FACULTY OF LAWLund University

Ali Bigdeli

Audiovisuals in the European Union withCompetition Law perspective on the

legal policies in charge

Master thesis30 credits

Henrik Norinder

Master’s Programme in European Business Law

Spring 2013

Contents1 Summary 12 Preface 33 Acknowledgments 44 Abbreviations 55 Introduction 6

5.1 Some kind of introduction 65.2 Purpose 85.3 Material 95.4 Method 105.5 Delimitations 105.6 Outline 11

6 An overview of the Audiovisual industry with the focus on TV-Broadcasting and Movie industry 137 Market definition in Audiovisuals 178 General remarks on EU Competition Law and Audiovisuals

209 Positions held by an Audiovisual undertaking, abuse of dominant position 22

9.1 General remark on abuse of dominancy 229.2 Dominant position held by an undertaking 239.3 Unjustifiable Abuse of dominancy and balancing 24

10 Agreements between Audiovisual undertakings, concentrations via Horizontal and Vertical agreements 29

10.1 General remarks on Horizontal and Vertical agreements 2910.2 Relevant Market definition 3110.3 Concentration by Horizontal or vertical Agreements 3110.4 Competitive assessment of a Concentration and balancing 33

11 Public TV-Broadcasting, exclusivity and special rights granted38

11.1 General remark on exclusivity and speacial rights 3811.2 Legislation 3911.3 Exclusivity and/or special rights granted to Public TV-Broadcaster

and balancing 4012 State financial Aid to Audiovisuals 44

12.1 General remarks on State Aid granted to TV-Broadcasting and Movie Industry 44

12.2 Legislation 44

12.3 State Aid granted to TV-Broadcasting and Movie Industry, balancing 46

13 Conclusion 4914 Bibliography 55

15 Table of Cases 59

1 SummaryPublished Data from the European Investment Bank and the Audiovisual Observatory in EU implies that the U.S. made Audiovisuals has dragged down European Audiovisuals' market share in EU market. Apparently, the constant situation is rising up some concerns about the future of the industry and the cultural, social and economical externalities.Considering the double nature of Audiovisuals and their character and nature, two sets of wants and principles are recognisable in governing the field. The market principles are governing the economical facets and broader public principles are governing the cultural and social facets. The both said principles are harnessing the "motive" to grow in the industry and are hoping for a better balance and sustainability.Briefly, the quality and the process of balancing as a variable in relation to different wants and values can be discussed in two settlements. On one settlement, the focus is on the Industries' attempts, their urges to grow and gaining competitive positions in the market. Noticeably, this attempt has been taken via the two main trends of having a dominant positions and concentrations. Both trends are taking financial and economical consideration as a motive. By abusing a dominant position, an undertaking seeks to strengthen its dominant yet unstable market position. Regarding this, the refusal to provide media content is a noticeable and common form in audiovisuals.By concentrating through the value chain and with other undertakings at different or at the same market level, a company seeks to raise its efficiency and competitiveness by reducing risks involved and benefiting from the new facilities and potentials made by the network.Various discussions are initiated in this part. These discussions cover different topics such as the economical and financial rationale behind the businesses' trends, the competitive restraints that Anti competitive acts may cause, assessment of dominancy, assessment of an abuse, thresholds, market share, justifications etc. On the other settlement, the focus is on the Member states' attempts to help and support the industries' growth. Distinctly, the two main governmental supports take the form of exclusivity and special rights or State Financial Aid granted to undertakings.By granting exclusive or special rights, a member state seeks to strengthen the market position of a public undertaking (including but not limited to public TV-Broadcaster). This kind of interventions in the competitive market is aiming to support the public and humanitarian principles (e.g. provision of unbiased information to citizens). Considering the role of TV-Broadcasters in the value chain and the life cycle of media contents, governmental interventions by putting private sector in a competitive deficit may result in negative externalities. By granting State Financial Aid and injecting fiscal helps to specific sectors in the industry, member states are aiming to support the industry by strengthening undertakings' market position in comparison with their competitors' and to ease down the financial risks involved. Moreover, parts

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of these State Aid helps are devoted to supports for Cultural values and social principles. Different discussions are originated from the member states' policies in supporting the industry. Notably, these discussions are about competitive restraints, distortion of competition by public interventions, cultural and social concerns involved, proportionality of a State Aid measure, criteria introduced for the admissibility and legality of a State Aid, efficiency of these fiscal supports and set thresholds and justification. As can be seen, on the two settlements above, the main concern is keeping the balance between all the considerations. These EU considerations at the bottom line are derived from being aware of the double nature of Audiovisuals. Consequently, the published figures, narrating the market deficit of European audiovisual works in comparison with the U.S. made ones, are and were predictable.

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2 PrefaceThe field of audiovisual industry and related businesses have always been my field of interest. As a movie collector and a music fan, I have always been curious about these fields. My interest drove me to choose the topic of my Master degree thesis in the same field hoping that I will continue working and researching in the very same topic. In the beginning of this study, I found out the variety and amount of the materials are as many as are the products. I went through some and tried to categorize them in accordance with the pre-sketch of my discussions in my mind. I took the list to H. Norinder to have his comment on the general idea. He looked at the paper in my hand with the list of materials and arrows, showed me his desktop picture on the computer. The picture was taken from some homes with canals in between and little bridges and old designed vases and a man standing in front of a door. Probably, it was a scene from Venice. Then he said, "This picture is the field of Audiovisuals in EU and we are going to talk about this guy's yellow T-shirt." Apparently, "the yellow T-shirt" in Audiovisuals is the Competition Law Perspective on legal policies in charge. Although this study is a limited perspective of the whole discussions and studies, but the hope is that it will provide with an understanding on the industry.

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3 Acknowledgments First, I would like to thank my supervisor H. Norinder for helping me with this study and motivating me all the way through. His guidance and attitude made the work under his supervision a charming chore.

I would also like to thank M. Shajarian, Pink Floyd, M. Namjoo, Mark Knopfler, Gorillaz and Balmorhea for playing their music in my headphone while I was writing this thesis.

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4 AbbreviationsAVMSD Audiovisual Media Services Directives

CABSAT Cable and Satellite Directive

EAO European Audiovisual Observatory

EC EC Treaty

ECHR European Convention on Human Rights

ECJ European Court of Justice

ECTT European Convention on Transfrontier TelevisionECtHR European Court of Human Rights

EEA European Economic Area

EEC European Economic Area

EIB European Investment Bank

EP European Parliament

EPRA European Platform of Regulatory Authorities

EU European Union

GATT General Agreement on Tariffs and Trade

IRIS Legal Observation of the European Audiovisual ObservatoryRAI Radio Audizioni Italia

ROI Return of the Investment

TWFD Television without Frontiers DirectiveUNESCO United Nations Educational, Scientific and Cultural Organization WIPO World Intellectual Property Organization

WTO World Trade Organization

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5 Introduction

5.1 Some kind of introductionWhat makes an Audiovisual Product popular? Does the public taste define the "popularity" of it? Do those products shape the public taste as well? How much is the role of Market in this manner? Those were the questions in my mind, years ago during my high school years at a movie shop and while I was trying to pick up a movie. For me purchasing a movie was more like a "buy and try". Some popular movies were fascinating giving you a constant Goosebumps and some were hard to resist watching to the end. Alongside all the Advertisement techniques, many factors were shaping my Purchase decision. Mostly, I was interested in popular movies. Not surprisingly, by "popular movies" I can only remember American made ones. It seems that, the case of dominant and popular American made movies is pretty much the same for other Audiovisuals. A quick look at the report issued by the EIB on Audiovisual Industry shows that the market share of American movies in the European Union was 73.7% in 20001. In addition, figures published by the European Audiovisual Observatory shows that the Hollywood Corporations enjoyed a market share of 63% in the European Union2. Although the mere presence of big actors is not substantially a legal problem, but the absence of equivalent European audiovisual counterpart with a competitive position in EU market is a factual deficit and is sourcing some concerns at EU and at the member state level. That's why, European TV experts warn, "if culture is marketed only and through economic forces, many smaller states will find that their native culture is not economically competitive".3

Different approaches have been taken by the member states and by EU authorities in order to protect the so-called "Native Cultures" and "the European Cultural Heritage". These protectionist acts may take different forms and strategies. Be it an obligation to dub a movie into a local language or a fund to protect the sector or introducing quotas for EU Broadcasters etc. has not shown enough efficiency at the end. Many factors based on different perspectives are shaping the current legal perspective on the industry. Audiovisuals have been a controversial field for legislators and policy makers. The subject encompasses double cultural and economic values, which makes it subject to a parallel interventions from the society and the market. Additionally, constant changes in the field by introducing new technologies makes the policy making quite challenging. 1 European Audiovisual Observatory Press release, "The Imbalance of Trade in Films and Television Programmes between North America and Europe Continues to Deteriorate", Strasbourg, 9th of April 2002, available from http://www.obs.coe.int/about/oea/pr/desequilibre.html (visited on 2013-03-23)2 European Parliament, "Fact Sheet on the EU- Audiovisual and media policy ", 2009 edition, p 3873 Wall St. J. 10, 1989, at B4, col.5.

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From one hand, Audiovisuals' cultural values make them different from other products and services. These differences ask for different treatments including governmental interventions, exceptional clauses etc. Besides, the field of Audiovisuals by its nature is tied up to the latest innovations in technology. These new playgrounds add another dimension to the subject. In a comprehensive legal analysis, the subject can be highlighted in various legislations. These legislations can be either Primary EU Laws or Secondary Legislations and related Directives. These legal bodies set a frame to the subject and try to make a balance between different concerns on the matter. As predicted, related legislations are as various as are the concerns. EU Treaties and Directives on the internal market, Competition law, human rights4 etc. are collectively make the current legal scheme. Treaty on the Functioning of the European Union (TFEU) in addition to regulating the market, deals with EU Foreign Policy and external actions. Moreover, Secondary Legislations directly or indirectly regulate the subject in details. Chief Directives related to this field are Merger regulations5, Commission's market definitions for audiovisual industry, Commission guidelines on State Aid, Television without Frontier Directives6, Audiovisual Media Services Directives7.

Policy making in the field of Audiovisuals is an attempt of keeping a balance between various and seldom-contradictory values. Although the EU has always been highlighting common cultural values, but at the same time it has taken into account the cultural diversity of the Member States. These considerations in addition to the other declared values (regarding integration and approximation of actions) partly shape the EU's consideration on the industry. Actions in connection with Audiovisuals in EU and Competition Law have developed in two major directions namely; support scheme and the Development of the Legal Framework and Case Law. Support schemes are consisting of fiscal and non-fiscal supports assigned from the budget and facilities of EU and member states for improvement of the industry and cooperation in this field. These Supports vary from financial supports, Special treatments, Preservation and collection of Cinema Heritage8 etc.

Regarding the Development of the legal framework, The EU intended to increase cooperation by harmonizing the legislation. One of the major attempts is via TVWF Directives of 1989 and AVMSD Directives accordingly. Moreover, European Community Merger Regulation (ECMR)

4 For further reading visit: the Charter of the United Nations (Common Provisions on pluralism, respect for human rights) , European Convention on Human rights, the charter of Fundamental Rights of the European Union5 The Council, regulation on the control of concentration between undertakings, 139/2004, 20th of Jan 2004 6 The Council, 89/552EEC, 1989(revised in 1997) 7 EP and the Council, 2010/13/EU, 10th of March 20108 EP and the Council, 2005/865/CE, 16th of Nov 2005, "Recommendation of the European Parliament and of the Council on film heritage and competitiveness of related industrial activities"

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plays an important role in supporting the industry by harmonizing the legislations and setting the framework for concentrations in the market.

Legal analysis of Audiovisuals encompasses controversial debates on different aspects of law. One of these debates is on the interactions of realities of the industry and EU principles and concerns. For that reason, the debate encompasses various subjects as competition law principles, market, positions held and decisions made by audiovisual businesses and state interventions. Additionally, each member state decides individually on the quality of its cultural trade. Constitutionalization of these rights (individual decision-making) in France and Italy shows the level of importance of this sector for member states. Moreover, and although Nice Treaty has replaced the Unanimity Voting in council with Qualified Majority voting9, but still decision making in audiovisuals at EU level is not a common trend. Different mechanisms are in charge to make all decisions in line with the EU general policies. Seemingly, a Left-right arrow symbolizes the connection between "Popularity" and "Availability" in this section. Meaning that, whichever makes an influence in each side of the equation is also a source of affection on the other side. The level that EU is willing to raise them both has to be assessed in connection with the other facets of the industry.

5.2 PurposeAs a legal assessment of EU's audiovisual industry and its current market dimension, we encounter the big market deficit of European audiovisuals in relation to constant dominant American made ones.This situation leads us to question:

What are the reasons for the absence of competitive and equivalent European Audiovisuals in the EU Market, which is dominated by American made Audiovisuals?

