1996 No.1 (E&W)

In the Restrictive Practices Court

(in England and Wales)

The Hon. Mr.Justice Ferris

Mr. B.M.Currie

Mr. D.L.Summers

 

IN THE MATTER OF THE RESTRICTIVE TRADE PRACTICES ACT 1976

and

IN THE MATTER OF AN AGREEMENT BETWEEN THE FOOTBALL ASSOCIATION PREMIER LEAGUE LIMITED AND THE FOOTBALL ASSOCIATION LIMITED AND THE FOOTBALL LEAGUE LIMITED AND THEIR RESPECTIVE MEMBER CLUBS

 

and

IN THE MATTER OF AN AGREEMENT RELATING TO THE SUPPLY OF SERVICES FACILITATING THE BROADCASTING ON TELEVISION OF PREMIER LEAGUE FOOTBALL MATCHES AND THE SUPPLY OF SERVICES CONSISTING IN THE BROADCASTING ON TELEVISION OF SUCH MATCHES

 

 

 

JUDGMENT

of the Court

 

 

 

Judgment handed down on Wednesday 28th July 1999 at 2pm.

 

This is the official judgment of the Court and I direct that no further note or transcript of it need be made.

 

 

 

The Hon Mr. Justice Ferris

 

 

 

Mr. Geoffrey Vos QC, Mr. Kenneth Parker QC, Mr. Jon Turner and Mr. Daniel Beard instructed by The Treasury Solicitor, Queen Anne's Chambers, 28 Broadway, London SW1H 9JS appeared on behalf of the Director General of Fair Trading

Mr. Charles Aldous QC, Mr. Richard Fowler QC and Miss Catherine Otton-Goulder instructed by Denton Hall, Five Chancery Lane, Clifford's Inn, London EC4A 1BU appeared on behalf of The Football Association Premier League Limited.

Mr. Jonathan Sumption QC and Mr. Nicholas Green QC instructed by Herbert Smith, Exchange House, Primrose Street, London EC2A 2HS appeared on behalf of British Sky Broadcasting Limited

Mr. Christopher Carr QC and Mr. Rhodri Thompson instructed by Richards Butler, Beaufort House, 15 St. Botolph Street, London EC3A 7EE appeared on behalf of the British Broadcasting Corporation

 

 

 

Hearing dates: 12th, 13th, 19th, 20th, 21st, 26th, 27th, 28th and 29th January 1999

1st, 2nd, 3rd, 4th, 15th, 16th, 17th, 18th, 19th, 22nd, 24th and 25th February 1999

2nd, 4th, 5th, 8th, 9th, 10th, 15th, 16th, 17th, 18th, 22nd, 23rd, 24th, 25th, 30th and 31st March 1999

20th, 21st, 22nd, 23rd, 27th, 28th, 29th and 30th April 1999

4th and 5th May 1999

 

 

Judgment handed down: 28th July 1999

 

 

JUDGMENT OF THE COURT

 

General Introduction

1. This court has before it an amended notice of reference by which the Director General of Fair Trading ("the Director General") has referred to the court three agreements, numbered respectively S6357 S6180 and S8772, on the register of agreements maintained under Section 1(2) of the Restrictive Trade Practices Act 1976 ("the 1976 Act"). Although the 1976 Act will be repealed by the Competition Act 1998 as from 1st March 2000, it continues to have effect in relation to proceedings, including those now before the court, which subsist before that date.

2. The three agreements which have been referred to the court comprise a large number of documents. Speaking generally, they relate to the establishment and rules of the Football Association Premier League Limited ("the Premier League") and to agreements made by the Premier League with British Sky Broadcasting Limited ("Sky") and the British Broadcasting Corporation ("the BBC") concerning the broadcasting on television of football matches played in the Premier League competition organised by the Premier League. The respondents to the reference are the Premier League, Sky and the BBC. The Premier League is joined as a representative respondent to represent the individual football clubs which are now, or have previously been, members of the Premier League.

3. By an order of this court made on 24th October 1996 it was provided that the proceedings should be limited to a consideration of certain specific provisions of the registered agreements. These provisions, with the restrictions which are said to be accepted by virtue of them, are identified in the Schedule to that order. In simplified form, and thus at the expense of some degree of accuracy, the restrictions may be said to fall into four categories, namely:

(i) A restriction under which the member clubs of the Premier League confer on the Premier League itself the exclusive right to grant licences to broadcast on television the Premier League matches and accept an obligation not themselves to grant licences for that purpose ;

(ii) Two similar restrictions as follows:

(a) A restriction arising from the fact that the Premier League has granted to Sky until the end of the 2000-2001 season the exclusive licence to broadcast sixty Premier League matches live during each season and has agreed not to grant to any other person a licence to make live broadcasts of any other Premier League matches;

(b) A restriction arising from the fact that the Premier League has granted to the BBC until the end of the 2000-2001 season the exclusive right to broadcast on television recorded highlights of the Premier League matches and has agreed not to grant to any other person a licence to make any recorded broadcast of the Premier League matches;

(iii) Certain supplemental restrictions which reinforce the exclusive rights of Sky and the BBC respectively; and

(iv) Certain supplemental restrictions affecting the freedom of the Premier League clubs to engage in competitions other than the Premier League competition or friendly matches.

 

The Legislation

4. We propose to begin by summarising the material provisions of the 1976 Act and certain other legislation. The case for the Director General is that the restrictions we have mentioned above are all restrictions relating to the supply of services. We are therefore concerned with the statutory provisions which govern the registration and investigation of agreements in respect of services. These are contained partly in the 1976 Act itself and partly in the Restrictive Trade Practices (Services) Order 1976 (SI 1976/98) ("the Services Order"). Their effect can be summarised as follows:

(1) The 1976 Act applies to any agreement which is

(a) an agreement between two or more persons who carry on business in the United Kingdom in the supply of services; and

(b) an agreement under which one or more relevant restrictions (as explained below) are accepted by two or more parties.

