New Preventive Measure in the Pay TV Market

1. Introduction

On August 18, 2011, the Secretary of Domestic Trade (the “Secretary”) issued a new preventive measure within the pay TV market and ordered an important provider of pay TV signals to refrain from entering into certain conducts which may infringe the provisions set forth in the Antitrust Law No. 25,156 (“Antitrust Law”). The Secretary based its decision on Resolution No. 721, issued by the National Commission for the Defense of Competition (“Antitrust Commission”) on August 17, 2011 (the “Resolution”).

This Resolution was originated by an accusation filed before the Antitrust Commission by the attorneys of the pay TV operator Telecentro S.A. (“Telecentro”), and was addressed against Fox Sports Latin America S.A. (“Fox Sports”) in view of certain irregularities evidenced in the commercialization of the sport TV signals.

2. Background

Pursuant to Section 35 of the Antitrust Law, the Antitrust Commission is entitled to issue, during the course of an investigation, preventive measures establishing the compliance of certain conditions or ordering the cease of an anticompetitive behavior, when said conduct has the potential to damage competition. Although not required by the Antitrust Law, the Antitrust Commission does not issue preventive measures if the requirements of likelihood of the law and danger in the delay are met.

On August 10, 2011 Telecentro, one of the most important pay TV operators in Argentina, filed an accusation against Fox Sports based on an alleged infringement to the provisions set out in the Antitrust Law. The claimant informed in its brief that these two companies maintained a long commercial relationship by means of which Fox Sports provided Telecentro with certain TV signals such as “Fox Sports HD”. By the time this accusation was submitted, “Fox Sports HD” was included within the signals commercialized by Telecentro to its clients.

Notwithstanding this commercial relationship, the claimant stated that on August 4, 2011 it was served with a registered letter sent by Fox Sports, by means of which Telecentro was notified that if it did not accept the commercial conditions set for the renewal of the agreement ended on July 31, 2011, as of August 18, 2011 Fox Sports would interrupt the provision of “Fox Sports HD”.

Telecentro was informed about these “Commercial Conditions” by means of a letter sent by Fox Sports on June 17, 2011, which proposed the following: (i) a 40% increase in the price of “Fox Sports HD” with respect to the price currently being paid by Telecentro and, (ii) hiring a new signal called “Fox Sports +” to be included in the analogical basic package of the TV operator. The claimant regarded such unilateral conditions imposed by Fox Sports constituted an abusive conduct against the general economic interest, which in this case is represented by the pay TV final consumers.

Telecentro denied such conditions and insisted that the relationship between the parties should be renewed in similar terms to the prior agreement in force between the parties. Otherwise, this would result in the elimination of “Fox Sports HD” from Telecentro’s program list, and this could generate that certain clients would relocate to another Pay TV operator. Pursuant to the claimant, Fox Sports abused of its market power because it always knew that Telecentro faced strong competitors within the Pay TV market such as Cablevisión and Directv.

Therefore, the claimant requested the Antitrust Commission to issue a preventive measure pursuant to Section 35 of the Antitrust Law, due to the fact that Fox Sports’ conduct was unlawful and against the general economic interest because (i) it limited, restricted and distorted competition in the Pay TV market and (ii) set discriminatory conditions to Telecentro and directly benefited Cablevisión and Directv which, pursuant to the claimant, may have a local or foreign based corporate relationship with Fox Sports.

At first the analysis of the Antitrust Commission within the docket focused on determining the execution of a possible infringement of Section 2, Sub-Section (j) of the Antitrust Law which states that the denial to sell may constitute an anticompetitive conduct. Sub-Section (j) sets forth that the act of conditioning the purchase or sale to the obligation of not using, acquiring, selling or supplying goods or services produced, processed, distributed or commercialized by third parties may be regarded as an anticompetitive conduct. The Antitrust Commission evidenced in this case that the claimant received an actual threat since Fox Sports stated that the provision of the sport signal “Fox Sports HD” could be discontinued.

Additionally, the Antitrust Commission analyzed the possible commission by Fox Sports of a tied-in sale, which may also limit competition and is set out under Section 2, Sub-Section (i) of the Antitrust Law. In this respect, the enforcement agency verified that the renewal of the signal “Fox Sports HD” was offered to Telecentro jointly with a new sport signal called “Fox Sports +”, expected to be included in the pay TV operator program.

The Antitrust Commission determined that the pay TV operator is the only party that should decide whether to include a signal or not, and that forcing the acquisition of a new signal solely because there may be the possibility of losing a highly-valued signal could be regarded as a tied-in sale in the terms of the Antitrust Law.

On August 17, 2011 the Antitrust Commission issued a preventive measure pursuant to Section 35 of the Antitrust Law ordering Fox Sports to prevent from imposing as a necessary condition for hiring “Fox Sports HD” the hiring of the signal “Fox Sports +”, thus enabling Telecentro to decide whether to incorporate this latter signal or not to its program list. Furthermore Fox Sports must keep on providing its services for 90 days under similar terms to the prior agreement, until the parties reach to an agreement regarding the signals herein involved.

3. Conclusion

The new preventive measure shows that the Antitrust Commission continues assessing the competitive conditions in the pay TV market. It is still possible that this new preventive measure may be revoked upon the filing of an appeal as in previous cases.

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