This question leads us to look for the EU attempts on filling this vacuum.Firstly, considering the potentials for further cooperation between EU member states and EU's unique specifications as the biggest Trading Block, more Competitiveness and more productivity of the Industry is expected. Secondly, treating Audiovisuals in a same way as any other goods or services can provides a safe stage for commercialization and a sudden boost in their production. However, it may be disrespectful to their specific qualities and externalities. Consequently and limited to the purpose of this thesis, various legal boundaries in charge and EU's attempts to balance these boundaries will be highlighted. The attempt is to provide an analytical point of view on the legal framework in EU with a focus on Competition Law. In that regard, regulations and case laws related to this industry will be assessed. 9 Treaty of Nice (amending the TEU, TEC and certain related Acts), Art157, 2001/C, 10th of March 2001, OJ C 80/1

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5.3 MaterialThe materials that are supporting this thesis are consisting from Books, Articles, Journals, Reports and relevant Legislations and Case Law.Since the field of audiovisual trade is subcategorised to various Headlines, the materials in use are sourcing from different fields. These various characteristics are both beneficial, bringing different points of view regarding the same subject and disadvantageous for cluttering up the sources. Materials that are used for this thesis are in three main fields. In the field of competition law the books of "The Limits of Competition Law" by Prof Tony Prosser and published by OXFORD University Press 2005, "European Media Law"by Oliver Castendyk, Egbert Dommering, Alexander Scheuer, Kathrin Böttcher (co-editor) published by Wolters Kluwer Law and Business and "Culture and European Union Law" by Rachael Craufurd Smith published by OXFORD University Press are used in different arguments. Also the Articles of "Cultural Industries policy in regional trade agreements" by Prof Hernan Galperin from Stanford University helps with Competition Law related topics.In the field of Internal Market Law and in discussions around the matter of Law, the book of "The Substantive Law of the EU" by Catherine Barnard provided me with good sources of materials. It has to be mentioned that part of the discussions in this thesis are based on definitions of different subjects. These definitions e.g. cultural preservation, language, native culture, social values etc. alongside with other supplementary definitions and statistics are partly projected in the legislations or by the European Commission's annual reports. These reports are available at the European Commission website at the address of http://ec.europa.eu/culture. During this legal analysis, reference to specific treaty Articles and directives and regulations are vital for this study. "Blackstone's Statutes" edited by Nigel G.Foster and published in 2010-2011 as its 21st edition and "Official Journal of the European Communities" available at the Address of http://eur-lex.europa.eu/en/index.htm made these references much easier and accountable.Other than that, accompanying materials are referred during the text.

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The basic statistics, and needed Data to support this thesis are collected from EU Official publications. In this regard, Sector Papers by the European Investment Bank, reports by the European Audiovisual Observatory and the Commission's reports on the industry provided most of the Data.

5.4 MethodThis thesis tries to establish a legal analysis for the EU market dimension of the audiovisual industry. This analysis is provided by focusing on EU competition law. In establishing a discussion about this subject, I used two methods.Firstly, by implementing the Multi-methodology this thesis uses both the Quantitative and the Qualitative Analysis for the evaluations. The Quantitative Analysis is aiming to assess the numerical Data published by EU Institutions. This form of assessment is specifically helpful with analysing the market statistics. Additionally, by implementing the Qualitative Analysis, this thesis is trying to assess the various statements, comments, rulings etc. obtained from EU institutions. Secondly, by implementing the comparative method this thesis would provide a selective comparison between different legal policies taken by Member states and of EU Institutions.The factual problem/concern is the lack of competitiveness of this sector. Limited to the subject and by implementing the abovementioned methods, this thesis will assess number of contradictory protected values and relevant legal policies at EU and Member state level.

5.5 DelimitationsThe subject of this thesis is a legal analysis of the European Audiovisual Market with the focus on EU Competition Law. In this regard, the interactions of the two main industries (TV-broadcasting and Movie Industry) have been highlighted as suitable examples. This limitation is unavoidable due to the limited time gap and vast amount of materials. The subject of Audiovisuals' legal analysis is as gigantic as is the industry. As a result, narrowing down the subject to abovementioned fields will help the clarity and simplicity of this study. Moreover, legal analysis sets the field of this study meaning that other fields of science are excluded. At the same time, audiovisuals are tied up to different facets of law namely; Intellectual Property Right, Copy Right and its neighbouring rights etc. These fields of Law are in a constant interaction with the Competition Law. Consequently, references will be made occasionally during this thesis. These references are only limited to the interactions with Competition Law; As a result, an indebt analysis is excluded.

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EU supports to Audiovisuals also cover General Supports mostly in line with the EU cultural Heritage preservation and non-commercial Cultural Cooperation. Although, these supports may have direct or indirect influences on the industry, they are excluded from this study. These general supports encompasses EU attempts on Intercultural Dialogue, Deposit of Audiovisual works10, Digital Library11, Education and training, sport events and other major events supporting these programmes.Interrelation of Audiovisuals and related technologies like electronics or telecommunications, introduce new facilities on a daily basis. These technological facilities can be Broadband Internet Connections, Middleware Technologies or Interactive Television Services etc. These technologies and directives regulating them may be referred during this thesis only limited to the subject. E-commerce and Advertisement are assigning to themselves parts of audiovisual Regulations. These fields are crucial for the financing of Audiovisuals (especially for private Broadcasters). These side industries and related regulations are left out of this study. EU competition Law perspective on Audiovisuals is meaningful in the Internal Market context. Consequently, the thesis is focusing on the Internal Dimension of the EU legal policies. External legal policies on Audiovisuals including bilateral Trade Agreements with third countries, the UN and the UNESCO Conventions, EU Economic Partnership Agreements with African, Caribbean and Pacific States, Euro-Mediterranean Partnership, free trade agreements, WTO including GATTS and TRIPS and the Convention on the Organization for economic Cooperation and Development are out of the frame work of this thesis.Audio Visual Media Services Directives is without a doubt a leading directive in this field. However, an in-depth analysis of the said directive is excluded from this thesis. The exclusion has made due to the limited framework of this study. Finally yet importantly, U.S. made audiovisual products and services as the biggest competitor in EU audiovisual market deserve an in dept analysis on a separate study and this thesis does not have as a purpose or capacity, the analysis of U.S. Audiovisuals and the related legislations.

5.6 OutlineFirstly, the Introduction part gives a general overview of the subject and a schematic sketch of the framework. Regardless of the limitations of this thesis and its focus, the Introduction tries to prepare a reasonable understanding to the subject in general and a platform for further legal analysis by covering most of the legal bodies in charge.

10 For further reading find " EP and of the Council recommendation on film heritage and the competitiveness of related industrial activities",2005/865/CE, 9th of Sep 2012, OJ L 323/57 11 For further reading find "Commission Recommendation on the digitalization and online accessibility of cultural material and digital preservation", 2006/585/EC, 25th of Aug 2006, OJ L 236/28

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Secondly, Delimitations narrow down the study by highlighting the central focus and cutting off peripheral discussions. At the same time, this part provides with references for further readings.Thirdly and as the first part of the main discussion, the focus is on Competition Law related viewpoint on Audiovisuals and more specifically on TV Broadcasting and Movie industry. In this part, various Provision and Directives are put forward and the relations between these legal bodies and their interactions are discussed. Case studies are also providing with the rulings of Courts in EU and the Commission's decisions. In addition, EU attempts to fill the loopholes are highlighted.Fourthly and as the second part of the main discussion, an extract of fiscal and non-fiscal EU supports to the industry will be presented and their effectiveness on the industry will be discussed. Finally and on the Conclusion Part, the question is asked once more and with a better perspective. The answer to the question (limited to this thesis framework) is derived by a deduction from main discussions. For a better understanding and coherence of the subject, Reasonable sequence of the discussions is supporting each topic.

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6 An overview of the Audiovisual industry with the focus on TV-Broadcasting and Movie industry

An overview of audiovisual industry and specifically TV-Broadcasting and Movie industry as the two distinguishable industries in this field set suitable grounds and examples for the study. Hence, it is beneficial to have a brief summary of the industries prior to the discussions in this part. The Overview covers specifications of the two industries and the quality of their interconnections. These specifications vary from different stages of the activity and the likelihood of the businesses. As has been pinpointed by the European Investment Bank, there are four main stages considerable for these industries12.

Developments Stage: Requiring rights (IPR, screenplay etc.), conducting prerequisite researches necessary for the project, estimating the budget, expenses etc.

Production Stage: consisted from two stages of1. Pre-production stage: gathering the Crew, Technical

Requirements, Financial Resources (budget), the Shooting of the movie etc.

2. Post-production stage: Editing, Special Effects etc. Distribution Stage: promoting and selling the movie by the

distribution company to exhibitors, packaging and transmitting the TV programme to the viewers by various delivery technologies

Exhibition and broadcasting Stage: at which the film or TV programme is shown

As it can be seen, each stage of the life cycle of an audiovisual product or service is a combination of different activities by different actors [Figures 1& 2 below]. Each of these activities implies separate expenses and risks on the entities. These risks have to be balanced with the possible profitability of the end-products or services and their acceptance and popularity by the consumer/viewer. It noteworthy that, the level of the appreciation and popularity of an audiovisual product or service cannot be assessed unless is put in the market. These uncertainties about the profitability and risks involved have been a drawback for the industry (regarding its financing and investment). As an investor, one has to make sure enough about the Return on Investment of the Capital Invested (ROI). This can be more problematic when considering the vital need of the Industry for capital investment by other businesses and more specifically by Banks13.

12 EIB, "An overview of The European Audiovisual Industry", p. 9, Sep 2001, available from http://www.eib.org/attachments/pj/pjaudio_en.pdf (visited on14-03-2012)13 Ibid, p.9 & pp.80-81, In this regard The “Institut de Financement du Cinéma et des Industries Culturelles” (IFCIC) is a national support mechanism in France which intervenes and guarantees the lending contracts with banks to AV producers

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Figure 114: The Film Industry Value Chain, a combination of different stages collectively make the movie/film life cycle. Various entities besides the Movie producer are selectively interfering in this process. The last three stages (in dark shadow) specifically represent the possible interference of other businesses as right holders/collecting societies, Distributer, Cinema/Broadcasting stations etc.

The abovementioned financial deficit for the competitiveness of the industry rests on the nature of Audiovisuals. In a comparison with the U.S. made Audiovisuals, it is recognisable that Apart from the various strategies taken by the U.S. to balance the risks, the U.S. audiovisual Industry relies more on the so-called "Studio system"15. Although the term has been used historically to refer to the practices of large motion picture studios from1920-196016, it resembles the Integration of different stages in the value chain and their collection under one Name and one corporation (through Vertical Agreements, Mergers or other forms of concentration). By taking this policy, the industry can fade away high risks by distributing it through up-stream and down-stream stages. This model may imply the traditional economies of scale. Additionally, other advantage is obtained by the industry by forming a concentration and that is the economies of scope.17 The term refers to the advantages earned by putting the same product through different ways and facilities. Considering the technological advantages in the industry and possibilities in transferring Data and receiving it via different platforms and the profitability of such strategy, the industry has been motivated enough to place its product in the largest possible number of different markets.

14 Adapted from Zerdick et al.(2000), cited from EIB," An overview of The European Audiovisual Industry", p. 13 15 Ibid, p.416 These studios are also referred as "Major 6" or "big 6" which operate in or around Hollywood including; Sony, Warner Bros, Disney, Universal, 20th Century Fox, Paramount17 M.M Pereira, "Vertical and horizontal integration in the media sector and EU competition law", Lecture at the Law School of the University of Lisbon, 7th of April 2013, Brussels

Development Pre-production Production Post-

production

Rights Library/asset Management

Packaging Marketing Distribution

Exhibition

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In relation to the movie industry and its three last stages (Figure 1), the interferences of other market actors can be shown. These market entities are providing various services from collecting loyalties for the creator of a film, marketing the product, distributing and exhibiting it etc. these businesses are to a large extend interrelated with each other that the prosperity of each one of them has a direct effect on the others. TV-Broadcasters as one of the main exhibitors are making the last ring of the value chain and are having significant roles. They play an intermediary role by purchasing the Broadcasting rights form "Rights Sellers", distributors, and broadcasting the film (or other contents) to the customer/viewer. TV-Broadcasters Regardless of their state18are partly depended on the likelihood of the Movie industry.

Movie industry is assigning itself a major role as a content provider for TV-Broadcasters. The three first rings of the value chain for this industry are assigned to provide materials to be broadcasted. These materials are to the big extent provided by the movie Industry.

Figure 219: Value chain for the broadcasting industry, a combination of different stages collectively make the TV Broadcasting life cycle. Various entities besides the Broadcaster are selectively interfering in this process. The marked stages in dark shadow, specifically, represent the possible interference of other businesses as Movie/programme producers, Telecom Operators etc.

Furthermore, Telecom Operators, as Up-stream Industries for TV Broadcasting, intervene to the value chain. These interventions occur in the "Packaging" and "Transmission and Delivery" stages.

