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Walt Disney Co. Says It Will Oppose European Union Antitrust Action

The Walt Disney Co. said it would “vigorously” oppose any action that the European Union takes as part of an antitrust investigation of pay TV operator Sky and six major studios.

In a statement given to several media outlets, Disney said, “The impact of the commission’s analysis is destructive of consumer value, and we will oppose the proposed action vigorously.”

“The Walt Disney Company is a leader in embracing new and innovative digital technologies that bring its unique entertainment to families and fans worldwide,” the studio said in a statement. “Our approach is one that supports local creative industries, local digital and broadcast partners and, most importantly, consumers in every country across the E.U.”  

The E.U.’s European Commission, its executive branch, announced on Thursday that it had launched an antitrust investigation of the claim that licensing agreements between the studios and Sky are breaching competition rules.

The E.U. argues that consumers from across Europe should be allowed access to Sky’s pay TV services in the U.K. and Ireland. The investigation is focusing on so-called geo blocking, or contract clauses in which Sky is required to block access to movies to consumers outside of Ireland and the U.K. The EU argues that such practices amount to “territorial exclusivity” that “eliminate cross-border competition between pay-TV broadcasters and partition the internal market along national borders.”

The commission “takes the preliminary view that each of the six studios and Sky U.K. have bilaterally agreed to put in place contractual restrictions that prevent Sky U.K. from allowing E.U. consumers located elsewhere to access pay TV services available in the U.K. and Ireland,” according to a statement issued by the commission.

Paramount, 21st Century Fox and Sony Pictures Entertainment had no comment. A representative for NBCUniversal did not immediately respond to requests for comment. A Warner Bros. spokesman said, “We are cooperating fully with the European Commission’s investigation. It is premature to comment further at this time.”

A spokeswoman for Sky said, “The European Commission is examining cross border access to pay TV services across a number of member states. As part of its ongoing enquiry, we have received a statement setting out the commission’s preliminary views. We will consider this and respond in due course.”

The preliminary finding from the commission is that the studio contracts with Sky violate E.U. rules that prohibit the restriction of sales of products “cross-border in the internal market responding to demands from customers not solicited by the seller.”

George Georgiev, a law professor at UCLA who has worked at the European Commission’s Directorate General for Competition in Brussels, noted that the case is represents just the latest effort by the E.U. to remove geographic restrictions within the European Union, having done so in other areas like telecommunications, banking and energy.

“The ‘digital single market’ is an area of particular focus for the E.U. right now because it sees itself as lagging behind the U.S. in innovation-focused areas which drive economic growth,” he said via email.

The European Commission is planning to propose a modernization of copyright rules to allow for wider access of online content across member countries.

“Geographic restrictions are fairly standard in such contracts and have been thought to be protected by copyright law,” he said. “However, there is sometimes a tension between copyright law, which permits certain restrictive practices, and antitrust rules, which generally prohibit the partitioning of markets. This case is a clear sign that the E.U. is seeking to remake or, as the Brussels authorities might say, ‘modernize’ E.U. copyright law.”

The European Commission is also looking at similar cases involving other pay TV providers, including Canal Plus in France, Sky Italia in Italy, Sky Deutschland in Germany and DTS in Spain.

In the case of Sky, Georgiev said the E.U.’s goal seems to be to make sure that Sky U.K. has the freedom to decide whether to accept offers from customers outside the U.K., as well as to make sure that U.K. pay-TV subscribers can access movies in other areas of the union.

The next step in the investigation will be for the studios and Sky to respond, after which the commission will make a final decision.

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