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Approval Agreement for Biblioteksmedier A/S

18. juni 2008

Journal nr. 4/1020-0100-0306/MES/ASL

The Council Meeting on 18 June 2008

Having regard to Section 16 a of the Danish Competition Act, the Danish Competition Council has adopted a decision in which the Council made the commitments offered by Biblioteksmedier (former DBC Medier) to prevent infringement of Section 11 of the Danish Competition Act and Article 82 EC legally binding.

Facts of the case

Biblioteksmedier sells lending materials such as books, CDs, DVDs, computer games and audio tapes to public libraries in Denmark.

According to section 19(3) of the Danish Copyright Act copies of cinematographic works may not be distributed to the public through lending without the consent of the producer. Thus, the public libraries have to buy copies of films and computer games which have been cleared with the producers. The public libraries buy these cleared copies through distributors, as it would demand considerable resources for the libraries if they had to clear the films and computer games for lending with the producers themselves. The public libraries choose their distributors through public tenders for periods of 2-3 years. It is important for distributors to participate in these tenders to hold a wide selection of popular titles, including films and computer games regarded popular by the borrowers. These consist among others of films from “Danmarks Radio” (Danish Broadcast Cooperation) and “Det Danske Filminstitut” (Danish Film Institute)

Biblioteksmedier has entered into exclusive agreements on distribution of films and computer games to the public libraries with several producers. According to Biblioteksmedier’s competitor, the exclusive agreements make it difficult for other distributors of lending materials to win the tenders.

Background

On 31 May 2006 the Danish Competition Council adopted a decision that Biblioteksmedier’s exclusive rights to a number of films and computer games intended for distribution to libraries did not constitute an infringement of sections 11 of the Danish Competition Act and Article 82 EC. The Council found that Biblioteksmedier with a market share clearly above 50 per cent. had a dominant position on the market for distribution of films and computer games used for lending to public libraries in Denmark. However, since the number of titles which Biblioteksmedier had exclusive rights to was limited, the Council did not find that the exclusive rights of Biblioteksmedier constituted a violation of section 11 of the Danish Competition Act and Article 82 EC.

This decision was appealed to the Competition Appeals Tribunal which on 8 May 2007 annulled and remitted the Council’s decision for reconsideration. The Appeals Tribunal held that there was not sufficient factual support in the Council’s decision to conclude that the effect of Biblioteksmedier’s exclusive rights was so negligible that it did not constitute an abuse.

Subsequently, Biblioteksmedier has submitted a set of commitments to the Danish Competition Authority. In these Biblioteksmedier in general abstains from entering into exclusive agreements on distribution of films and computer games to public libraries. Biblioteksmedier can still enter into exclusive agreements on I) distribution of Danish produced documentary films to public libraries and II) distribution of Danish produced technical films to public libraries. The stipulation on exclusivity can only apply to such films' first publications and shall last no longer than 12 months and cannot be extended. Biblioteksmedier shall abstain completely from entering into exclusive agreements with “Danmarks Radio” and “Det Danske Filminstitut”.

The Danish Competition Authority’s investigations show that the number of titles covered by exclusivity is below 1 per cent of the total number of film marketed to public libraries. The most popular titles (e.g. blockbusters, children’s film, and TV-series) are not included in the exception where Biblioteksmedier can apply stipulations on exclusivity. This will further reduce the importance of the exception. Furthermore, any provision of exclusivity cannot have duration of more than 12 months (against earlier periods of 5 years and a larger amount of titles covered by exclusivity).

Consequently, the Danish Competition Council has adopted the decision making the commitments, offered by Biblioteksmedier, legally binding.