18 Free Channels relying on Advertisements and sponsorships as the main source of income or subscribing channels relying on subscription fees etc.19 M.M Pereira, "Vertical and horizontal integration in the media sector and EU competition law", p.14

Content creation Production Post-

production Programming Packaging Transmission and delivery

Sales

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Businesses tend to cooperate closely with each other at up/down levels or even with their competitors at the same level to harmonize their actions in the market and in hope for a more profitable business and a bigger market share. These cooperations are partially permitted as long as they are not changing the conditions of the internal market and Competition Law. Harmonisations of actions between undertakings may take the forms of Mergers, Vertical/Horizontal Agreements etc. These agreements may temporarily or permanently, set a condition in which risks are balanced with a more financial strength, better market assessment and more alternative production plans etc. Different situations regarding these Agreements are discussed subsequently. Market players active at different market levels intervene in both industries. These interventions are significant in connection with Movie industry and TV-Broadcasting Industry20. Regarding the cross-economical influences of the two industries and the high risks involved needed to be balanced financially; the rationale behind the "studio system" can be seen more clearly.In a comparison with the U.S., the audiovisual market in EU is more fragmented. The fragmentation exists at the life cycle of an audiovisual product or service and from early stages on the value chain.Financial and non-financial capabilities for businesses are limited as same as EU's fiscal and non-fiscal supports. Consequently, EU has adopted measures to allow a closer cooperation of the industries (as a way to compensate existing limitations) and as much as they are applicable by competition rules and legal frameworks.

20 In both Figures 1&2 dark squares with white frames illustrate these interactions

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7 Market definition in Audiovisuals Similar to other industries, Market in Audiovisuals has certain specifications that make it unique from other related industries. At the same time, we have to consider that Audiovisual Market is a broad notion and is consisting of many subdivided markets. Market as the playfield of different undertakings in audiovisual sector has to be defined uniquely in relation to each sector. These different definitions set a platform for further discussions in the industry. Notably, the discussions are about abuse of dominancy, Cartels, Merger accusation and market division. As a general statement, any position held or agreement made by undertakings are meaningful in relation to a particular market.

The rulings of the European Court of justice and General Courts in EU have also highlighted this necessity21. Moreover, a concise definition of the market Including the Geographic Market dimension collectively with Product Market dimension (both Products and Services Market) frames the playground for the undertaking. Geographic dimension distinguishes the geographic zone in which the firm is active in and the product and service dimension distinguishes the substitutable present competitors22. This definition will help us to realize competitive constraints that the firm is facing and the likelihood of the affects it may take or may cause in relation to that market. There are various Market Definitions in each industry depending on the various subsectors. In other words, market definition varies as intersections of the Value Chain and competition issues vary23. Since Primary or Secondary Law has not defined markets in this Sector, the definitions are left for the Community Courts and the Commission24. The Notice issued by the Commissionexplains the need of the definition and its quality for competition law purposes. 25 Hence, particularities of this definition are as fallow:

"The structure of the media industry is multidimensional and complex. Indeed different players such as content providers, right holders, content distributers, operate in the value chain from the production of content such as films, pay-TV, programming, and music, to its delivery via theatres, pay-TV channels or internet portals" 26

21 ECJ, Case 322/81, Michelin v. Commission, 1983, ECR 3461, para.37; CFI, Case T-62/98, Volkswagen AG v. Commission, 2000, ECR II-2707, para. 230, cited by R. Capito, "European Media Law", p. 15522 Bird&Bird, " Market Definition in the Media Sector-Comparative Legal Analysis", Dec 2002, p 7, available from http://ec.europa.eu/competition/sectors/media/documents/legal_analysis.pdf (visited on 16-03-2013) 23 Ibid, p 69, para 18324 R. Capito, "European Media Law", Definition in EC Competition Law, p 155, para.8 25 Commission, Notice on the definition of relevant market for the purpose of community competition law, 97/C 372/03, 9th of Sep 1997, OJ C372/5 26 Commission, Case IV/M.2050, 13th of Oct 2000, Vivendi/Canal+/Seagram, 13th of Sep 2000, CELEX 300M2050, para.14

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As it can be seen, the role of "trading relationships" between market players is a general theme of the above saying. These various entities in the market can be assigned to two general market divisions:

1. Upstream Market in an indirect relation with the end user, for instance the Market for Acquisition the rights for production, distribution, publishing etc.

2. Downstream Market in a direct relation with the end user, for instance the Market for sales of goods or the provision of services to the final user

Below, there are illustrations of exemplary the Markets. Although, the Graphs do not encompass all the details of the market, they show the relationships between separate markets in one sector.

Figure 3: Overview of the Markets in Broadcasting and TV

In Figure (3), Market Players can be assigned to Upstream and Downstream players. We have to consider that Undertakings at the upstream level may also interact at the downstream level. The example is an undertaking active in the Wholesale Access Market that also provides services at the Retail Market (e.g. Internet Access or Mobile Operators). In a situation like this, the Commission will scrutinize activities of the Undertaking more strictly for a case of Margin Squeeze and Abuse of dominancy27.

The Commission and EU Courts have distinguished various Markets On the Retail level and regarding the contents provided for the end-users (Audience/Subscriber in this case).

27 ECJ, Case C-52/09, Konkurrensverket v. TeliaSonera AB, 17th of Feb 2011, OJ C103/03

Market in Broadcasting and

TV

Upstream Market

Wholesale Market for raw content

Wholesale Access Market to the infrustructure

Downstream Market Retail Market

- Cable Operators- Digital Terrestrial TV

- New Digital Distribution- Internet Access Provider- Mobile Operator- ...

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Figure 4: Overview of the Market in TV-broadcasting at the retail level

Figure (4) partly illustrates subdivided Markets for Cable and Digital TV-Broadcasters and the different contents and programmes "On-Air". These markets are shaped around the Acquisitions of Rights for the produced contents. It is noteworthy that, TV-Broadcasting has already predefined by the Commission as a) Cable TV (including Commercial TV-Broadcasters) and b) Public TV-Broadcaster. The two figures above show parts of the overall picture of the market. It has to be mentioned that, other market divisions in relation to different competitive conditions, perspectives etc. may take place. Specific Market definitions are collectively creating a base for any competition related effort by EU Authorities. They also give precise views for the businesses themselves in relation to their competitors.

TV Broadcasters including Cable Operators and

Digital TV

Acquisition of Rights for

Films

Market for Broadcasting Feature Film

Market for Broadcasting Make-for-TV Programmes

Acquisition of Rights for

Sport Events

Market for Broadcasting

Winter Olympics

Market for Broadcasting

Summer Olympics

Market for Broadcasting

World Cup Football

Market for Broadcasting

Regular Football Events

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8 General remarks on EU Competition Law and Audiovisuals

Competition Law is certainly assigning itself most of the materials in this section. These vast amounts of resources and discussions are sourcing from controversial character of Audiovisuals from Competition law perspective. These discussions are mostly as follows:

The contradiction of competition law principles (on elimination of agreements and/or Practices capable of distorting free competition) and the need for sufficient-size undertakings in the Audiovisual market

The contradiction of competition Law principles (on elimination of exclusive or special rights or State Aid granted to the undertakings capable of distorting free competition) and the protection of fundamental rights and principle notions of the EU in this sector.28

Regarding the first bullet point, the main concern for the Commission and EU authorities is how to keep the balance between the two wants. From one hand, competition in the relevant market is highly protected by the competition law. As has been stated by the ECJ, the competition itself is the subject of the EU competition law and not the competitors. The statement can be interpreted by the undertakings in a way that, as long as their approach in the market is responsible toward the competition in the market, they are standing in the safety zone. On the other hand and not surprisingly, the Commission and the industry itself are aware of the need for sufficient size market players and the need for more concentration. This puts the Commission on a situation in which it has to face potential and already existing market powers created by different forms of concentration in the market (namely mergers, horizontal and vertical agreements) which may distort the free competition. These two wants have to be balanced in relation to each other.Regarding the second bullet point, the focus is on the contradiction of different EU principles and goals related to the industry. These goals are collectively important for EU policy makers. From one hand, Pluralism, protection of minorities, equality and fundamental rights are making a footstone for the democratic Union. These rights and values are protected by different means on the internal dimension (by EU institutions and by member states) and on the external dimension (by international conventions etc.). From the other hand the exclusions and exceptional treatments toward the industry is in a contradiction with the so-called "market principles" of the EU (including four freedoms and completion law).

28 H. Galperin, "Cultural Industries in the Age of Free-Trade Agreements", para 1, Available fromhttp://www.cjc-online.ca/index.php/journal/article/viewArticle/1082/988; "Trade liberalization is only one among many of EU's goals including full monetary, partial political and cultural integration etc."

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Discussions in this part split into various topics. These topics are the relevant headlines that assumed to be controversial in the competition law analysis of the Audiovisual Industry. The division of these topics is supposed to keep the consistency and simplicity of the discussion.

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9 Positions held by an Audiovisual undertaking, abuse of dominant position

9.1 General remark on abuse of dominancyAbuse of a dominant position by an undertaking, regardless of its form and its Market sector, is a form of distortion of Competition in the internal market.The distortion happens when three constituent elements are present. These three elements are:

1. A relevant market (Geographic and Product Market)29

2. A dominant position held by an Undertaking (or a group of Undertakings)

3. Unjustifiable Abuse of the dominancy For the coherence of this part, the abovementioned elements are discussed in order.

EU attempts in audiovisual sector are combinations of supports for the Industry and prosperity of the cultural values. These attempts are set to be done by balancing them with negative externalities and through set limitations and red lines. One of the red lines in Competition Law is the condition in which a position held by an undertaking is distorting competition in the relevant market. These distortions may take place as Refusal to Deal, Unfair Pricing, Market Dividing (by refusal to supply etc.), Discrimination and other Forms of Abuse. Treaty provisions and secondary regulations and directives have prohibited abuse of a dominant position in the relevant market. In addition, case law has interpreted the regulations in hand and extended their inclusions. Treaty provisions regarding this prohibition cover both Exciting Market Powers and "the Creation of new Market Powers"30. Article 102 TFEU (ex Article 82 EC) in general is prohibiting a distortion of Competition by an existing market power or several market powers acting jointly. This article is in line with Art 3(1) (g) EC on the abolition of distortion of Competition law. The numeration of Art 102 TFEU is exemplary and the Abuse can take forms other than the situations mentioned by this Article. Moreover, Article 102 TFEU paves the way for the Commission to issue directives and decisions to improve competition in the Internal Market and to make sure that member states are complying with their obligations to "neither enact nor maintain in force any measure contrary to the rules contained in EC Treaty"31. Meanwhile, the directives on abolition of

29 The Relevant Market has been discussed under the chapter "Market Definition in Audiovisuals"30 R. Capito, European Media Law, p 153 31 Ibid, p.154

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restriction on the audiovisual market are not limited per se to audiovisual directives. Rather, directives on liberalization of neighbouring industries are partially used as a base line for further abolitions in this section32.

9.2 Dominant position held by an undertaking

After framing out the relevant market by defining it33, the next step necessary to determine an abuse of a dominant position in the relevant market, is the assessment of the dominancy. The EU's definition of "dominancy" and the factors necessary for this assessment are making "the pattern" for the Commission and the EU Courts. In addition, the effects of holding a dominant position encompass rights and obligations for an undertaking.

As it has been pointed out by the ECJ in Hoffmann-La Roche v. Commission34, the dominancy is a state in which a firm possesses the ability to hinder the maintenance of effective competition. The most reliable factor to determine this ability is economical and depends on the market share of the company. Other factors as market structure, the history of the undertaking etc. can be subsidiary indicators of a possible dominancy. According to the Commission and the rulings of the ECJ, there are different margins defined for a market share hold by a company. A market share of more than 70% by an undertaking is most definitely shows a dominancy of the firm and the market share less than 10-15% shows that there is a slight chance for holding it. It noteworthy that, access to capital, holding an IPR, vertical integrations and other common trends in audiovisual industry are also indicating factors of possible dominancy. In fact, most forms of a dominant position in Audiovisual Industry are in a form of collective dominance of firms. Although by the wording of article 102 TFEU "An abuse of one or more Undertakings" clearly covers the situation of a collective dominancy, the ECJ has been dealing with these cases under Merger regulation35. Dominant position in itself is not contrary to EU provisions; yet, it makes an undertaking holding it, vulnerable for strict evaluations. These evaluations may take place specifically when there is a big gap between a market share hold by an undertaking and its competitors. 32 In this regard: The Commission Directive 95/51/EC, 18th of Oct 1995, "abolition of restrictions on the use of cable television networks for the provision of already liberalized telecommunication services (amending Directive 90/388/EEC)", OJ L256/49 33 An overview of markets in audiovisual industry as it has been defined by EU Commission and ECJ is presented under the chapter "an overview of the Audiovisual Industry with the focus of TV-Broadcasting and movie industry". However, the definition of each subdivided markets are different from each other. 34 ECJ, C 85/76, Hoffman-La Roche v. Commission, 13th of Feb 1979, para 39, available form http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61976CJ0085:EN:PDF 35 E.g. visit, The Commission, Case COMP/M.3333, SONY/BMG, 19th of Jul 2004, para 12 et seq., C(2004) 2815

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However, a dominant undertaking may take measures to maintain its dominancy without aiming to strengthen it. One of these measures that by nature are quite common in audiovisual industry is the usage of the advantages provide by IPR and access to media Content.

