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Hollywood In EU Spotlight as TV Probe Said to Escalate

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Hollywood studios including 20th Century Fox as well as some of the European Union’s biggest pay-TV companies face an EU antitrust complaint over movie-licensing deals that regulators claim thwart cross-border competition.

EU regulators may send a so-called statement of objections to five studios and five broadcasters as soon as next month, said three people familiar with the case who asked not to be named because the matter isn’t public.

The move would escalate a 2014 probe into how contracts with EU broadcasters, including U.K.-based Sky Plc and its German and Italian units, curb the sale of movies and TV programs outside their home markets. Other film companies involved are Time Warner Inc.’s Warner Brothers unit, Sony Pictures, Comcast Corp.’s NBCUniversal Media and Viacom Inc.’s Paramount Pictures.

The EU has made competition in the digital market place one of its top priorities. Aside from clashing with Google Inc. over alleged abuse of market power, antitrust chief Margrethe Vestager opened an industrywide investigation into barriers that block access to Internet-based services and content -- including films and TV shows -- across the 28-nation EU.

France’s Vivendi SA and Spain’s DTS Distribuidora de Television Digital SA may also get the EU complaint, the people said.

The EU case into so-called absolute territorial protection clauses was triggered by a ruling from the bloc’s top court in 2011 that the English Premier League’s geographic restrictions limiting where TV channels can show its soccer matches breached competition law.

Rapid Escalation

Sending a statement of objections, or SO, laying out the EU’s case marks a rapid escalation of a probe Vestager inherited when she took office at the end of last year.

While SOs are typically a precursor to fines in price-fixing probes, regulators can instead order companies to change their business practices, including contractual terms. That’s the most likely scenario in this case, one of the people said.

NBCUniversal, Sony Pictures, Paramount and Vivendi’s Canal Plus didn’t immediately respond to e-mails seeking comment.

Warner Brothers, Sky, the European Commission in Brussels, Telefonica SA, owner of DTS, and Rupert Murdoch’s 21st Century Fox Inc. all declined to comment. Twentieth Century Fox is the film studio of 21st Century Fox. Murdoch also owns a 39 percent stake in Sky.

Exclusivity Clauses

The EU considers that such exclusivity clauses violate its competition rules and allow studios to gain more revenue by dividing up the market for their content, the people said. Regulators want to get rid of such restrictions, giving TV companies the right to broadcast or Web stream to customers wherever they are based in the 28-nation bloc.

The commission’s goal of extending the availability of films across the 28-nation bloc is difficult to achieve as long as the EU doesn’t have a more harmonized copyright system in place, one of the people said.

This conflict between different national copyright laws and the EU’s wish to open up access to films through the use of antitrust law is at the heart of this case, the person said.

EU regulators are requesting the companies involved to de-classify some of the documents they have supplied to the commission, one of the people said.

This step, which allows the EU to share information about its case, is seen as a clear signal that a statement of objections is on the way.

Google Case

In the Google case, a formal complaint followed weeks after regulators asked people to open up their files. Getting an SO also doesn’t rule out a potential settlement or the EU eventually dropping the case.

As part of its separate probe into e-commerce barriers, the EU said last month it will also examine limits barring digital content from being shared more widely.

“If they are anti-competitive we will not hesitate to take enforcement action under EU antitrust rules,” Vestager said.

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