible with Community law and communicate them to the other member states….

    "3. Member states shall ensure, by appropriate means, within the framework of their legislation that broadcasters under their jurisdiction do not exercise the exclusive rights purchased by those broadcasters following the date of publication of this Directive in such a way that a substantial proportion of the public in another member state is deprived of the possibility of following events which are designated by that other member state in accordance with the preceding paragraphs via whole or partial live coverage or, where necessary or appropriate for objective reasons in the public interest, whole or partial deferred coverage on free television as determined by that other member state in accordance with paragraph 1."

    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:

    "(1) A television programme provider shall not, without the previous consent of the Commission, exercise rights to televise the whole or part of an event which is a designated event, in relation to an EEA state other than the United Kingdom, for reception in that EEA state or any area of that EEA state, where a substantial proportion of the public in that EEA state is deprived of the possibility of following that event by live or deferred coverage on free television as determined by that state in accordance with article 3a(1) of Council Directive 89/552/EEC."

    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:

    "13.  In deciding whether to give its consent it may be sufficient for the ITC to establish that the availability of the rights was generally known and no broadcaster providing a service in the other category had expressed an interest in their acquisition to the rights holder, or had not bid for the rights. However, the ITC will wish to be satisfied that broadcasters have had a genuine opportunity to acquire the rights on fair and reasonable terms and, in reaching a view, will take account of some or all of the following criteria:

    -  any invitation to express interest, whether in the form of public advertisement or closed tender, in the acquisition of the rights must have been communicated openly and simultaneously to broadcasters providing services in both categories.

    -  the price sought for the rights must have been fair, reasonable and non-discriminatory as between the two categories of programme service. What is a fair price will depend upon the rights being offered and the value of those rights to broadcasters. A wide range of prices is likely to be regarded as fair but when required to make its own judgment on the matter the ITC will have regard to, inter alia:

    -  previous fees for the event or similar events;

    -  time of day for live coverage of the event;

    -  the revenue or audience potential associated with the live transmission of the event (eg the opportunity to sell advertising and sponsorship; the prospects for subscription income);

    -  the period for which rights are offered; and

    -  competition in the market place."

    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:

    "a genuine opportunity to acquire rights [sc non-exclusive rights] on fair and reasonable terms. In the present case the Commission does not accept that it was sufficient that the rights were originally awarded in a tender process as described in your letters."

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.

 
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