9.3 Unjustifiable Abuse of dominancy and balancing

The last constituent element necessary for an "Abuse of a dominant position" is the "Unjustified Abusive conduct" of an undertaking. As stated above, a dominant undertaking holds an obligation to act in a responsible way. The responsibility concerns the position held by the undertaking and the competition in the market. Hence, a dominant undertaking has to avoid any abusive conduct that distorts competition either in an "exploitative" or "exclusionary" way.36 In this regard, the exploitative abuse means exploitations of consumers in the relevant market and "exclusionary abuse" means excluding other competitors (actual or potential) in the relevant market by hindering competition. Any anti-competitive conduct by an undertaking has as a result a distortion of competition in the internal market and will directly or indirectly, ends to an unfair economic burden for the consumers. As a result, it may be hard to distinct clearly the general effects of an abusive conduct.Although, Article 102 TFEU has been interpreted in a way that it mostly covers "exclusionary" form of an abuse by a dominant undertaking (or collective dominance) it also includes a situation, which precisely covers both kinds of abuses. Article 102 (b) TFEU explains the situation as "Limiting production, markets or technical development to the prejudice of the consumers". This form of exclusionary abuse in the industry may take the form of "Refusal to supply Audiovisual content" to other undertakings and to the prejudice of the consumer. Since, this form of Abusive conduct in relation to IPR for media contents is quite common in the audiovisual Industry and media contents are connecting factor of the abovementioned industries (movie industry and TV-Broadcasting)37 its quality and its relation to the "undertaking's responsible conduct" will be discussed in this part.

Exclusionary abuse in relation to audiovisual contents has been a familiar trend for dominant undertakings that has access to these contents. The crucial importance of the provision of the contents for the industry and for the competitiveness of the market is realized by the industry and by EU authorities. Case law has been setting interpretations of the relevant provisions in this field. These cases have been handled at the community level and by the ECJ, the Commission and Courts of first instance (for cases

36 R. Capito, European Media Law, p.167. 37 Figures 1&2

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with the same merits but lacking the community dimension e.g. in respect to their economic influence on the internal market). The applicability of these decisions and the justifications made by dominant undertakings, collectively, are making the main discourses in this part.As mentioned above, Article 102(b) TFEU includes exclusionary abuses.

The crucial importance of the media content for the industry is due to the situation it has as a raw material for the media sector and the role it plays for the newly introduced media services.As has been illustrated above in figure 2, "content production" makes the first part of a TV-Broadcasting's value chain.Depending on the type of the broadcaster, these contents may vary from feature films, made for TV programmes, sport contents etc. Moreover, new technologies in the field are providing with the possibility of parallel transfer of media content and other forms of data, faster and with a better quality. These new services have constantly introduced to the market and have shaped many new businesses around them. The interactions of audiovisual industries with each other and with neighbouring technologies have made a good environment for new players to grow and compete. However, these interactions have also made the industries too depended to each other that without one the other may be dysfunctional or damaged. This will put a considerable risk on the new businesses. Additionally, these new industries bring considerable amount of facilities and options to consumers that their removal from the market may deprive consumers from their benefits (exploitative abuse). Dominant undertakings on the other hand, may impede the entrance of these new competitors fearing that "their core revenues will be cannibalized"38. Access to contents gives a competitive advantage to an undertaking and a tool to strengthen its position. Music industry and printed media have assigned to themselves most of the cases in relation to the exclusionary abuse by refusal to provide content. As a result, they have had a "collecting society"39, Collective rights management's organization (CMO) etc. as a party.In addition, some other cases have been related to the provision of digital content for Medias40, IPR protection etc.The discourse about the clash between Anti-competitive behaviour of a dominant undertaking with access to media content and the necessity of provision of those contents encompasses "objective justifications"41 of 38 Ibid, p 17339 Collecting Societies are playing a middle role between the creator of a copyrighted audiovisual content and the industries willing to have access to that content. They are in contractual agreement (trustee) with the right holder and are entitled to make new agreements with any undertaking that needs the content. They are also responsible for monitoring these rights for any IPR infringements etc. 40 ECJ, joined cases of C 241/91, C 242/91, Magill TV Guid/ITP& BBC and RTE , 6th of April 1995, available form http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61991J0241:EN:HTML (12-4-2013) 41 CFI, British Case 95/04 P, Airways plc v. Commission , 15th of Mar. 2007; Considering the ECJ' ruling on Hoffmann-La Roche v. Commission, the concept of abuse is an objective concept. One conclusion that can be made from this saying is that the subjective intentions of the undertaking are irrelevant more over a counter-argument that

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undertakings. However, the quality of the clash and justifications beside the rulings of the court and the Commission's assessments are relevant to movie industry and TV-Broadcasting and to the same extends to other Audiovisuals.

Summary of Ministère Public v. Tournier(Sacem)42

Reference to the court was made under Article 177 of the EEC treaty by the court d'appel (court of appeal) for the preliminary ruling in the proceeding pending before the court between Ministtère public and Jean-Louis Tournier the director of Sociéte des auteurs, compositeurs et éditeurs de musique (Sacem) on the interpretation of Article 30, 59, 85, and 86 EEC Treaty. Although the questions cover both competition law and internal market law and IPR, but for serving the purpose of this essay only the competition law related questions and justifications is presented (more specifically regarding Articles 85, 86 EEC Treaty).Sacem was a national society in charge of copyright management in music with a dominant position and absolute monopoly in France. Discothèque as a Content user, which was located in southeastern France, complained on the ground that Sacem required excessive, unfair or undue payments for the performance of protected musical work on his premises. Moreover, Sacem's method of calculating royalties [based on the application of a fixed rate 8.25% to the turnover, including value added tax of the dicothèque in question] is high and disproportionate in comparison with the same services in other member states and considering the economical estimation of the price. The royalties charged consider obtaining access to the whole of Sacem's repertoire while in fact part of it was needed. Discothèque could not deal directly with the copyright-management societies in other countries since other copyright-management societies were bound by "reciprocal representation contracts" with Sacem and accordingly refused to grant direct access to their repertoires. The court of appeal referred five questions to the ECJ for a preliminary ruling. The questions concerned the amount of royalty charged regarding Article 86 EEC (102 TFEU) and unfair trading conditions as such reciprocal trading contracts with other content providers which made them refuse to deal with the content users not residing in the same member state and fees higher than ordinary and without any objective justifications and their compatibility with Article 86 EEC (102 TFEU). On the fifth question, it asked for the compatibility of national copyright legislation with Article 30 and 59 EEC concerning an infringement of copyright the public performance of protected musical works by means of sound recordings without the payment or royalties where there have already been paid to the author for reproduction in another member state.The court said; Sacem imposes unfair trading conditions where the royalties which it charges to Discothèque are appreciably higher than those charged in other Member States, the rates being compared on a consistent basis. .The court also mentioned that No provision of national legislation may permit Sacem to charge a levy on products from another Member State...in accordance with the prohibition of discrimination laid down in the international conventions on copyright, and to enable copyright management societies to rely, for the protection of their repertoires in

can be used by an undertaking is a legal justification of an abuse, 42 ECJ, Case 395/87, Ministère Public v. Tournier(Sacem), 13th of Jul.1989

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another Member State, … without being obliged to add to that organization their own network of contracts with users and their own local monitoring arrangements, are not in themselves restrictive of competition in such a way as to be caught by Article 85 ( 1 ) of the Treaty.

Article 85 of the EEC Treaty must be interpreted as prohibiting any concerted practice by national copyright management societies of the Member States having as its object or effect the refusal by each society to grant direct access to its repertoire to users established in another Member State …Meanwhile, The refusal by a national society for the management of copyright in musical works to grant the users recorded music access only to the foreign repertoire represented by it does not have the object or effect of restricting competition in the common market and less access to a part of the protected repertoire would entirely safeguard the interests of the authors, composers and publishers of music without thereby increasing the costs of managing contracts and monitoring the use of protected musical works .

The court also mentioned that Articles 30 and 59 of the Treaty must be interpreted as not preventing the application of national legislation which treats as an infringement of copyright the public performance of a protected musical work by means of sound recordings without payment of royalties, where royalties have already been paid to the author, for the reproduction of the work, in another Member State.

As can be seen from the case above content providers may easily switch their "uncertain position" in relation to their competitors and new market actors to a "certain position" by gaining a monopoly or quasi-monopoly and strengthening it by various Anti-Competitive acts. These Anti-Competitive acts may include tightening up the customers to the undertaking by means of agreement, practices or impeding the entrance of new service providers etc. The possibility of as such market behaviours by movie industry and other content providers have been a concern for member states and the Union. In France, the Competition Council on its decision on the case Filmdis and other relevant cases in movie industry has set an example of the quality of the abuse and the legal procedure in the cases alike43.

Filmdis is a film distribution company with a monopoly as a content provider. The practices of Filmdis consider the distribution of movie content to local cinemas and exhibitors at certain areas in France namely Guadeloupe, Martinique and French Guiana.A reference made by one of the exhibitors Ciné-Théâtre du Lamentin to the France Competition Council on the certain Practices of Filmdis such as refusal to provide movie content (by providing them later than the agreed time or refusal to provide them) and abusing its dominant position and hence, making local exhibitors activities unprofitable. The rapporteur, Deputy General Rapporteur, the Government Commissioner and e exhibitors representatives of the Cine-Theatre Lamentin and Filmdis

43France Competition Council, Decision No 04-D-44, Ciné-Théâtre du Lamentin v. Filmdis, 15th of Sep.2004, available from http://www.autoritedelaconcurrence.fr/pdf/avis/04d44.pdf

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circuit and Cinésogar SA, agreed at the meeting of 22 June 2004. On the Decision No 04-D-44 on 15th of September 2004 following the meeting, France Competition Council stated that the company filmdis had abused its dominant position by refusal to supply movie content to local exhibitors and had breached competition law provisions.In assessing the abuse, the council observed that Filmdis had a quasi-monopoly and therefore independent cinemas in the area where economically depended on it.

Seemingly, the competition council in France considered two constitutive elements on analysing the situation namely dominant-position and economic-dependence. It is noteworthy that in cases like Filmdis the damage is not necessarily limited to the cinema exhibitors as such, but is also to the movie producers. As has been stated by the Commission in the joined cases of 60 and 61/8444 before the court, movie exploitation in cinema produces 80% of the revenue and the income earned via other forms of exploitation (movie castes, Broadcasting etc.) are small in comparison. As a result, "Cinema showings were essential for the film industry to remain profitable and thus for the continued production of films"45 . The cases Sacem and Filmdis exemplify a common abuse of dominancy in audiovisual industry by refusal to provide media content at the EU and a member state level. Media content has a double value for the EU audiovisual industry, firstly, as an 'End Product' of media producers. The media content is a package of economical and cultural values. These values can be in line with EU general policies on prosperity of the audiovisual industry and safeguarding the cultural heritage. Secondly, these products are valuable as raw materials for undertakings active in different market levels (e.g. exhibitors, broadcasters). Media content is a key element for continues and survival of the industry. As a result, access to content produced is a 'sine qua non condition from entering or staying in business'46. Consequently, Media content providers' activities as the middle stage of the life cycle of Audiovisuals is under strict scrutiny by competition authorities.

44 ECJ, Cases 60 and 61/84, CINÉTHÈQUE v FÉDÉRATION NATIONALE DES CINÉMAS FRANÇAIS Joined, 11th of July 198545Ciné-Théâtre du Lamentin v. Filmdis, Para 16 46 M.M Pereira, "Vertical and Horizontal integration in the media sector and EU competition law", 7th of Apr. 2003, Brussels, available from < http://ec.europa.eu/competition/speeches/text/sp2003_009_en.pdf>

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10Agreements between Audiovisual undertakings, concentrations via Horizontal and Vertical agreements

10.1 General remarks on Horizontal and Vertical agreements

Mergers of two or more undertakings in any form and via any kind of settlements are not in themselves contrary to competition law but in a certain circumstances are limited by EU legislations. These circumstances may lead to distortion of competition by the new merged company in the internal market. The distortion of competition mainly happens to the benefit of the new merged entity and in relation to the market and its competitors. Basically, a merged undertaking may seek to strengthen its position and benefiting from it by various forms of abuse namely, restriction to input market or sale market, limiting inter-band competition or acting to the big extend independent from its competitors (e.g. by raising prices).These kinds of foreclosure or distortion to competition happen when three main constituent elements are present.

1. Relevent market 2. Conclusion of a concentration by Horizontal or vertical agreement 3. Anti-Competitive attempts by a Merger

Mergers in audiovisual industry are the subject of balances between different wants. The legislator has to consider these major wants while regulating the actions in this area. The unbalance is mainly between supporting the industry with its profitability and creation of a more efficient market player and the competition in the market with the risks that these supports and new merged entity may have. The prosperity of the audiovisual field by creation of new entities with bigger investments, facilities, networks and more capable of competing with other market players inside and outside EU is both required by the EU and the industry. Meanwhile, the creation of more powerful undertakings by joining of different market players at different levels of the value chain or even at neighboring markets or cooperation of dominant or semi-dominant undertakings at the same level may distort competition in the internal market.The legislation in this field is consisted of treaty provisions, secondary legislations, and case law.Main treaty provisions regarding mergers as an agreement between undertakings are Article 101 & 102 TFEU.

Article 101: the following shall be prohibited as incompatible with the internal market: all agreements between undertakings...

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Nor does the wording of Article 101 neither 102 specifically identifies "agreements between undertakings", their qualities or forms.