Every agreement to which the Act applies is subject to registration under the Act (Section 1 and Section 11 as implemented by the Services Order).

(2) For this purpose a relevant restriction is one in respect of one or more of the matters specified in Section 11(2) of the 1976 Act. Five such matters are specified. These are:

"(a) the charges to be made, quoted or paid for ... services supplied, offered or obtained;

(b) the terms or conditions on or subject to which ... services are to be supplied or obtained;

(c) the extent (if any) to which, or the scale (if any) on which, ... services are to be made available, supplied or obtained;

(d) the form or manner in which ... services are to be made available, supplied or obtained;

(e) the persons or classes of persons for whom or from whom ... services are to be made available or supplied or are to be obtained."

 

(In this quotation we have omitted some immaterial words. Further, the legislation refers to "designated services" rather than to "services", but as services of every kind have been made designated services the word "designated" is otiose and we have omitted it).

(3) Particulars of agreements which are registrable under the 1976 Act have to be furnished to the Director General for registration and these particulars will be entered on the register maintained by the Director General pursuant to the Act (Sections 23 and 24).

(4) This court has jurisdiction, on the application of the Director General, to declare whether or not any restrictions by virtue of which the 1976 Act applies to a registered agreement are contrary to the public interest (Section 1 (3)).

(5) The Director General does not have an unfettered discretion whether or not to make an application to this court. Generally he is under a duty to make such an application, although this duty is subject to certain exceptions. The only exception which has been discussed in this case is that, under Section 21(2), the Secretary of State has power to give a direction discharging the Director General from taking proceedings in respect of a particular agreement. This power is only exercisable by the Secretary of State upon the Director General's representation that the restrictions accepted under the agreement in question are not of such significance as to call for investigation by the court. In the present case the Director General has made no such representation and accordingly the Secretary of State could not give, and has not given, any direction relieving the Director General from his duty to refer to this court the agreements with which we are now concerned. The significance of this will appear later.

(6) Correspondingly this court does not have an unfettered discretion to decide what is and what is not in the public interest. The effect of Section 19 of the 1976 Act is that every relevant restriction is deemed to be contrary to the public interest unless the court is satisfied both (i) that the restriction passes through one of the "gateways" mentioned below and (ii) that the restriction is not unreasonable having regard to the balance between the circumstances which enable it to pass through a gateway and any detriments to certain persons or classes of persons arising or likely to arise from the operation of the restriction. The part of Section 19 which imposes the latter requirement is commonly referred to as "the tailpiece", which is what we shall call it.

(7) Eight "gateways" are specified in Section 19. Only three of them are invoked in the present case, namely gateways (b) (g) and (h). So far as material these are expressed in the following terms:

"(b) that the removal of the restriction ... would deny to the public as users of any services ... specific and substantial benefits or advantages enjoyed or likely to be enjoyed by them as such, whether by virtue of the restriction ... itself or any arrangements or operations resulting therefrom;"

"(g) that the restriction ... is reasonably required for purposes connected with the maintenance of any other restriction accepted ... by the parties ... being a restriction ... which is found by the Court not to be contrary to the public interest on grounds other than those specified in this paragraph ..."

"(h) that the restriction ... does not directly or indirectly restrict or discourage competition to any material degree in any relevant trade or industry and is not likely to do so."

(8) The persons or classes of persons who have to be considered in relation to the balancing exercise mentioned in (6) above are, so far as material to this case

"the public or ... persons not party to the agreement (being users of services supplied by such parties, or persons engaged or seeking to become engaged in any business of supplying such services or of making available or supplying similar services, or being vendors purchasers, consumers or users of goods or other property in relation to which any such services or similar services are supplied) ..."

Vendors, purchasers, consumers and users include persons selling purchasing consuming or using for the purpose or in the course of trade or business or for public purposes (Section 19(2)(a)).

(9) If the court finds that a restriction is not in the public interest it must declare that this is the case and it may also grant injunctive relief restraining the parties to the agreement and any relevant services supply association from (i) giving effect to or enforcing or purporting to enforce the agreement in respect of the condemned restriction (ii) making any agreement to the like effect and (iii) where an agreement to the like effect has been made, giving effect to or enforcing or purporting to enforce that agreement.

(10) Under Section 26 of the Competition Act 1980 (which, though generally repealed, remains in effect so far as this reference is concerned) the court may suspend the operation of any declaration and (by implication) refrain from granting any injunctive relief pending the consideration of a revised agreement and the determination of whether or not any restrictions accepted under the revised agreement are contrary to the public interest.

The main issues

5. There are three main issues in this case. The first is whether all or any of the restrictions said to be accepted under the provisions of the registered agreements with which the court is concerned are relevant restrictions in the sense referred to above. The second, which only arises in respect of any restriction which is found to be a relevant restriction, is whether or not the restriction is contrary to the public interest, having regard to the statutory test already referred to. The third is what action the court should take in respect of any relevant restriction which is held to be contrary to the public interest.

6. If the first issue stood alone it would not be necessary to explore the factual background in any detail. That issue is primarily, if not exclusively, one of law and it would suffice to set out the bare facts and the relevant terms of the agreements. But the second issue, and to some extent the third as well, require a much more extensive account of the underlying facts. Even if we were to find ourselves wholly in favour of the respondents on the first issue we would consider it necessary to state our views on at least the second issue, on which we have heard very full evidence and argument, lest we be held to be wrong in our conclusions on the first issue. We must therefore explore the facts to the extent necessary to enable the second and third issues, as well as the first, to be decided.

