Vertical Effects in Competition Law and Regulatory Decisions in Pay-Television: France, the United Kingdom and the United States
74 Pages Posted: 11 Jun 2015 Last revised: 13 Oct 2015
Date Written: June 8, 2015
This paper examines vertical effects in competition law and regulatory decisions in pay-television markets in France, the United Kingdom and the United States, with a focus on vertical input and customer foreclosure, exclusive dealing, countervailing buyer power and some aspects of the implementation of remedies. Its inception in the discussion surrounding convergence is justified by the importance of vertical effects in consolidation and vertical integration trends between the telecommunication and pay-television industries. Although convergence between these two industries may be considered both from the vertical (vertical integration) and horizontal (service bundling) perspective, this paper only addresses its vertical aspects. Among all types of vertical effects, only those judged more relevant by the authorities, and subject to a greater degree of scrutiny are being addressed, as explained in Section 1.
First, we examine the different treatments of buyer power and its use as an argument to justify relaxing requirements for the authorisation of mergers in France and the United Kingdom (countervailing buyer power). Second, we conduct an exhaustive assessment of vertical foreclosure (both input and customer foreclosure) in relation to its regulatory treatment in these countries. In a separate section, exclusive dealing and related competition law practice are assessed in order to discern in which situations it can be pro- or anti-competitive, including future market structures. Finally, a section discusses the pros and cons of having wholesale reference offers for pay-television content against the use of arbitration mechanisms to prevent vertical foreclosure.
The overall conclusion of the paper is that, while the United States has been moving away from stringent ex-ante regulation in pay-television markets, justified by an improvement in competition dynamics, France and United Kingdom have only partially succeeded in addressing these concerns – in many ways more serious that in the United States – due to a lack of a legal framework to issue ex-ante regulation.
The empirical evidence for this paper is based on an exhaustive assessment of all related competition law and regulatory decisions in pay-television markets in France, the United Kingdom and the United States. The Annex includes a summary of vertical effects in antitrust and merger decisions in these countries from 1996 to 2014.
Keywords: competition, pay-television, convergence, telecommunications, vertical foreclosure, mergers, regulation
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