In fact, Article 102 identifies an individual or a "collective action" of a group of undertakings in abusing their dominancy, but is not going further to explain the quality of the collective action. Accordingly, most of the cases relating to the collective action of two or more undertaking or the creation of a merger by horizontal and vertical agreements etc. are dealt with under the Merger regulations. Council regulation 4064/89/EEC on the control of concentration between undertakings is the first merger regulation adopted on 21st December 198947.The latest Council regulation following the 1989 regulation is the Council regulation 139/2004/EC of 20th of January 2004 on the control of concentration between undertakings that applies now (here in after Merger regulation or ECMR)48. These regulations accompanied by the Commission's guidelines on the Assessment of Horizontal Mergers49 replace the old merger regulations. Article 1(1) ECMR designate the scope of the regulation. The scope of this regulation is "all concentrations with a Community dimension as defined in this Article". Accordingly, the scope of this regulation in audiovisual sector is limited to the concentration' in the industry with "the community dimension".Article 3(1) designates the "conclusion of a concentration" as a change of control happened out of a merger of two or more previously independent undertakings by any means. In addition, Article 1(2) ECMR designates the "community dimension" as an economical importance of the company. In this regard, merger regulations on Articles 1&2 introduce different thresholds for this designation50. In addition to the major legislations regarding concentrations in audiovisual industry, the complementary legislation will be presented during the discussion. Considering that the number of mergers in audiovisual industry has increased amain in recent years, many cases have been dealt in this regard by the Commission, CFIs or the ECJ. These cases among with the legislations in this field will help understanding the situations in which a merger can lead to a distortion of competition. Moreover, the discussions in this part will help understanding the policies that EU has taken regarding this phenomenon.

47The Council, Regulation No 4064/89 EEC , 21st of Dec.1989, on the control of concentration between undertakings, OJ L 257/90 48 The Council, Regulation 139/2004/EC , 20th of Jan. 2004, on the control of concentration between undertakings, OJ L 24/1 49 The Commission, Guidelines 2004/C, 5th of Feb. 2004, Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings here in after Horizontal Merger Guidelines, OJ 31/0350 The Council, Regulation 139/2004/EC (ECMR), Article 1(2)

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10.2 Relevant Market definition Market definition is a precondition for the assessment of the affects on free competition by any form of concentration. The purpose of market definition and the quality of the definition is the same as the definition in the previous discussion. The only difference in definition in use for the competitive assessment of concentrations is the future development of the market51.

10.3 Concentration by Horizontal or vertical Agreements

Conclusion of a concentration subject to Article 1(1) ECMR is the second constitutive element necessary for the foreclosure of competition in the internal market. The ways that two or more undertakings merge or concentrate and the reasons behind the growing attempt of undertakings in doing so explain the quality and forms of these concentrations. Article 3 ECMR explains the meaning of concentration as a "change of control" and on the second paragraph exemplifies the means by which the change of control happens. Article 3(2) ECMR states that "Control shall be constituted by rights, contracts or any other means". The rationale behind undertaking's urge for vertically or horizontally merging is totally economical. As has been put on the previous discussions, the conditions of market in audiovisual industry, and the need for capital, big risks etc. is urging companies to merge. As an example, a trend toward a vertical integration has been a constant trend in audiovisuals.52A vertically integrated company by multiplying its presence over a number of markets and the value chain can hold a control over the sources of different businesses in the market. This trend is also referred as the "gate keeper" role in the industry which is apparently very common in relation to the primary audiovisual content. The same concern has been brought by the Commission in the case VIVENDI / SEAGRAM53. The Commission states; one of the concern relating the proposed concentration refers to the fact that the merging parties belong to different categories of players. This situation can make the merging entity the world’s second largest film library and the second largest library of TV programming in the EEA in terms of content.Accordingly, it can be said that the main concerns of the EU Authorities in vertical integration in audiovisual industry is the foreclosure of the Input Market.

51 R. Capito, European Media Law, p 18452 For more reading regarding this visit The Commission, M. M. Pereira, "Vertical and Horizontal integration in the media sector and EU competition law", 7th of April 2003, Brussels 53Commission, Case IV/M.2050, 13th of Oct 2000, Vivendi/Canal+/Seagram, CELEX No 300M2050

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The other concern regarding vertically integrated undertakings in audiovisual industry is the possible ability of the new merged company to interchange its market power to the neighboring markets. Considering the life cycle of the media product form its production to its exhibition and the interaction of different industries in this life cycle, the occurrence of such an action is quite possible. The two abovementioned concerns depict the two major concerns regarding vertically integrated companies in media sector. At last but not least, any form of integration, be it through a vertical or horizontal agreement results in the creation of bigger size companies regarding their assets, capital, network etc. The existence of these giant corporations with strong purchasing power can also cause inflation in the market of media contents. A simple comparison between the royalties to be paid for an access to the media content in two different time periods acknowledge this inflation. As an example the price paid for broadcasting rights of the Football WorldCups of 1990, 1994, and 1998 were EUR 241 million. This price for the same rights paid in 2002 and 2006 was EUR 1, 7 billion.54

Horizontally integrated companies are considered to be the second concern of EU authorities regarding mergers in audiovisual industry. The second place in the assessment of these kinds of integration does not reflect their lack of importance, rather; it reflects their unpopularity in the industry in comparison with Vertical integration. Horizontal agreements between undertakings are considered as an indicative factor for the Commission and narrate possible distortion of the competitive market. As a result, these forms of integration have to be announced to the Commission prior to their conclusion in respect to ECMR. The two of the main Commission's competition law related concerns regarding these agreements in audiovisual industry can be extracted from the two of the leading merger cases. Although the cases are not specifically limited to the interactions of TV-broadcasting and Movie industry, but they simulate the very concern of the Commission. In Newscorp/telepiù(comp/m.2876) then Commission states that the concentration is leading to the creation of a Monopoly and is capable to distort competition in the relevant market and make a substantial change in the market structure. As can be seen from this case, the integration of the two effective market players in the market can lead to the creation of a monopolistic situation of the newly merged undertaking and can make it capable to act to a big extend independent form competitive constraints in the market. The other main competitive concern regarding horizontal agreements in audiovisual industry is the risk for creation of a collective dominance between major market players in the market. This view has been pointed out in cases such as Sony/BMG55. Regarding the special circumstances of the market, the Commission stated that the combination of Bertelsmann Music

54 M.M Pereira, "Vertical and Horizontal integration in the media sector and EU competition law", 7th of Apr. 2003, Brussels, p.2

55 The Commission, comp/m.3333, Sony/BMG, 19th of Jul. 2004, OJ C(2004) 2815

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Group "BMG" and Sony Music Entertainment considering the discovery and development of Artists, Marketing and Sale due to the fact that there were only five market players active in the market and that after conclusion of the concentration there will be only four, the risk for creation of a collective dominance between remained undertakings is quite high.

The abovementioned discussions try to explain the conclusion of a concentration in audiovisual sector, its forms and its reasons. The second constitutive element for an unjustified distortion of competition to happen is the agreements between undertakings that in special circumstances fall within ECMR. Understanding the logic behind this 'growing trend' delves the way for the better understanding of the industry and partly explains the Commission's reactions toward them. The next part will focus on the step after the conclusion of an agreement and will analyse the EU attempts toward these mergers.

10.4 Competitive assessment of a Concentration and balancing

The previous parts discussed the mere Act of concentration and its quality. In addition, the relevant legislation in hand, Merger Regulation and its scope of application on the merger were partly assessed. More importantly, the EU concerns of each of the main forms of mergers were presented.This part focuses on the competitive assessment of a concentration as the third constitutive element. In this part, the relevant discussions on the competitive assessment and the attempts that have been taken by the EU, approval and remedies will be discussed. Before going further on analysing the competitive assessment of a merger, it is profitable to remember the different wants that has to be balanced by the Commission and by the more general EU legal policy in this field. The Commission has to make sure that the alleged concentration is not capable of distorting competition in the internal market. Consequently, the Commission acts consciously to the industry's special conditions, consumers' benefits and competitors' businesses. Objective justifications of the parties having a concentration are also taken into those considerations. This view has been taken in Commission's notification on accusation of joint control of VG Media by RTL and ProSiebenSat. 1. 56

Summary of Joint control of VG Media by RTL and ProSiebenSat. 1

'RTL is a part of the Bertelsmann Group. The company supplies television and radio content, produces its own television programmes and acquires and licenses television-broadcasting rights.

56 The Commission, IP/02/744, declaration on approval of the accusation of joint control of VG Media by RTL and ProSiebenSat. 1, 22nd of May 2002, available from http://europa.eu/rapid/press-release_IP-02-744_en.htm

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ProSiebenSat. 1 is a part of the Kirch Group and is active in the fields of free TV and new media.Under the German Protection of Copyright and Similar Rights Act of9 September 1965 (the Copyright Protection Act), VG Media, which is currently wholly owned by the Kirch Group, has been approved as a copyright management company by the German Patent and Trademark Office. VG Media’s business activities will consist of protecting media undertakings’ copyrights and related rights. In connection with cable retransmission the most important principles of the Copyright Protection Act are the licensing requirement, the protection requirement…by the German Patent and Trademark Office. The licensing requirement precludes the possibility of competitors of the notifying parties suffering any competitive disadvantage through the creation of the joint venture, as VG Media is legally required to protect their copyright and related rights if called upon to do so.Given the special legal framework governing VG Media’s activities, the creation of the joint venture is therefore unlikely to lead to any partitioning of the market.'

Meanwhile, as the field is very interacted with the social and cultural values, EU audiovisual industry and more specifically concentrated undertakings with more efficiency in the market can play an important role in preservation of EU cultural values. However, free competition in the market and its effects on the prosperity of the internal market is too essential to be disregarded and a distortion in that market in any form is not necessarily beneficial for Audiovisuals. Article 167 (4) TFEU (151(4) EC) states that "the Union shall take cultural aspects into account in its action in order to respect and promote the diversity of its culture". Although, these considerations have not been explicitly announced by the Commission in ECMR, but their considerations are obligatory for the Commission. Theoretically, Economical evaluation of an Anti-competitive effect of an undertaking in its relevant market can provide with a realistic decision on the notified concentration. However, mere economical evaluation of the situation, although is attentive to the industry's needs, customers and other competitors' benefits, is hardly capable enough to fulfil all the wants. Economical assessment by the EU authorities although not enough, but it legitimates economic base Remedies to sustain activities of the merged undertaking.Article 2 ECMR obliges the Commission to conduct a test to determine whether the notified concentration is compatible with the common market. New substantive test in European merger control (SIEC-test) as has been rephrased by the Council's new Merger regulation on 2004 has to be adopted.57 On the first look, it may appear that any concentration that falls within ECMR and has as an effect a distortion of free competition in the internal

57 For further reading on the new merger regulation visit: The Commission, Lars-H Röller & M de la Mano, "the impact of the new substantive test in European merger control", 22nd

of Jan 2006, available from http://ec.europa.eu/dgs/competition/economist/new_substantive_test.pdf (visited on 02-05-2013)

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market will certainly be foreclosed. On the contrary, the Commission has considered a second chance for the concentrated undertaking to skip the foreclosure. Recital 30 ECMR states that:

"Where the undertaking concerned modify a notified concentration, in particular by offering commitments with a view to rendering the concentration compatible with the common market, the Commission should be able to declare the concentration, as modified, compatible with the common market...".

This view is legislated by Article 8(2) ECMR that states:

"The Commission may attach to its decision conditions and obligations intended to ensure that the undertakings concerned comply with the commitments they have entered into vis-à-vis the Commission with a view to rendering the concentration compatible with the common market".

In Newscorp / Telepiù58 the Commission took the view that defining specifically the conditions and the frame work of the notified concentration instead of foreclosure of its activity is more beneficial for consumers, potential competitors and the market.

Summary of Newscorp / Telepiù

Newscorp is an international company active in production of motion pictures and TV programming and Content distribution etc.Telepiù also operates as a pay-TV broadcaster and has been solely controlled by Vivendi Universal S.A. Stream operates only in digital technology, transmitting its signals via satellite and, to a lesser extent, via cable.On 16 October 2002, the Commission received a notification of a proposed concentration of the abovementioned companies. The proposed concentration involves the acquisition of sole control by Newscorp of Telepiù and Stream with the aim of pursuing the combination of their business.pursuant to Article 4 Commission concluded that the notified operation fell within the scope of the Merger Regulation and that it raised serious doubts as to its compatibility with the common market. On the assessment of the effects of the concentration the Commission noted on point that "the merger will lead to substantial horizontal overlaps in a number of markets which are vertically related".59 It also has an effect, the creation or strengthening of a dominant position in the Italian Pay-TV market regarding that the concentration will lead to the creation of a near monopoly in the pay-TV market in Italy.

It also has an effect the creation or strengthening of a dominant position in acquisition markets, Horizontal effects in upstream affected markets by acquisition of contents, acquisition of exclusive broadcasting rights on premium films.

58 The Commission, , Case No COMP/M.2876, Newscorp / Telepiù, 2nd of Apr.2003, Brussels, C (2003) 1082 final 59 Ibid, No. 78

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The Commission noted under point 4 on Overall Conclusion on the Horizontal and Vertical effects of the concentration that Newscorp will have the monopoly as a pay-TV supplier in Italy...and if the concentration concluded Newscorp will have access to the most attractive and most comprehensive content. Moreover, no other undertaking will have the essential content to establish an alternative.