7. We therefore divide this judgment into sections in which we shall consider the following main aspects of the case:

I. The factual background

II. Are all or any of the alleged restrictions relevant restrictions for the purposes of the 1976 Act?

III. Are any relevant restrictions contrary to the public interest?

IV. A summary of our decisions in sections II and III.

Section I: The factual background

The Organisation of Football before the formation of the Premier League in 1992

8. Everyone knows that football originated in the United Kingdom. Many of the football clubs in this country have a history going back beyond anything which is to be found in other countries and some of the controlling bodies of the sport in the United Kingdom are of similarly ancient origin. But the sport is now played world-wide and organised on a world-wide basis. International governing bodies have been introduced into the hierarchy above the purely national bodies which used to be autonomous. We propose first to describe the organisation of football as it stood at the beginning of 1992, the year in which the Premier League was formed. Save for the introduction of the Premier League into the hierarchy in the manner which we shall narrate, the organisation remains substantially the same today.

9. Football is organised throughout the world by a hierarchy of governing bodies. At the top of the hierarchy is the Federation Internationale de Football Association ("FIFA"), the membership of which consists of national football associations which agree to conform to the statutes, regulations and decisions of FIFA, each of which is recognised by FIFA as governing the sport in its own country. There are currently about 190 such national associations. The national association so far as England is concerned is the Football Association ("FA") which was founded in 1863 as the governing body of football in England. Scotland, Wales and Ireland have their own separate national associations, which are likewise members of FIFA.

10. National Associations of countries within a single continent may form confederations which are recognised by FIFA. The confederation of which the national associations of countries in Europe are members is the Union des Associations Europeennes de Football ("UEFA").

11. For the purpose of organising football England is divided into a number of geographical areas, in each of which football is regulated by a county association. Individual clubs which desire to participate in football in England must register with the appropriate county association. There are currently some 43,000 clubs which are represented on the Football Association through their county associations and which thus constitute the membership of the FA.

12. Individual clubs participate in a variety of football competitions, each of which has to be sanctioned by the FA. Competitions exist for clubs at various levels, ranging from a senior level (which includes the Football League, the Football Conference and, since 1992, the Premier League) and extends down through certain "feeder" leagues to lesser leagues, including local "park" leagues. A system of promotion and relegation exists between the Premier League, which is the pre-eminent league, down through the Football League, the Football Conference and the "feeder" leagues. In theory, therefore, a club consisting of amateur players participating in one of the feeder leagues could work its way up through the hierarchy to the Premier League and a prestigious club which has participated in the Premier League could be relegated to a much lower level on the ladder. In practice, of course, movements are usually much less dramatic than this.

13. Of particular importance in this hierarchy, so far as the present case is concerned, is the Football League, which was formed in 1888 to represent the interests of all professional football clubs in England and to organise a league championship competition. Until the formation of the Premier League in 1992 it remained the only English professional league and had a membership of over 90 clubs divided into four divisions. Since the formation of the Premier League its membership has been reduced to 72 clubs organised into three divisions of 24 clubs. The divisions operate in a hierarchy, with a system of promotion and relegation. At the end of each season the three most successful clubs in division one are promoted to the Premier League and the three least successful clubs in the Premier League are relegated to division one. A similar system operates as between divisions one and two and also as between divisions two and three where, however, four clubs are promoted and relegated.

14. In addition to the league competitions already mentioned, both the Football Association and the Football League organise cup competitions on a knock-out basis (i.e. the winner of each match goes forward to the next round, the loser being eliminated from the competition). The Football Association Cup competition is open to any club which is affiliated to the FA. It is so organised that clubs which participate in the Premier League or Football League competitions do not have to play until the later rounds. All clubs in the Premier League and the Football League compete in the Football League Cup, now known as the Worthington Cup, The Football League also organises another cup competition, currently known as the Auto Windscreens Shield, in which clubs in the second and third divisions of the Football League participate.

 

Problems of English Football in the 1980's

15. Opinions differ about the quality of English football, by comparison with overseas competition, in the 1980's. England won the World Cup in 1966, which represented a high point in international achievement. Thereafter the national team was less successful and individual clubs sold some of their leading players to foreign clubs. Public support for the game seems to have declined over a longer period. Attendances at Football League matches fell from a peak of 77 million in the 1949/50 season to about 20 million in the late 1980's. Since then there has been a recovery in attendances and, if there was previously a decline in the quality of play, this seems to have been reversed. Some witnesses expressed the view that this reversal only took place after the formation of the Premier League in 1992, the circumstances surrounding which we shall describe later. Others claimed that the corner had been turned, so far as the standard of play was concerned, by about the mid 1980's. This is not a matter on which we find it possible or necessary to express a view of our own.

16. What is clear, however, is that English football suffered a number of disasters during the 1980's. The main causes were crowd behaviour and the problems of ensuring crowd safety in antiquated stadia. Three tragedies stand out. In 1985 serious disorder at a match between Liverpool and Juventus at the Heysel Stadium in Brussels resulted in the deaths of 55 Juventus supporters. This was blamed on Liverpool supporters and as a result English clubs were subjected by UEFA to an indefinite ban on participation in events organised by UEFA. This ban was not lifted until the end of the 1990/1991 season. There was also in 1985 a very serious fire at the stadium of Bradford City, which resulted in a number of deaths among those attending the stadium. This resulted in the setting up of an inquiry under Mr. Justice Popplewell to inquire into safety at football grounds.

17. A third, even more serious, disaster occurred on the 15th April 1989 at the Hillsborough stadium in Sheffield on the occasion of a semi-final match in the Football Association Cup between Liverpool and Nottingham Forest. There was serious overcrowding of the terraces and a failure of crowd control, leading to an excessive number of spectators trying to gain access to a restricted standing area in order to see the match. This resulted in 96 deaths. Lord Justice Taylor was appointed by the government to inquire into the cause of the disaster and to make recommendations about how any repetition of it could be avoided. In his final report he said, in addition to much else:

"Football is our national game. We gave it to the world. But its image in our country has been much tarnished. In my Interim Report I concentrated on overcrowding because it was the cause of the Hillsborough disaster. But wider and deeper inquiry shows that overcrowding is only one feature amongst a number causing danger or marring football as a spectator sport. The picture revealed is of a general malaise or blight over the game due to a number of factors. Principally these are: old grounds, poor facilities, hooliganism, excessive drinking and poor leadership. Crowd safety and crowd behaviour with which I am concerned are closely related to the quality of the accommodation and facilities offered and to the standards which are encouraged and enforced. So I think it necessary to consider all these aspects." ("The Hillsborough Stadium Disaster", Final Report of an Inquiry by The Rt. Hon Lord Justice Taylor, January 1990, Cm 962, paragraph 26).

