In its judgment of 9 December 2020 (Group Canal +/Commission, C-132/19 P), the Court of Justice clarified the Commission’s obligations under Article 9 of Regulation 1/2003. While the Commission may accept and make binding the commitments offered by an undertaking under investigation to meet the competition concerns identified in a preliminary assessment, it cannot do so without considering the effects of those commitments on the interests of third parties.
The case concerned licensing agreements on audio-visual content concluded between Paramount and the main pay TV broadcasters of the European Union, including Sky UK and Canal +. In 2015, the Commission sent Paramount a statement of objections concerning certain clauses in the licensing agreement concluded with Sky which restricted the ability of broadcasters to accept passive sales, thereby restricting the provision of cross-border pay TV services and leading to territorial exclusivity. Those clauses were in fact intended to limit Sky’s ability to respond favourably to unsolicited requests from consumers resident in the EEA but outside the UK and Ireland while Paramount was required to prevent EEA broadcasters, other than Sky, from accepting requests from consumers in the UK and Ireland.
In 2016, the Commission accepted the commitments offered by Paramount in order to address the concerns raised and made them legally binding. In substance, Paramount undertook no longer to act in order to enforce the clauses leading to the broadcasters’ absolute territorial protection. Canal +, which had concluded a licensing agreement with Paramount and was granted an absolute territorial exclusivity on the French market, brought an action before the General Court seeking annulment of the commitment decision, arguing that the commitments in question could not be relied on against it. That action was rejected by the General Court considering that the commitments did not bind Paramount’s contracting partners and that these third parties, including Canal +, could enforce the clauses of the licensing agreements before national courts.
On appeal, the Court of Justice considered that the General Court erred in law in its assessment of the effect of the commitment decision on the contractual rights of third parties such as Canal +. Indeed, the Court of Justice pointed out that, when applying the proportionality test in the context of Article 9 of Regulation 1/2003, the Commission is not only required to verify whether the commitments offered are appropriate to address its own competition concerns but must also consider the impact of those commitments on the contractual rights of third parties so that those rights are not deprived of their substance.
In addition, the Court of Justice considered that the General Court could not refer such contracting partners to the national courts in order to have their contractual right enforced. Indeed, a national court cannot order Paramount to honour its obligations under its contract with Canal + without contravening the Commission’s commitments and therefore without infringing the provisions of Article 16 of Regulation 1/2003 which prohibit national courts from adopting decisions running counter to an earlier Commission decision on the matter.
Consequently, the Court of Justice set aside the judgment under appeal and, taking the view that the state of the proceedings permits final judgment to be given, it annulled the Commission’s commitment decision. Indeed, the Court of Justice considered that the Commission infringed the principle of proportionality as, by adopting the commitment decision, it rendered the contractual rights of the third parties meaningless, including the contractual rights of Canal + vis-à-vis Paramount.
Please contact Pierre de Bandt or Jeroen Dewispelaere for further information about this case and/or for general legal advice relating to competition law.