The Commission further considers that an authorization of the merger subject to appropriate conditions will be more beneficial to consumers than a disruption caused by a potential closure of Stream.

'In this respect, the Commission's findings show that, although it is true that TV-broadcasters, especially pay-TV platforms, need to buy a variety of TV content, from the demand-side viewpoint, that is to say, from a TV operator's perspective, these contents are not substitutable (a feature film and a made-for TV program do not have the same value in terms of attractiveness to consumers).52. from the supply-side, rights to TV content are traded under different pricing structures and do not have the same economic value. In addition, suppliers of specific content are not able to switch production between different types of contents.55. The markets affected by the present transaction on which the concentration creates or strengthen a dominant position with regard to the demand-side (the acquisition of the rights)'.

On point 325 the Commission concluded that considering the commitments by Newcorp on the notified concentration's future actions on provision of Media content etc. The concentration would not create or strengthen a dominant position on the market for the supply of pay-TV services, and on the markets for the acquisition of exclusive rights to premium movies,...and as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it. The concentration should, therefore, be declared compatible with the common market.

Concentration between undertakings, mergers or any other form of acquisition as a business strategy is not contrary to competition law. Although in specific circumstances it may lead to distortion of the free competition, but as a business decision, it is more likely to produce positive effects for the whole market.

The two scenarios above on abuse of a dominant position by a single undertaking and Anti-competitive effects of a concentration of two or more undertakings have tried to illustrate the most common competition law issues in audiovisual industry. The challenge is regarding the keeping of balance between the contradiction of competition law principles on elimination of agreements and/or Practices capable of distorting competitive market and the need for more efficient undertakings ready to play more importantly in the market.Disadvantages and advantages of the abovementioned scenarios were discussed to provide with a better concept of the decision-making for both businesses and EU policy makers.

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Unlike the previous titles, next parts will focus mainly not on the businesses' market behaviours and EU's responsive approaches toward them, but on the two of EU's most prominent "supports" to the industry.

In respect to section 5.3 and on the next part, this study tries to analyse the contradiction of competition Law principles on elimination of supporting schemes (in a form of exclusive and/or special rights or State Aid granted to undertakings). Interventional supports are capable of distorting competitive market and the protection of fundamental rights and principle values related to culture and audiovisual products and services. The quality and their relations with the industry will be discussed in the next chapters.

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11Public TV-Broadcasting, exclusivity and special rights granted

11.1 General remark on exclusivity and speacial rights

Exclusivities and special rights granted by member states to their national institutions have always been controversial from the competition law point of view. These special treatments outside the framework set for private sector put one side on a competitive advantage toward the other one. However, it seems that free competition and market allocation is not necessarily a guarantee for the attainment of all the commercial and non-commercial social goals. After the introduction of the first private/commercial Broadcasters during1960s in Europe as "pirate satiations" and subsequently as legal commercial Medias, the dominancy of public broadcasters faded away. The entrance of these new competitors with new legal bodies regulating them has brought new discourse besides the typical public broadcasting framework. A society has to have specific qualifications to be democratic. One of these qualifications is the provision of unbiased information to all citizens regardless of their social status or geographical position. Without a doubt, Media has been one of the main sources of information in each society. Consequently, its role is undeniable as a tool for that discourse.Accordingly and on one hand, national regulations on public broadcasting in EU have been historically "directed primarily toward the attainment of cultural policy goals"60. The fundamental principles regarding the democratic discourse of European societies and provision of unbiased information for citizens have been assumed a driving force behind the attainment of public broadcasting services. On the other hand, the coming into force of the new order has brought new concerns and obligations on the industry. Private broadcasters in a same way as other service providers are subject to EU market principles and more specifically competition law. Additionally, the inclusion of the industry as a whole to competition law, subjoins public broadcasters to the same legal framework.The inclusion may contradict in some cases with the public institution's primary tasks and the application of those assigned tasks. This contradiction has to be balanced in a way most suitable for all the stakeholders.

60 R. Craufurd Smith, Culture and European union Law, Oxford University press, 2004, p.261

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11.2 LegislationThe definition of a public broadcaster is provided by the transparency Directive (Directive 2006/111/EC)61. As Article 2(b) of the said directive states:

‘Public undertaking is any undertaking over which the public authorities may exercise directly or indirectly a dominate influence by virtue of their ownership of it, the financial participation therein, or the rules which govern it.’

The main treaty provision in this part is Article 14(ex Article 16TEC) and Article 106 TFEU (ex Article 86 TEC). Article 14 and 106 both are recognizing the role for Public services including Public TV-Broadcaster. Article 14 states:

'Without prejudice to Article 4 of the Treaty on European Union or to Articles 93, 106 and 107 of this Treaty, and given the place occupied by services of general economic interest in the shared values of the Union as well as their role in promoting social and territorial cohesion, the Union and the Member States, each within their respective powers and within the scope of application of the Treaties, shall take care that such services operate on the basis of principles and conditions, particularly economic and financial conditions, which enable them to fulfil their missions...'

Additionally, the first part of Article 106 puts obligations on member states as it states:

'Member States shall neither enact nor maintain in force any measure contrary to the rules contained in the Treaties...'

This has to be read in a way that member states granting special rights (e.g. a monopoly of TV-broadcaster) are obliged to follow Articles 18, 101 and 109 TFEU rulings on discriminations and free competition. Second part of Article 106 puts obligations on the undertakings benefiting from special treatments and exclusive rights etc.

'Undertaking...shall be subject to the rules contained in the Treaties, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them...'

The so called "public undertakings" as in this case public TV-Broadcasters have to consider treaty provision and EU principles to the same extend as

61 The Commission, Directive 2006/111/EC, 16th of November 2006, Directive on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings, OJ L 318/17

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other undertakings. The exclusion provided is regarding the actions, which are necessary for the performance of the tasks assigned to them. As it is understandable by the wording of this article, the inclusion of a "task" refers to the minimal inclusion of public tasks. This interpretation of article 106(2) TFEU is in line with the court's observation on the proportionality of the actions with the provision of the tasks assigned to these undertakings. Other leading legal instrument in respect to Audiovisuals and TV-Broadcasting is the protocol on public broadcasting which is annexed to the EC treaty by the treaty of Amsterdam62. This protocol has an interpretative role for the TEC Treaty and encompasses considerations on fundamental role of Public Broadcasting in provision of an independent media that answers the public cultural and social needs. The protocol clearly considers "the member states' competence" to define and organize their public service broadcasting institutions. 63

In other words, legislating in this part has to be in line with the Union's different wants and member states' competences.

11.3 Exclusivity and/or special rights granted to Public TV-Broadcaster and balancing

In discussing public TV-Broadcasting, the focus is on the public approaches (at Member state level and EU level) toward the industry. The exclusion of Public TV-Broadcasters from Competition Law settlements, the necessity of establishing public Broadcasting undertakings and justification for special Treatments, have been controversial. Leading justifications by public authorities and arguments questioning them are shaping the discussion in this part.

Cultural Diversity, pluralism, freedom of expression and other Fundamental Citizen Rights are protected by many means. In this regards, the most prominent legal protection is the Charter of Fundamental rights of the EU (especially after its Constitutionalisation by the Lisbon treaty). Other legal instruments protecting it vary from United Nations' Universal Declaration of Human Rights64, the Council Decision on the conclusion of the Convention on the Protection and Promotion of the Diversity of Cultural Expressions65, Copenhagen Criteria66, Statute of the Council of Europe and its main 62 Treaty of Amsterdam, the protocol on Public Broadcasting, 10th of Nov. 1997, OJ C 340 63 R. Capito, European Media Law, p 20264 Universal Declaration of Human Rights, Full Text, available from http://www.un.org/en/documents/udhr/index.shtml 65 The Council, 8668/1/06 REV 1, 11th of May. 2006, Decision on the conclusion of the Convention on the Protection and Promotion of the Diversity of Cultural Expressions European Culture Portal, available from http://ec.europa.eu/culture/portal/action/diversity/pdf/st08668.EN06.pdf 66 EU commissioner for enlargement and neighborhood policy, Copenhagen Criteria, 14th of May.2013, Copenhagen, Political Conditions, available from

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instruments67. Having in mind the abovementioned consideration, as a citizen, one is subject to different fundamental rights. These rights may be neglected easily and where there is no guarantee protecting them.

Private TV-Broadcasters are funded by advertisement fees and other sources of income except for public supports. Consequently, their policies are pretty much in line with investors' demands. Regardless of the credibility of funders to social values, this very nature of private TV-Broadcaster has raised the risk of disregarding the public benefit to maximize profitability68.Exemplarily, in the state of perfect competition where the economic base decisions are the rational common trend, an undertaking may find it economically unprofitable to provide with services in certain geographic areas or for certain minorities etc. due to the managements' decision.

Meanwhile, the economical dependence of a TV-Broadcaster to its investors may raise concerns regarding the provision of unbiased information to the society.In addition, the lack of appropriate TV-Broadcaster capable enough to fulfil the social considerations has been emphasized by Member states to justify the presence of Public undertakings in this sector. Although, in a free market economy the market will adjust itself to demands and consequently, if there is a demand for any of the social rights the market allocation has to be adjusted or justified to reflect those demands/rights69, but the situation is sensitive enough not to wait for the industry deciding on it.In response to the common trend in the industry, Public TV-Broadcasters have typically been vertically integrated. Additionally, to make sure that the content will be available in all the territory, public broadcasters may enjoy the access to the whole of the national territory and infrastructures needed.70 Such advantages bestowed by the market strategy, exclusions from competition law and rights granted by Member states, have put these undertakings subject to various questions and criticisms.

One of the questions raised from the Competition Law point of view is whether there are some other means less restrictive than Public TV-Broadcasters.More specifically Commercial TV-Broadcasters as the main competitors facing the competitive deficit have raised this question. Many arguments supporting the question have been as follows: As it is the case in Audiovisual Industry, the old technology has merged with the telecommunication technology and hence, has evolved a new http://europa.eu/legislation_summaries/glossary/accession_criteria_copenhague_en.htm67 The Council, CETS No. 001, 5th of May. 1949, Statute of the Council of Europe, Article 1, available from http://conventions.coe.int/Treaty/en/Treaties/Html/001.htm 68 This attitude has been challenged by scholars of Corporate Social responsibilities (CSR) stating that Businesses' profitability is more likely to be attained in a long run by being credible to society. For further reading see Radu Mares, "the Dynamics of Corporate Social Responsibilities, 2008, Boston, Chapters 2,3 and 5 69 T. Prosser, The Limits of Competition Law, Oxford Studies in European Law, Public Service Broadcasting: A special Case, p 20770 R. Craufurd Smith, Culture and European union Law, Oxford University press, 2004, P 174

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phenomenon. This new phenomenon makes vast options available for citizens, notably, the growth of subscribing channels and so-called non-linear TV Programmes (on-demand TV programmes). The vast number of subscribing channels and the extended availability through different platforms, can easily cover all citizens at different geographic areas, different values etc. By this meaning market-allocation in free competition can adjust automatically to protect common citizenship rights. Consequently, there will not be a place for limiting the application of Competition Law nor the ruling on the case of Italy v. Sacchi71.

Although there is an increasing number of subscribing channels, but public TV-Broadcasters are still keeping their classic popularity. As it appears from table (1), the current situation is "sort of mixed oligopoly" where the competition is between private and public operators'.72

1995 2000 95/2000Publ

icPriva

teTotal

Public

Private

Total

Public

Private

Total

Austria 2 0 2 3 2 5 8% 25% 20%Belgium 4 0 4 6 12 18 8% 67% 35%Denmark 2 3 5 3 4 7 8% 6% 7%Finland 2 2 4 2 5 7 0% 20% 12%France 5 22 27 4 79 83 -4% 29% 25%Germany 10 19 29 14 54 68 7% 23% 19%Greece 3 6 9 5 13 18 11% 17% 15%Ireland 4 0 4 3 3 6 -6% 32% 8%Italy 3 9 12 15 54 69 38% 43% 42%Luxembourg

0 1 1 0 1 1 - 0% 0%

Netherland

3 10 13 4 20 24 6% 15% 13%

Portugal 2 2 4 3 8 11 8% 32% 22%Spain 4 10 14 8 70 78 15% 48% 41%Sweden 3 9 12 9 14 23 25% 9% 14%UK 3 62 65 11 102 113 30% 10% 12%EU 50 155 205 90 441 531 12% 23% 21%Table (1): Number of National TV Channels* in the EU73

*: national channels (terrestrial, cable, and/or satellite): not including digital bouquet, local or regional channels and windows, or channels for foreign markets.

As can be seen from table (1) the growth in numbering of public TV-Broadcasters parallel with the increasing of Commercial TV-Broadcasters , strengthens the hypothesis that the growth is responsive to the growth of commercial TV-Broadcasters. Hypothetically, if t the abovementioned criticisms were persuading enough for Authorities in EU, then the case would be very different.