18. Amongst many other recommendations Lord Justice Taylor proposed that steps should be taken to ensure that spectators were admitted only to stadia having seated accommodation, not the traditional unseated terracing. He proposed that this recommendation should be implemented at certain high risk matches from the start of the 1993/94 season; that it should apply at grounds in the first and second divisions of the Football League (i.e. what became the Premier League and the first division of the Football League) by the start of the 1994/95 season; and that it should be extended to matches at other grounds over a slightly longer period, the change being completed at all relevant grounds by the beginning of the 1999/2000 season. This recommendation was accepted by the government and by the governing bodies of football.

19. Lord Justice Taylor was mindful of the very high cost of implementing this recommendation and devoted considerable attention to how it might be met. Amongst other suggestions he said (Taylor Report, para 117):

"In particular I would expect the football authorities to seek the highest possible price for television rights. ... The television companies know that football on the screen has a vast following. They should be expected to pay a substantial price for the rights to relay popular matches. For their part, the football authorities should ensure that this valuable source of revenue is directed towards improving stadia as a high priority."

 

The formation of the Premier League

20. As we have mentioned, until 1992 the Football League consisted of over 90 clubs divided into four divisions. By the end of 1990 some of the more successful clubs in the first of those divisions had become discontented with the way in which the Football League was run, particularly the way in which each of the 90 member clubs had an equal voice in the affairs of the Football League. There was also concern that potential for raising revenue from the broadcasting of football matches on television was not being fully exploited. Five clubs in particular led the way. They were Liverpool, Arsenal, Manchester United, Everton and Tottenham Hotspur, then the leading clubs in the first division of the Football League. With some encouragement from the Football Association they began to explore the possibility of forming a new league, separate from the Football League and consisting of the twenty or so most successful clubs in the Football League. At a meeting on 8th April 1991 the Council of the Football Association accepted in principle a composite proposal under which a new league, to be called the Football Association Premier League, would be established and start its activities by the beginning of the 1992/93 season.

21. Both before and after the Football Association Council meeting of 8th April 1991 less formal preparations were made for the formation of the new Premier League. These preparations involved numerous meetings with interested parties in which the leading part, on behalf of the putative Premier League, was taken by Mr. Rick Parry, who had been engaged as a professional management consultant to explore and pursue all aspects of such formation. In his evidence to us Mr. Parry went into considerable detail concerning these discussions. We have no difficulty in accepting his evidence, which was not challenged in this respect, but we do not find it necessary to summarise it here. It will suffice to say that, apart from structural issues, the prospects for new and lucrative television contracts had a most important part to play in Mr. Parry's negotiations. The prospect of greatly enhanced revenues from television which would be shared between the member clubs on the basis of an agreed formula was a major inducement in persuading those clubs in the old first division of the Football League who were doubtful about the new Premier League to agree to join the original five clubs. The negotiation of the formula involved a good deal of bargaining, but an acceptable formula was arrived at and agreed at a meeting of the division 1 clubs on 13th June 1991. At that meeting the same clubs also agreed in principle that they would give notice of their intention to leave the Football League .

22. On 17th July 1991 the 22 clubs which then made up the first division of the Football League entered into a formal "Founder Members Agreement" in which they recorded in a more formal way the matters agreed upon on 13th June. They stated their belief that a separate Premier League needed to be established. They declared certain basic principles for the establishment of a Premier League which included:

(a) constitutional and commercial independence of the Premier League;

(b) a system of promotion from and relegation to the Football League ;

(c) conduct of the business of the Premier League on the basis of "one club one vote";

(d) there would be no management committee, policy agreed by the clubs being implemented by "a competent executive team";

(e) revenue from domestic television contracts would be shared as follows-

50% would be divided equally amongst the member clubs;

25% would be shared on the basis of the league position of each member club at the end of the season;

25% would be allocated as facility fees to be divided equally between the home club and its visiting team, the intention being that each club would appear in at least one televised match each season;

(f) revenues from sponsorship and overseas television contracts would be shared equally amongst the clubs.

23. Notices of intention to leave the Football League were duly served by the clubs who were parties to the Founder Members' Agreement. Negotiations then took place to enable the Premier League to begin its activities at an earlier time than the expiration of the three seasons during which the notices would run. Agreement was reached and approved by the member clubs of the Football League in September 1991. The substance of the agreement was embodied in heads of agreement between the Football Association, the Football League and the Premier League (then operating as a sub-division of the FA) signed on or about 23rd September 1991. These heads of agreement provided as follows:

(a) the Premier League was to start at the beginning of the 1992/93 season;

(b) relegation and promotion between the Football League and the Premier League was to take place generally as if the Premier League was the senior division of the Football League ;

(c) it was agreed that the Premier League clubs would continue to play in the Football League Cup competition and in the Football Association Cup;

(d) each league was to conclude its own television deal for the broadcasting of its league matches;

(e) the Football League was to be supported financially by allowing it to receive for five years an amount equal to the Premier League clubs' share of an existing levy on gate receipts and the whole of the proceeds of a subsisting contract with football pools companies for the use of the fixture lists of both leagues.

24. An expanded version of these heads of agreement was incorporated in a formal tripartite agreement, but this was not executed until a much later date, namely 15th December 1992.

