Competition Appeal Tribunal overturns Ofcom’s Pay TV decision

15/08/12

The Competition Appeal Tribunal has published a non-confidential summary of its Pay TV judgment (full judgment to follow). Having considered over 35,000 pages of submissions and evidence, and the evidence of 41 witnesses (including 14 experts), it held that Ofcom's Pay TV decision was unfounded.

Ofcom decided in 2010 that Sky was required, as a condition of its broadcasting licence, to offer its Sky Sports 1 and 2 channels to its retail competitors on a wholesale basis and at a price set by Ofcom. Ofcom imposed the wholesale remedy on the basis that Sky had deliberately withheld those channels from its competitors (and had supplied them to Virgin Media at too high a price) because it was acting on strategic incentives to withhold its channels. Ofcom relied on its powers to ensure fair and effective competition under section 316 of the Communications Act 2003, a provision not previously considered by the courts.

Sky, the Premier League, Virgin Media and BT Vision all appealed against the decision (Sky and the Premier League arguing against the wholesale remedy, Virgin Media and BT arguing in favour of modifications to the remedy). The England and Wales Cricket Board intervened in support of the Premier League's appeal; in Sky's and the Premier League's appeals, BT Vision and Virgin Media intervened in support of Ofcom.

The Tribunal has found that, although section 316 of the Act does give Ofcom the power to impose a condition of this kind on Sky, the Pay TV decision is unjustified. The Tribunal held that Ofcom had misinterpreted the history of the negotiations between Sky and its competitors, which did not support Ofcom's conclusion, that Sky had on the whole engaged constructively with its competitors and was acting on normal commercial motives, and that Ofcom's central competition concern that Sky had been deliberately withholding wholesale supply of its premium channels from its retail competitors was unfounded. The Tribunal rejected Ofcom's competition concerns about the price and terms of supply by Sky to Virgin Media under the rate card, and found that Virgin Media competes effectively with Sky in the retail supply of packages. The Tribunal therefore did not find it necessary to decide the other grounds of appeal.

The non-confidential summary is here.