Break point to BT Sport in the 5th set against Sky

The battle between BT and Sky in the vast market of sports broadcasting rather has the feel of a five set match between Roger Federer and Rafael Nadal in times gone by.

In the Courts it is advantage to BT, following the recent decision of the Court of Appeal ([2014] EWCA Civ 133)¹ in an appeal brought by BT against a decision of the Competition Appeal Tribunal² (“CAT”) (“the Appeal”) (in which Ofcom, Virgin Media and the Football Association Premier League were also parties).

The Appeal was a colossal legal battle argued by no fewer than four silks and eight junior counsel, on appeal from a hearing before CAT which lasted for 39 days and resulted in a 330 page judgment!

It will be no surprise, therefore, that the judgment of the Court of Appeal does not make for light reading either. The purpose of this article is to summarise what was in issue before the Court of Appeal, and what was decided.

Pay TV is big business. Sky had (at the material time) a right to broadcast major sporting events on “core premium sports channels” (or “CPSCs”). Other companies such as BT and Virgin Media are competitors in the Pay TV market. Sky has always been prepared to retail, for a fee, the CPSCs on these competitor’s platforms.

Ofcom regulates Pay TV broadcasting. Following detailed consultation from 2007 onwards, Ofcom issued a statement on 31 March 2010³, concluding, among other things, that:

1. Sky had a “practice” which consisted of a “strong reluctance” to negotiate wholesale deals for CPSCs with retailers except where there had been a prospect of regulatory intervention had it not done so, in order to maintain two “strategic objectives”.
2. This practice was prejudicial to “fair and effective competition” in the Pay TV market.
3. Further, where Sky entered into discussions as to the wholesale pricing for CPSCs it would do so only on the basis of a price referred to as the “rate-card” price, and any discounts to this price would depend on the percentage of a particular retailer’s customers that would subscribe to Sky’s CPSCs via that retailer. This approach was, in Ofcom’s view, likely to reduce incentives to innovate and would also be an impediment to competition.
4. As a result of Ofcom’s findings it declared that pursuant to section 316⁴ of the Communications Act 2003 (“CA 2003”) a term was imposed in the licence of Sky fixing the price that it must offer the wholesale of CPSCs, the wholesale must offer (“WMO”) obligation.

Sky appealed this decision arguing that Ofcom did not have jurisdiction to impose the WMO obligation, and challenging the conclusion of fact by Ofcom as to the existence of the practice referred to in point (1) above. Before CAT, Sky lost the jurisdictional argument but succeeded on the merits in overturning the finding of fact as to the existence of “the practice”. CAT found that Sky did on the whole engage constructively in negotiations with regard to the wholesale supply of CPSCs.