25. It appears to have been envisaged in the earlier stages that the Premier League would operate as an organisation within the Football Association, but by October 1991 the clubs which intended to break away from the Football League decided that they wanted the Premier League to be independent of the Football Association as well. For some months thereafter it operated as an unincorporated association of clubs, with Mr. Parry acting as its chief executive. On the 22nd May 1992 a new company was incorporated with the name "The Football Association Premier League Limited.

26. The objects of the company, as stated in its Memorandum of Association, include the following:

"(a) to organise and manage under the jurisdiction of the Football Association a league of association football clubs to be known as "The Football Association Premier League" or such other name as the company may from time to time adopt ("the Premier League");

(b) to make adopt vary and publish rules, regulations and conditions for the management of the Premier League and the matters relating thereto, and to take all such steps as shall be deemed necessary or advisable for enforcing such rules, regulations and conditions;

(c) to promote, provide for, regulate and manage all or any details or arrangements or other things as may be considered necessary or desirable for, or ancillary to, the comfort, conduct, convenience or benefit of football players and of the public or of any other persons concerned or engaged in or in or associated with the Premier League;

(d) to enter into television, broadcasting, sponsorship, commercial or other transactions of any kind in connection with the Premier League;"

27. It is to be noted that in this quotation references to the Premier League are references to the league which was to be organised and managed by the company rather than to the company itself. Elsewhere in this judgment references to the Premier League are references to the company, unless the contrary is indicated.

28. The Premier League is so constituted that it is governed in accordance with its Articles of Association and Rules and Regulations adopted by it. The following points of a constitutional nature are to be noted:

(a) There were to be only two directors who were to be a non-executive Chairman and a Chief Executive, both of whom were to be appointed by resolution of the members of the Premier League in general meeting.

(b) The first members of the Premier League were to be the 22 clubs who would otherwise have constituted the first division of the Football League .

(c) Provision was made for relegation and promotion of clubs in such a way as to reduce the number of member clubs to 20 at the end of the 1994/95 season.

(d) Relegated clubs were to cease to be members of the Premier League and promoted clubs were to become members of it.

(e) Each member club was to hold one share, relegated clubs being required to relinquish their shares when relegated and promoted clubs being obliged to take one share each. Member clubs were entitled to one vote each at general meetings.

(f) The powers of the Board of the Premier League are governed by Articles 44 to 46. Articles 44 and 45 are unremarkable in committing the general management of the affairs of the company to the Board, but this is subject to an important limitation by virtue of Article 46 which is in the following terms;

"46. The Board shall not in relation to any dealings relating to television broadcasting sponsorship or like transactions or other matters materially affecting the commercial interests of the members enter into any contract or agreement or conduct themselves in any way as would bind the Company to any contract or agreement without prior approval by Resolution of the members in General Meeting. Without limitation to the generality of the foregoing, the Board shall in relation to any such dealings disclose the provisions contained in this Article to any entity or individual with whom the Board is considering entering into a contract or agreement."

(g) By Rules A.5.1 and A.5.3 it was provided amongst other things as follows:

"5.1 Membership of the League shall constitute an agreement between the Company and each Club, and between each of the Clubs, to be bound and comply with:

(a) these Rules and the Articles of Association (each as altered, revoked or added to from time to time);

(b) ...

(c) ...

(d) the terms of the Formation Agreement insofar as such terms apply to the members of the League for that Season."

"5.3 By virtue of this undertaking Clubs shall in particular be bound to provide certain rights facilities and services to the Company in order to enable it to fulfil its obligations under commercial contracts entered into in accordance with the Memorandum and Articles of Association. In return for this, the Company shall make payments to Clubs of fees as specified in Section D - Finance, Broadcasting and Sponsorship"

 

The reference to "the Formation Agreement" in Rule A.5.3 is a reference to the tripartite agreement which we have already briefly mentioned which was executed on 15th December 1992. That agreement existed only in the form of heads of agreement at the time when the first Rules, incorporating the terms which we have quoted, were adopted, but it was treated as a subsisting agreement.

 

(h) As indicated in Rule A.5.3, Section D of the Rules contains a number of provisions relating to broadcasting and other matters. Of these Rule D.7 lies at the centre of the present case. It is in the following terms:

"7.1 The Company shall enter into commercial contracts in respect of broadcasting in accordance with the Memorandum and Articles of Association.

7.2 The Clubs undertake to provide such rights, facilities and other services as may be necessary to enable the Company to fulfil such contracts, including but not limited to providing access to enable television companies to film League Matches at the grounds of the relevant Clubs.

7.3 No League Matches shall be televised or recorded or transmitted by satellite or cable or any similar method without the written consent of the Board, save in the case of closed circuit television within the ground of the Club where the League Match is being played"

It is the third of these rules, referred to throughout these proceedings as Rule D.7.3, which is of particular importance, but it needs to be read in conjunction with the other rules, particularly Rule D.7.1. Their joint effect is to put the Premier League, as distinct from its member clubs, in the position of being able to grant licences to make television broadcasts or recordings of all Premier League matches, free from the possibility that individual clubs, or pairs of clubs playing a match against each other, will sell conflicting or competing rights.

(i) Rule D.8.1 is also of importance and the material parts of the opening section of it need to be set out. They read as follows:

"In return for the Clubs providing such rights, facilities and other services to the Company to enable it to fulfil its agreements for the broadcasting and televising within the United Kingdom of any League Match, the Company will pay, by way of fees, in respect of the moneys so derived ... after deducting therefrom any amount paid to the Professional Footballer's Association ... the following: ...."

Provision is then made for division of domestic television revenue in the shares envisaged by the Founder Members' Agreement, namely 50 per cent being divided equally between the member clubs; 25% being divided between the Clubs on merit ascertained by reference to their finishing position in the league at the end of the relevant season; and the remaining 25% being divided as facility fees between the clubs whose matches are broadcast on the basis of an equal share being allocated to both the home and the away club. The reference to any amount paid to the Professional Footballer's Association ("the PFA") is a reference to certain payments which, it was envisaged, would be made to that Association for educational, insurance or benevolent purposes.

