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Viasat's business terms

29. marts 2006

4/0120-0289-0009/SEK/MM The Council meeting 29st March 2006

On March 29 2006 the Danish Competition Council concluded that Viasat’s business terms, which stipulates that Viasat’s TV-channels be placed in the best TV-channel package after the TV-channel package containing the “must carry” channels, did not infringe Article 81 or Article 82 of the Treaty, respectively section 6 and 11 in the Danish Competition Act.

The case was initiated by a complaint from the Danish Cable Television As-sociation (DCTA). The DCTA argued that Viasat’s business terms restricted competition between the broadcasters. Furthermore, the DCTA claimed that Viasat’s business terms restricted local cable networks options when determining the composition of TV-channel packages.

Viasat is vertically integrated and acts both as a broadcaster and a satellite distributor. Viasat’s business terms regulate the conditions between Viasat as a broadcaster and the local networks and cable distributors.

When defining the relevant product market it is necessary to distinguish be-tween three different types of TV channels: 1) free to air TV financed 100 pct. through advertising; 2) mini pay channels financed both through advertising and subscription fee and 3) premium channels financed 100 pct. through subscription fees.

In the present case the relevant market was defined as the market for free to air channels and mini pay channels, with the exception of the TV-channels covered by section 6 (4) in the Danish Radio and Television Act – “must carry” channels – which must be carried in the first package.

“Must carry” channels are not in direct competition with other free to air channels or mini pay channels, because local cable networks by law are re-quired to distribute these channels.

The geographical market for free to air channels and mini pay channels was defined as Denmark.

In determining whether the claim in Viasat’s business terms has had an appreciable effect on competition the Danish Competition Authority (DCA) found that there was no direct competition between broadcasters as to which TV-channel package their TV-channels could be placed in. It is up to the local cable network to decide which package each channel is placed in, and the packaging is not always determined according to how popular channels are.

Furthermore, the DCA found that Viasat’s TV-channels are among the most popular and would therefore in most cases be placed in the best package even if the claim had not been part of Viasat’s business terms.

Finally the DCA appraised whether Viasat has a dominant position on the relevant market and whether the claim in Viasat’s business terms constituted an abuse of dominant position.

Viasat has a market share < 40 pct but is vertically integrated and has purchased important live broadcasting rights to matches from the Danish na-tional football league and Champions League. Finally, Viasat has been able to raise prices significantly without loosing a noticeable number of subscribers. The DCA therefore concluded that Viasat most likely possesses a dominant position. A final conclusion was, however, not necessary as the DCA concluded that Viasat’s business terms did not constitute an abuse of dominance.

The DCA based its conclusion on the facts that Viasat’s business terms did not differ from other broadcaster’s business terms, and that Viasat’s com-petitors had not been able to point out any harmful effect of the business terms.

The DCA therefore concluded that Viasat’s business terms did not infringe section 6 or 11 in the Danish Competition Act, respectively Article 81 or 82 of the Treaty.