71 ECJ, Case 155/73, Italy v. Sacchi, 30th of Apr. 1974, ECR409 72 EIB, "An overview of The European Audiovisual Industry", P. 5973 European Audiovisual Observatory (1996, 2000), Cited in EIB, P. 59; For further information visit, A. Lange, "Some data to compare public and private TV programming (Figures in the "framework of the conference on public media services at the digital age)", July 2008, available from http://www.obs.coe.int/online_publication/expert/data_public_vs_private_tv.pdf.en

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Treaty provision and the Court's interpretations of the related Articles and the inclusion of Public TV-Broadcasters to the treaty provisions, have demystified uncertainties in this field.Although, Public TV-Broadcasters are shaped under state regulations and consequently may be fall outside the inclusion of Treaty provisions, but the Court in Case Italy v. Sacchi took the view that; "In the absence of express provision to the contrary in the Treaty, a television signal must, by reason of its nature, be regarded as provision of services."As a result other treaty provision on Internal Market Law and Competition Law are directly applicable to these undertakings. In addition, the court stated that the "cultural" element is not constitutive enough for exclusion from Article 101 and 102 TFEU74.

Considering the Courts rulings and treaty provisions, it seems that the only argument remained for Public TV-Broadcastings is in the case that the application of treaty provisions obstructs the operation in law or in fact, the particular task they are assigned to them. This argument has been taken occasionally by member states whenever public TV-Broadcasters and the exclusive and special rights assigned to them have been challenged. It noteworthy that, all the derogations from treaty provisions has to be narrowly interpreted and is only limited to proportionate national measures. Accordingly, the Commission and the Court while assessing the measures may approve the exclusion only if the measure taken is suitable to meet the objectives and is in the manner least restrictive to competition law.

The parallel importance of Competition Law and cultural and social consideration, make the EU approve the limited derogations from Treaty Provisions to fulfil other objectives. This view, although criticized by the industry, guarantees the provision of unbiased information to the citizens and subjects member states for that provision. The same kind of attitude is recognizable in the legilations relating to the national supports in the form of State Aid and the subject of Article 107TFEU (Ex 87 EC).

74 R. Craufurd Smith, Culture and European union Law, Oxford University press, 2004

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12State financial Aid to Audiovisuals

12.1 General remarks on State Aid granted to TV-Broadcasting and Movie Industry

As in chapter 7, more or less the same discussions are affirmative here. The discussions relating to State Aid to Audiovisual Industry and more specifically to Movie and TV-Broadcasting Industries are mainly concerning the admissibility and necessity of State Aid as a type of public intervention.EU and member states considerations on the protection of cultural heritage and cultural identity and the importance of audiovisual industries as one of the main cultural platforms have made legislators at both levels to grant fiscal helps to the industry. These economical supports at the member state level are in the form of a State Aid and granted to market players at specific sectors. Particularly, State Aid in audiovisual industry is mainly designed to protect the broader public concerns, firstly, by protecting cultural aspects and secondly, by protecting the businesses themselves. Evolution of State Aid in both industries has happened during different time gaps. As in state aid for public TV-Broadcasters, the set time gap can be chased back to 1970s. As has been discussed before, economical and technological developments in the industry made it possible for commercial/private sector TV-Broadcasters to enter the market. The entrance of the new competitors and the free competition with its inherent risks involved delved the way for further public interventions in the form of State Aid.75 Additionally, State Aid system directed toward the Movie Industry has started during 1920s with Italy and the UK being pioneers in that field. By the end of 1950s, this system has been already widespread in EU. 76 Not surprisingly, protections and interventions in the market in form of state Aids granted, subject member states' attempts to competition law criteria. The inclusion of these measures and available derogations from the Treaty Provisions will be discussed in this chapter.

12.2 LegislationThe main Treaty provisions regarding State Aid are Article 107 and 167 TFEU (ex Article 87 and 151EC). As Article 107 on point 1states: 75 The Commission, Communication on the application of state aid rules to public service broadcasting (text with EEA relevance), 2001, available from http://ec.europa.eu/competition/state_aid/legislation/broadcasting_communication_en.pdf76 EIB, The European Audiovisual Industry: An overview, 2001, P. 58

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'1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favoring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.'

Through Article 107 TFEU, the state aid granted by a member state "in so far as it affects trade" in the Union, is contrary to Competition law. However derogations available for Aids granted to the audiovisual industry are under number of provisions mainly Article 107 (3), 106 (2) and 93 TFEU. Article 107(3) TFEU states:

'3.The following may be considered to be compatible with the internal market:(d) Aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest.'

Additionally, Article 167 TFEU (ex Article 151 TEC) obliges the Union to contribute to the "flowering of the cultures of the Member States" and of EU. As the Article 167 (2) & (4) states:

'2. Action by the Union shall be aimed at encouraging cooperation between Member States and, if necessary, supporting and supplementing their action in the following areas: …artistic and literary creation, including in the audiovisual sector...4. The Union shall take cultural aspects into account in its action under other provisions of the Treaties, in particular in order to respect and to promote the diversity of its cultures. '

Meanwhile secondary legislations and case law sets out the framework for the Aid granted to the audiovisual Industry. The 2001 Commission Communication on the application of State Aid rules to public service broadcasting1is of a major importance. In addition, the so-called cinema communication77 provides with special rules assessing the cinematographic works and other audiovisual products.

77 The Commission, Communication COM(2004) 171 final, 30th of Apr. 2004, Communication on certain legal aspects relating to cinematographic and other audiovisual works, OJ C 123/01

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12.3 State Aid granted to TV-Broadcasting and Movie Industry, balancing

Another approach taken by Member states to support parts of the industry and specific goods or services is through Aid granted to those sections. Similarly, these forms of funding system have been granted to the audiovisual sector and specifically to TV-Broadcasting and Movie Industry.State Financial Aid granted to the industry is in line with the treaty provisions on protection of member states cultural values and the EU's broader cultural concerns. However, the injection of capital to parts of the Industry, actually and potentially, distorts Competition in the Union. The selected undertakings can strengthen their market position regardless of the competitive restraints and their position in the market. As a result, the strengthening of their market position puts other competitors at a competitive disadvantage.Competition law concerns on state aids directed to the TV-Broadcasting industry are limited to the public sector. Member states have been granting financial State Aids to public TV-Broadcasters with the same justifications for granting them exclusivity or special rights. These forms of supports are controversial in two senses. Firstly and considering the objectives of the financial state aid support, the concerns is whether the funding is going beyond what is necessary to achieve the objectives. In this meaning, the concern is about the proportionality of the State Aid granted (with evaluating its necessity and its amount). Regarding the derogations available under the treaty provisions, member states may argue in all the State Aid cases before the Commission and the Courts that the specific financial help is necessary for the achievement of the said cultural goals. This argument has to be assessed for its accuracy. The second concern is the possibility that the Aid granted is "misdirected".78

Meaning that, the goal set for the granted undertaking is not having a public service nature. Hence, the Commission's approach assessing the set programme justifying the State Aid has changed quite often. The changes are in respect to the fact that the Commission's decisions have to be in line with ECJ and CFIs rulings on the scope of the public interest.

78 R. Capito, "European Media Law", p.228

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Moreover, the political pressures by member states are undeniable. 79

Parts of the State financial Aid in each member state is directed to the Movie Industry. Both EU and Member states have granted fiscal helps to the movie industry and cinematographic products. These helps are mainly in accordance with the level of cultural importance and special characters of film products as artistic works entailing cultural messages. At the member state level, the Competitive concerns regarding State Aid granted to the movie industry are focused on the two very common models of granting them.80

1. Automatic Financial Support System: In this model, the sum of money is calculated on the box-office revenues of a film and then will transfer automatically to the producer or distributor to help them to finance their next movie.

2. Selective Funding System: this model is a form of a "soft loan" given to the producer for the future revenues.

As can be seen, the Automatic system is aiming for the sustainable competitiveness of the movie industry by rewarding for the success of the movie and using it for launching another project. Meanwhile, the Selective system is aiming to support the cultural facets of the movie products. This form of State Aid is mostly covering the creation of movies that are not necessarily aiming for a top sale. State Aid helps granted to the movie industry in all the member states are often a mixture of the two models.

The Commission and the courts in the Union while assessing any forms of governmental interventions on free competition subject to Article 107 TFEU, have to take in mind the cultural concerns at the member state and at EU level.

While analysing the legality of a State Aid granted, the Commission and the Courts have to balance the various considerations. Thus, Article 107 (3) TFEU has to be read in connection with Article 167 (4) and the obligation on the Union for taking into account "cultural aspects" and the promotion of "the diversity of cultures". It is notable that this clause was added to this Article by the Treaty of Maastricht. Additionally, from the Commission's Cinema Communication81 providing rules for the assessment of audiovisual products and the Commission's

79 Ibid80 Ibid 81 The Commission, Communication COM(2004) 171 final, 30th of Apr. 2004, Communication on certain legal aspects relating to cinematographic and other audiovisual works, OJ C 123/01

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notices on State Aids granted82, a set framework for this assessment can be derived collectively. The set framework is more or less a checkpoint list introducing five steps for the assessment of a State Aid in Audiovisuals.83

1. Legality of the State Aid granted and that it does not contain clauses that would b contrary to treaty provisions.

2. The aid is directed towards a cultural product3. The producer must be free to spend at least 20% of the film budget in

other schemes. In other words the Commission accepted territorialisation of a State Aid in terms of expenditure of up to 80% of the production budget

4. State Aid intensity (in principle) has to be limited to 50% of the production budget. However, difficult and low-budget films are excluded

5. State Aid supplements for specific filmmaking activities (e.g. post-production) are not allowed.

It appears from the abovementioned criteria and the general theme of the Courts 'decisions, that in an Undistorted Market, the cultural values and considerations of the member states weight over the community's competition law principles. The five steps above evaluate admissibility and necessity of such public interventions. The awareness of the outcomes of a State Aid for both the market and the society helps with a more sustainable growth with least negative externalities.

82 As a cornerstone decision visit, The Commission, State aid No. N591/2005- Sweden, Prolongation of State aid to support Swedish film production and filmrelated activities (The Swedish Film Institute Agreement), 22nd of Dec. 2005, Brussels, K (2005)592583 The latest extension of the criteria introduced by the Commission's cinema communication is until the end of 2012. However, the new communication in this regard is expected to be published shortly. For further information visit, EU, Commission consults on film support issues, available from http://europa.eu/rapid/press-release_MEMO-12-186_en.htm

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13Conclusion On this part, the main question of this thesis is put forward and with a better perspective on Audiovisuals and legal policies in charge, a possible answer is concluded. The better perspective on the topic is derived from the set of discussions in the three main chapters and the following headlines.

What are the reasons for the absence of competitive and equivalent European Audiovisuals in the EU Market, which is dominated by American made Audiovisuals?

This question leads to an in-depth analysis of the legal policies in charge. The answer, limited to the subject of this study, is a deduction of the set discussions as follows:

1. Having regard to the Movie Industry overall sketch and that: - An Overview of the Movie Industry shows different businesses

active at different stages of the value chain. - Each stage from the development to the distribution and

exhibition are connected and influencing each other.- Movie Industry is a risky business by nature. This innate quality

and uncertainty around the ROI rate, has made rigid any investment needed for the industry.

- The industry's tendency to concentrate, to be dominant and/or any other mean to strengthen the market position inspired from the U.S. Studio System is recognizable.

2. Having regard to the TV-Broadcasting Industry overall sketch and that: - An overview of the TV-Broadcasting Industry shows interactions

of different businesses at different stages of the value chain. - These businesses may be active at the Up-stream or Down-

stream market for TV-Broadcasting. - The value chain shows the intermediary role of the TV-

Broadcasting Industry as between Content producers (e.g. Movie Industry) and customers and the society.

- The fragmented state of the industry is recognizable.- The Industry's fragmentation and the risks involved are enough

motivations for the industry to Concentrate, to hold a dominant position and other ways of strengthening its state.

3. Having regard to the Market structure and that:- Markets in Audiovisuals are very much connected to each other

in a way that the likelihood of each one actively and potentially influences the other one.

- The interactions of the Up-stream markets and Down-stream markets in TV-Broadcasting and Movie industry are recognizable.

4. Having regard to the positions held by audiovisual undertakings and more specifically the abuse of dominancy and that:

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- Dominancy in the market is not contrary to the EU provisions yet; it obliges the undertaking holding it to act responsibly to the competitive market and stakeholders.

- The abolition of distortion of competition law subject to Art 3 and 102 TFEU concerns the trend taken by the industry for possessing a dominant market power.

- The aim for having an upper hand in the industry can be met through various arrangements.

- The common scenarios in having a dominant position in audiovisual market are applied by having an ultimate access to media content capital and, owning an IPR, Integrations etc.

- According to Cases Sacem and Filmdis, a dominant undertaking with an access to media content may refuse to supply other businesses with the needed media content.

- Abuse of dominancy may take the forms of exploitative abuse and/or exclusionary abuse.

- Considering the role of media contents as the raw material for the industry and for the new businesses in the market, we can see the sensitivity of any possible impediment in the access to media contents.

- Considering the Case Filmdis, in the case of a quasi monopoly undertaking, the damages are not limited to the mere exhibitors. Similarly, the consideration of the nature of Audiovisuals approves this concern.

- The Commission's notice on the Cases 60 and 61/84 on the role of exhibitors shows their importance for the movie industry.

- Audiovisual products are having double characters as economical (e.g. raw material for exhibitors) and cultural.

- The cultural quality has made audiovisuals subject to social concerns and fundamental rights as a citizen.