(j) Rule D.8.2 records the intention that each club shall appear in at least one live televised league match each season.

(k) Rule D.8.3 provides for the division of money received by the Premier League for broadcasts of league matches outside the United Kingdom and Rule 10 provides for the division of money received by the Premier League from sponsorship. Each club is to receive an equal share of both these categories of income.

(l) Rule D.12 provides for the receipt by relegated clubs, during each of the first two seasons following relegation, of a proportion of the broadcasting income, the overseas income and the sponsorship money which it would have received if it had not been relegated. The provisions for division between member clubs which we have already summarised are thus clearly modified to this extent. The payments to which relegated clubs are entitled under this Rule are colloquially referred to by the clubs as "parachute payments".

(m) By Rule A.5 no alteration or deletion may be made in or to the Rules except by resolution passed by a majority of not less than two-thirds of the votes cast at a general meeting of the Premier League. As each member club has one vote the effect is that any amendment requires the support of at least two-thirds of the clubs.

29. he Rules have been altered and in some cases re-numbered from time to time since the formation of the Premier League, but the provisions which we have noted above have remained unchanged throughout the life of the Premier League.

 

The Premier League Competition

30. Since it began at the start of the 1992/93 season the Premier League has organised, and its member clubs have participated in, the league competition which the constitution of the Premier League envisaged. The form of the competition is very similar to that of other league competitions, notably that of the Football League. Each member club plays each of the other member clubs twice during each season, once at home and once away. This means that when, as now, the Premier League has 20 member clubs, a total of 380 games are played in the Premier League in each season.

31. The winner of a match receives three points. In the event of a draw each of the sides receives one point. A losing club, naturally enough, receives no points. The position of each club in the league is determined by its total number of points in the season. There are rules for the determination of the order in which clubs having an equal number of points are ranked. These rules are of great importance when the winner of the championship or a club to be relegated has to be identified from two or more clubs having an equal number of points but do not need to be explained here.

32. Except at the end of the 1993/94 season, when four clubs were relegated to the first division of the Football League and only two clubs were promoted from that division, so reducing the membership of the Premier League from 22 clubs to 20, three clubs are relegated and three promoted at the end of each season. A total of 29 different clubs have been members of the Premier League between its inception and the 1998/99 season.

Other relevant football competitions

33. There are, of course, many other football competitions. Some of them have already been mentioned, including the Football League championship, the Football Association Cup and the Football League Cup. Premier League clubs participate in the two Cup championships, the winner of each Cup usually being a Premier League club. There is also an expanding range of attractive European and World competitions and the fortunes of Premier League clubs are increasingly tied up with these. Other competitions which are of relevance to these proceedings include:

The World Cup: FIFA organises the World Cup, in which national teams participate, which is competed for every four years, with qualifying matches taking place during the two years preceding each World Cup final. The initial stages are played on a league basis, the later ones on a knock-out basis. England always participates in the World Cup, although its team does not always reach the final stages. The English team is likely to consist mainly, if not wholly, of players who normally play for a Premier League club.

UEFA Champions League: The European Champions League, formerly known as the European Cup, is organised by UEFA for the leading clubs in the national leagues of countries affiliated to UEFA. A total of 56 clubs took part in the 1998/99 season, the number of clubs from each country being dependent on UEFA's ranking of that country. In 1998/99 two clubs from England took part, these being the winner and the runner-up in the Premier League championship for the preceding season. The early stages of the competition, after two qualifying rounds, are conducted on a league basis, the later stages on a knock-out basis. For the 1999/2000 season there will, in the early stages, be four leagues, each of six clubs. The two most successful clubs in each league will go forward to the knock-out stage, where they will be joined by the winners of the Champions League in the preceding year and one club from each of the seven highest standing nations affiliated to UEFA (currently England, Italy, France, Spain, Germany, Portugal, Holland and Greece). There will then be quarter-finals, a semi-final and a final to select the winner out of the sixteen clubs participating in the knock-out stage. The league stages of the Champions League are played early in the season; the knock-out stages are played in the latter part. There is thus a gap, of the order of three to four months in duration, in Champions League activity in the middle of winter.

The European Cup Winners Cup: This competition (which, we were told, was discontinued at the end of the 1998/99 season) was formerly open to the winners of the cup competition of the national association in each UEFA country which had a sufficiently high ranking. In England this was the winner of the Football Association Cup in the preceding season or, where the winner of the Football Association Cup was also the winner of the Premier League championship, the losing finalist in the Football Association Cup. The previous year's winner of the Cup Winners Cup was also entitled to participate. The main competition was limited to 32 clubs, but a qualifying stage was introduced for countries whose UEFA ranking was too low to entitle them to an automatic place. The competition was played on a knock-out basis. In each round the clubs drawn against each other played two matches, one at home and one away. The result was decided on the basis of the aggregate of the goals scored in the two matches, equality being resolved by the weighting of away goals.

The UEFA Cup: This is a knock-out competition organised by UEFA and played on a home and away basis similar to that adopted for the Cup Winners Cup. Generally the clubs entitled to participate are the winners of domestic competitions which do not carry with them a place in the Champions League or the Cup Winners Cup (e.g. in England the Football League or the Football League Cup) and clubs from countries whose UEFA ranking does not give them a place in the Champions League or Cup Winners Cup. After the discontinuance of the Cup Winners Cup some clubs which would formerly have been eligible for that competition will be eligible to play in the UEFA Cup.

The UEFA Intertoto Cup: This competition is little known in England, partly because it is of recent origin, having been first staged in 1995, and partly because its object is to provide matches in the period between mid-June and the end of August when English clubs are reluctant to play more football. No Premier League clubs participated in 1995, the first year of this competition. In 1996 three Premier League clubs entered but they were subsequently penalised for failing to field their strongest teams. In 1998 only one Premier League club entered, namely Crystal Palace. It was suggested to us that the competition may become more popular as the result of an arrangement under which the three clubs doing best in the Intertoto Cup will qualify for the UEFA Cup.

The problems of scheduling matches

34. The traditional time for professional football matches to take place in England is Saturday afternoon, with a kick-off time of 3pm. The commencement and ending of the football season are fixed by the Council of the FA. The tendency has been for the season to be fixed so that it lasts longer and longer. In recent years it has begun on or about the 10th August and ended on about 28th May in the following year. There are thus some 40-43 Saturdays in each season but for one reason or another not all of these may be available for the playing of Premier League matches. Each Premier League club will play 38 Premier League matches in the season, but all of them will also play a number of other matches. Each Premier League club will, for example, enter the Football Association Cup and the Football League Cup in each of which a successful club will play a significant number of matches over and above its Premier League commitment. In addition the most successful clubs may be involved in one or more of the UEFA competitions. Mr. Foster, who is the company secretary of the Premier League and whose responsibilities include the scheduling of football matches for the Premier League, said that Premier League clubs which are successful in European and domestic competition could potentially play up to 70 matches over the playing season, with international players within these clubs playing a further 6 or so games.

35. Quite clearly it would be impossible to arrange for this number of matches to be played only on Saturday afternoons during the season. Many of them have to be arranged at other times. Mr. Foster gave a detailed account of the difficulties involved in arranging the fixture list. Leaving aside the requirements of television companies and restrictions on the broadcasting of football on television arising from Article 14/44 of UEFA's statutes (both of which we shall discuss later) the conflicting requirements which have to be accommodated by Mr. Foster and his colleagues in preparing the fixture schedule include:

(a) The need to give priority to fixtures in other competitions. Mr. Foster said that, on the basis of FIFA, UEFA and Football Association rules and historical tradition and subject to a limited degree of flexibility, fixtures are given priority in the following order:

(i) International matches;

(ii) European Cup competitions;

(iii) FA Cup matches;

(iv) Football League Cup matches;

(v) Matches in the Premier League and Football League ; and

(vi) Other competitive matches.

(b) The requirements of the local police forces, which may affect both the dates upon which and the times at which particular matches are played. The football authorities recognise that it is in their interests to liaise with the police, and this liaison has produced a willingness on the part of the police to accommodate the requests of clubs where this is reasonably possible. A special effort is made to ensure that where there are two or more clubs in a particular area they do not both (or all) have home matches on the same date. Home matches at bank holiday weekends for clubs situated in holiday resorts are also avoided, as are other combinations of date, time and place which are likely to give rise to a special risk of disorder or an undue strain on police resources.

(c) The need to allow each club a sufficient period of time between matches to enable its players to recuperate from the efforts expended in the earlier match. In general an attempt is made to ensure that no club is required to play two fixtures within less than 48 hours and the period should preferably be not less than 72 hours.

(d) The desirability of arranging each club's fixtures in such a way that home and away fixtures alternate with each other. In practice this is often impossible to achieve, but attempts are made to avoid long sequences of either home or away fixtures.

(e) The need to balance the numbers of mid-week or bank holiday fixtures which are played at home and away respectively.

(f) The need to encourage clubs to make their players available for the England international squad by sheltering the clubs from the need to play other matches during a period of some days before international matches involving England.

(g) The need to make provision in the schedule for events such as replays in the Cup competitions.

Mr. Foster mentioned a number of other requirements which have to be met. We accept that this is the case but we do not set them out as it appears to us that they are of lesser importance than those we have set out.

36. The general picture which was painted by Mr. Foster, which we accept as being correct, is of an overcrowded fixture schedule which leaves little or no room for manoeuvre, particularly towards the end of the season when such factors as the success of a particular club in one of the Cup competitions or in a European competition have to be taken into account. We think that some of the possibilities canvassed by Mr. Parker in his cross-examination of Mr. Foster did not so much offer a solution to the difficulties involved in lifting the pressure on the existing fixture list as it emphasised those difficulties. These included such measures as the reduction of the number of clubs in the Premier League and changing the rules of the Cup competitions so as to eliminate the need for matches still drawn after extra time to be replayed (Transcript, Day 16, page 157 et seq).

The Television Industry

37. We turn now from the organisation of football to the evolution of the television industry in the United Kingdom.

38. Television was invented in the 1930's, but there were very few broadcasts on television until after the 1939-45 war. For a time after the war the BBC was the only organisation which was permitted to broadcast in the United Kingdom, whether in sound only or by means of television. The technical means whereby programmes were broadcast was the transmission of a radio signal from a broadcasting station to a reception point consisting of an aerial attached to the radio or television set of the person desiring to receive the broadcast. This method of broadcasting is now known as "analogue terrestrial", meaning that the signal consists of radio waves of an analogue nature and that the signal travels direct from a transmitter on the earth's surface to a receiving point on the earth's surface, with the consequence that it can only be received by listeners or viewers living within the limited range of a transmitting station. As no other method of broadcasting was in use when television began the expression "analogue terrestrial" was not then used. It is used now mainly for the purpose of distinguishing this method of broadcasting from others which are now available.

39. The BBC is established by royal charter, the charter being revised from time to time. It is financed by the government by means of a subvention equal to the amount received by the government in respect of television licences, which must be held by every person desiring to receive television broadcasts in the United Kingdom, whether or not that person intends to receive BBC programmes.

40. In 1954, or soon afterwards, "commercial" television began, as the result of the passing of the Television Act 1954. It has been referred to ever since as Independent Television or "ITV". It is not provided by a single broadcaster. Instead the country is divided into a number of regions, the franchise for commercial television broadcasting in each region being awarded for a specific period to a broadcaster chosen by means of a competitive bidding process. The franchisees for each region make some of their own programmes, but most are purchased or made on a central basis. In the case of sports programmes the franchisees have established a separate company to acquire the necessary television rights and to make the programmes. This separate company is referred to as "ITV Sport" or, in this judgment, as we are concerned only with sport, simply as "ITV".