- The economical assessment of an abuse of dominancy can provide with a better assessment of the factual influences.

- Introducing a safety zone for a dominant undertaking, (a gap between 10 or 15% to 70% of the relevant market share) is more considerable to the realities of the industry.

- As has been stated by the court, the competition law protects competition in the market and not the competitors.

- A dominant undertaking in Audiovisuals is tolerated as long as it is acting responsibly and attentively to the market.

5. Having regard to the concentrations in Audiovisuals by vertical or horizontal agreements and that:- Being attentive to Audiovisual's nature and the market dimension

means that the EU realizes the rationale behind the urge for concentration in the industry.

- An efficient size companies with higher risk-taking ability makes a good opportunity for a more efficient industry with an equivalent competitiveness.

- The main treaty provisions are Articles 101 and 102 TFEU and the general rules on competition law.

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- The two articles are trying to control the growing trend toward concentrations in Audiovisuals. Moreover, article 167(4) obliges the union to take into account cultural aspects while regulating the area.

- ECMR, in line with the treaty provisions, is the main legal body regarding horizontal and vertical agreements.

- The business's trend to concentrate is an attempt to easing up the hefty expenses and uncertainties by extending through the value chain and possible neighbouring markets. This network will provide the business with stronger economical position in relation to its competitors.

- A concentrated undertaking with an extended market presence and a stronger and market position, is more likely to impede competition actively or potentially for its competitors.

- Economical considerations urging the industry for joining the forces are not necessarily in line with the competition law principles.

- According to Case Vivendi/ SEAGRAM , vertically integrated audiovisual undertaking may take "the gate keeper" role by having control over the sources of different businesses.

- The main concerns regarding vertically integrated audiovisual undertakings are a possible foreclosure of the input market and a possibility of interchanging the market power to other markets.

- Giant undertakings raised out of concentrations may cause inflation on the market for media content. In that sense, it may also cause an exploitation of end-users of media contents.

- Concentrated audiovisual undertakings with a stronger market positions, and the results of business decisions, are more likely to help gaining competitiveness in relation to the U.S. made Audiovisuals. Meaning that, the positive externalities of such an undertakings are undeniable. Theses externalities are beneficial for the whole industry and consequently for preservation of the European cultural heritage.

- According to RTL Case, a concentrated undertaking may raise the risk of partitioning the market.

- The mere economical assessment of a concentration can hardly balance all the wants and principles.

- Hence, article 2 ECMR has introduced a "new substantive test" and criteria to assess a concentration.

- As in the case of Newscorp/telepiù, a second chance is given to a concentrate undertaking fallen under ECMR and in a risk for foreclosure. The possibility is available in a form of commitment by the undertaking to assure it is not going to distort actively or potentially free competition in the market.

- Although EU and the industry are aware of the need for concentrations and its positive externalities but, free market principles and treaty provisions are too essential to be disregarded.

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- Apparently, the balancing of different wants and values are still the main "want" in this section. EU authorities and legislations are supporting the businesses limited to the treaty provisions.

6. Having regard to Public TV-Broadcasting and exclusivities and special rights granted by Member states and that:- The balancing of all the wants and principles and various facets

of any attempts taken in Audiovisuals is not limited to the measures taken by the businesses rather, it covers all the measures at the member state or EU level including public interventions.

- Public TV-Broadcastings are assigned by member states, in accordance with their territorial competence, to fulfil social values and cultural concerns. However, they are subjected to treaty provision too. The case Sacchi is remarkable in this sense.

- Their public role and the tasks assigned to them justify their derogation from competition law principles. However, these derogations have to be balance with negative externalities of public interventions and distortion of competition law and possible damages to other competitors and end-users.

- Considering the definition of public undertakings provided by Article 2(B) of the Transparency Directive and the interaction of article 14 and 106 TFEU, we can conclude that member states limited to the tasks assigned to public TV-Broadcasters, can derogate from treaty provision.

- Yet, those undertakings have to consider treaty obligations on Article 18, 101, 109 TFEU.

- Amsterdam Treaty emphasises on the Public and the humanitarian aspects of public TV-Broadcasters roles. Additionally, other legal instruments on the EU level (e.g. the charter) and/or international conventions on the cultural diversity, freedom of expression, minorities' rights, citizen' rights etc. are affirming the role.

- The statistics issued by The European Audiovisual Observatory shows that Public TV-Broadcasters are continuing to be active parallel to private/commercial sector.

- Private TV-Broadcasters are funded by many sources rather than Public supports. The business model of a Cable-TV may oblige the Broadcaster and the managements to refuse to provide services whenever that provision is not economically beneficial.

- Public broadcasters on the contrary, are hardly limited by the managers' economical business decisions. The tasks assigned to them are justifying the public supports they benefit from.

- Private TV-Broadcasters argue that the technological advantages in the field and accessibility and adjustability of TV-channels to all citizens alternate the existence and justifications of Public-Broadcasters.

- Exclusivities and special rights granted, are raising up the risk for creation of a monopoly, partitioning of the market, abuse of dominancy etc.

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- A democratic society has specific qualifications that have to be met. One of these qualifications is the provision of unbiased information to all citizens.

- Free competition and the market allocation is not necessarily enough guarantees for the protection of fundamental rights and social values by private/commercial TV-Channels.

- The balance has to be made between different wants and values including humanitarian and social goals, abolition of distortion of competition by public intervention etc.

- EU approaches toward these Broadcasters are in a way that it approves states' interventions limited to special circumstances. Firstly, the exclusivities and special rights granted have to be proportionate with the tasks assigned. Secondly, the notion of 'tasks' refers to the minimal inclusion of the public tasks.

- It seems that the EU is conscious about the negativities of public interventions in the market for the competitors and the whole business. However, EU will not cease the provision of the fundamental rights in hope that they will be provided through market allocation and free competition.

7. Having regard to the State aid supports to Public TV-Broadcaster and the movie industry and that:- The balance has to be kept between the EU considerations on the

industry ( its vital need for financial support and capital) and that injection of capitals to the specific sectors in the industry is contrary to competition law in a way that it strengthen the market power of a benefited undertaking in comparison with their competitors.

- The concerns and justifications regarding the State Aid granted to Public TV-Broadcasters are pretty much the same as the notions behind the exclusivity and special rights granted.

- Article 107 TFEU generally considers any form of intervention in the free competitive market, contrary to treaty provisions on competition law. However, article 167 TFEU puts as a general obligation, the contribution to the Union's cultural considerations.

- Considering the connection between Article 107 and 167, it can be concluded that Article 170(3) TFEU has to be read with Article 167(4).

- Derogations from treaty provisions are available for State Financial Aid to the industry under Articles 107(3), 106(2) and 93 TFEU.

- Regarding the State Aid granted to the movie industry, two models are applicable: a) Automatic financial and b) Selective funding system

- The entrance of new private TV-Broadcasters and the new competitive environment they caused, has partly justified further helps granted in the form of State Aid.

- From the competition law perspective the question is the admissibility and the necessity of a State Aid.

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- Regarding the movie industry, an injection of capital can support, to the big extend, industries active in the sector in competition with the dominant market players (e.g. with U.S. Audiovisuals).

- Main Competition law concerns regarding State Aid granted to the movie industry are a) the proportionality of the State Aid and b) the concern that the State Aid granted is misdirected.

- State Aid granted to the movie industry is meaningful by considering the cultural values of audiovisual contents.

- The policy is in line with the obligation for cooperation on cultural sector. Additionally and in respect to the movie industry, the policy is in line with the industries' want on gaining an equivalent competitive position in relation to other competitors.

- State Aid helps granted are following five-step criteria introduced by the Commission's Cinema Communication and Commission's notice on State Aid.

- The criteria cover the legality, the aim, thresholds introduced for territorialisation of state aid, threshold introduced for the production costs and State Aid for specific filmmaking activities.

- It appears from the criteria and the Courts' rulings that in an undistorted market, the cultural values and social considerations of a member state weights over the competition law principles.

- It appears that EU is considerable to the distortions caused by public interventions in the form of State Aid. However, EU is also attentive to the industries' sectoral needs for fiscal supports.

- It seems that EU is emphasizing on the sustainable growth of the industry rather than an economical sudden boost. The sustainability in the industry can be achieved by being conscious about all the facets of the industry including the externalities of a State Aid.

Considering the above statements, we can conclude that:i. EU's General Theme in accordance with the audiovisual

industry is on keeping the Balance of different and seldom contradictory wants and values.

ii. EU's Ultimate Goal is a Sustainable Growth of the industry rather than a sudden boost in the market share. This Uncompromising goal can be achievable by being Conscious of Various Facets of Audiovisuals.

iii. EU's Understanding of Audiovisuals Internalizes the Double Nature of Audiovisual and is Fundamentally Different from its U.S Counterpart.

In other words, it can be stated with a complete confidence that the differential in the audiovisual market share is originated from two different understandings of the word "Audiovisuals".

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14Bibliography

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Lectures:

A. Lange, "Some data to compare public and private TV programming (Figures in the "framework of the conference on public media services at the digital age)", July 2008

Websites:

http://www.obs.coe.int/about/oea/pr/desequilibre.html (20-05-2013)

http://www.eib.org/attachments/pj/pjaudio_en.pdf (20-05-2013)

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http://europa.eu/rapid/press-release_MEMO-12-186_en.htm (22-05-2013)

Legislation:

Consolidated version of the Treaty on the functioning of the European Union (TFEU), OJ 2012/ C 326

Consolidated version of the Treaty on the European Union (TEU), 9th of May 2008, OJ 2008 C 115/13

Charter of Fundamental Rights of the European Union, 2010/C 83/02, 30th of Mar.2010, OJ 2010/C 83/02

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Treaty of Nice (amending the TEU, TEC and certain related Acts), 2001/C, 10th of Mar.2001, OJ C 80/1

Treaty of Amsterdam, the protocol on Public broadcasting, 10th of Nov.1997, OJ C 340

Statute of the Council of Europe, CETS No. 001, the Council, 1949

Secondary Legislation:

Directive abolition of restrictions on the use of cable television networks for the provision of already liberalized telecommunication services (amending

Directive 90/388/EEC), 95/51/EC, the Commission, 18th of Oct.1995, OJ L256/49

Directive on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings, 2006/111/EC, The Commission, 16th of Nov. 2006, OJ L 318/17

Decision on the conclusion of the Convention on the Protection and Promotion of the Diversity of Cultural Expressions, 8668/1/06 REV 1, The Council, 11th of May. 2006

Television without frontiers Directive, 89/552EEC, The Council, 1989(revised in 1997), (TVWF)

Audiovisual Media services Directives, 2010/13/EU, EP and the Council, 10th of Ma.2010, (AVMSD)

Regulation on the control of concentration between undertakings The Council, 139/2004, 20th of Jan 2004

Regulation on the control of concentration between undertakings, No 4064/89 EEC, The Council, 21st of Dec.1989, OJ L 257/90 P 13 

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Recommendation on the digitalization and online accessibility of cultural material and digital preservation, the Commission, 2006/585/EC, 25th of Aug.2006, OJ L 236/28

Recommendation of the European Parliament and of the Council on film heritage and competitiveness of related industrial activities, 2005/865/CE, EP and the Council, 16th of Nov 2005

Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings , Guidelines 2004/C, The Commission, 5th of Feb. 2004, OJ 31/03 (Horizontal Merger Guidelines)

Notice on the definition of relevant market for the purpose of community competition law, 97/C 372/03, The Commission, 9th of Sep.1997, OJ C372/5

Copenhagen Criteria, EU commissioner for enlargement and neighborhood policy, 14th of May.2013, Copenhagen

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International Law:

Universal Declaration of Human Rights, The United Nations

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15Table of Cases

Court of Justice of the European Union

ECJ, Case 322/81, Michelin v. Commission, [1983]

ECJ, Case C-52/09, Konkurrensverket v. TeliaSonera AB, [ 2011]

ECJ, C 85/76, Hoffman-La Roche v. Commission, [1979]

ECJ, Joined Cases of C 241/91, C 242/91, Magill TV Guid/ITP& BBC and RTE , [1995]

ECJ, C 395/87, Ministère Public v. Tournier(Sacem), [1989]

ECJ, Joined Cases 60 and 61/84, CINÉTHÈQUE v FÉDÉRATION NATIONALE DES CINÉMAS FRANÇAIS Joined, 11th [1985]

ECJ, C 155/73, Italy v. Sacchi, [1974]

The European Commission:

The Commission, C IV/M.2050, Vivendi/Canal+/Seagram, [2000]

The Commission, C Comp/m.3333, Sony/BMG,[2004]

The Commission, C IP/02/744, declaration on approval of the accusation of joint control of VG Media by RTL and ProSiebenSat.1 [2002]

The Commission, C Comp/m.2876, Newscorp / Telepiù, [2003]

The Commission, State aid N591/2005- Sweden, Prolongation of State aid to support Swedish film production and filmrelated activities (The Swedish Film Institute Agreement), [ 2005]

General Court: CFI, British Case 95/04 P, Airways plc v. Commission , [2007]

CFI, Case T-62/98, Volkswagen AG v. Commission, [2000]

Member state institution:

France Competition Council, Decision No 04-D-44, Ciné-Théâtre du Lamentin v. Filmdis, [2004]

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