41. Like the BBC, the ITV franchisees broadcast by means of analogue terrestrial signal. Unlike the BBC they receive no money from the government. They are financed by means of the advertising revenue which they obtain for advertising which is transmitted at intervals in their programmes.

42. Originally the BBC had only one "channel", by which is meant a broadcasting system through which a sequence of individual programmes is transmitted. In 1964 it opened a second channel, broadcasting a different series of programmes. The two channels, which continued to be broadcast in analogue terrestrial form, became known as BBC1 and BBC2 respectively.

43. In 1987 a second commercial channel was also opened. This has become known as Channel 4. It operates under the terms of a licence granted by the Independent Television Commission ("ITC") which requires it to provide alternative programming, including programme content targeted to cater for minority interests. A third commercial channel, known as Channel 5, began operations in 1996 or 1997. As with the three earlier channels these newer channels broadcast by means of an analogue terrestrial signal. Like the ITV franchisees they receive no public money and are financed by advertising revenue.

44. The five channels so far mentioned make no charge direct to their viewers. The television licence fee, which every television owner must pay, goes to the exchequer, not direct to the BBC. They are referred to collectively as "free to air" broadcasters,

45. During the 1980's a new form of broadcasting became feasible. This involves the transmission of a signal to a satellite which is in orbit above the earth, from which the signal is re-transmitted by means of a device called a "transponder" to a specific area of the earth's surface. There it can be received by means of a dish-shaped aerial and translated into a television picture, with sound accompaniment, by means of a set-top box. By means of the use of a coded signal the broadcaster can ensure that the service is only available to subscribers who have paid for it and that certain channels, referred to as "premium channels", are available only to those viewers who have paid an enhanced subscription. This form of broadcasting is, for obvious reasons, referred to as "satellite" broadcasting. It was used to some extent from the early 1980's but, for technical reasons connected with the power of the available satellites, it was only in the later years of that decade that broadcasting by this means direct to the viewer's home became feasible.

46. Originally two companies offered satellite broadcasting services to domestic consumers. The first, Sky Television plc ("Sky TV") launched its service early in 1989. The second, British Satellite Broadcasting Ltd. ("BSB") launched in 1990. Both used an analogue signal, although each used a different satellite and a different type of television system. They also distributed their channels via cable networks. They each faced the problem that their initial audiences were small, even though both of them initially offered their channels, other than a movie channel, on a free to air basis. This produced the result that both subscription income and advertising income were low. As a result neither broadcaster prospered and by the latter part of 1990 both were in a parlous state financially. The businesses of the two of them merged on 3rd November 1990, the main operating company being named British Sky Broadcasting Limited. It is this company which is a respondent to these proceedings and which we refer to as Sky. The merger resulted in a consolidation of channels (one of which, eventually known as Sky Sports, was a dedicated sports channel) and the use of one satellite only. Nevertheless the new company was burdened by debt arising from past losses and it continued to suffer further substantial losses. We were told that during the 37 week period from 13th October 1990 to 30th June 1991 these amounted to more than �750 million before tax. Break even point, so far as operational income and expenditure (ignoring interest payments) was concerned, was not reached until March 1992.

47. Two other forms of broadcasting call for mention, namely cable and digital. The possibility of distributing television by means of cable has been appreciated for some time. But the initial costs of establishing a cable network are high, involving as they do a good deal of street excavation to enable the cables to be laid. For this reason cable has become available only in the more highly populated areas. A further problem is that cable networks have been established on a piecemeal basis in a multitude of different ownerships. It is only in recent years that, as the result of amalgamations and take-overs of cable companies, three main networks have emerged. These are Cable & Wireless, Telewest and NTL.

48. The nature of cable is that it is available for the transmission of telephone services as well as television. Cable operators have tended to concentrate more on offering a telephone service as competitors of British Telecommunications than on offering television. Nevertheless they have begun to provide television to an increasing extent in recent years. Cable broadcasters usually buy in their television channels from outside sources. In particular they offer Sky's own channels, Sky having given an undertaking to make its channels available to other broadcasters on payment of charges calculated in accordance with a rate card approved by the Office of Fair Trading.

49. As to digital broadcasting, a digital signal is an alternative to an analogue signal. The technical differences between the two signals do not matter for present purposes. It will suffice to say that digital has a number of advantages over analogue, notably higher quality of reception and the ability to compress the signal. The latter characteristic means that it is now possible to deliver a greater number of digital channels by any given delivery medium, whether terrestrial, satellite or cable. A disadvantage of digital is that the viewer must either buy a new television set or install a set-top box to handle the signal. If the viewer wishes to receive programmes broadcast by more than one broadcaster he may need to install more than one set-top box.

50. A digital signal can be used in all types of broadcasting. It was first used by Sky for its channels in October 1998. We were told that Sky plans that its digital satellite service will eventually include 200 channels. Digital has not yet been used for cable broadcasting, but is expected to be launched at an early date. So far as terrestrial broadcasting is concerned, the fact that so many more channels can be used has alleviated the shortage of available frequencies which had previously held up expansion. In 1997 the government made available 6 groups of digital channels, known as multiplexes, for digital terrestrial transmission (i.e transmission by means of a signal which passes direct from a transmitter on the earth's surface to the viewer's home, as in the case of the original analogue signal). Three of these were opened to bidding by commercial broadcasters and a company named British Digital Broadcasting Plc was given a licence for all three multiplexes. That company adopted the trading name "ONdigital" at the end of July 1998 and we shall refer to it by that name.

51. ONdigital is a joint venture between Carlton Communications Plc and Granada Group plc, which are two of the main ITV franchisees. Originally Sky was also a member of the joint venture, but when the applications for allocation of the multiplex licences were being considered the ITC, which was responsible for granting the licences, indicated that on competition grounds it would not be willing to grant licences to a consortium of which Sky was a member. The other two participants in the joint venture therefore bought Sky's interest. The application for a licence had, however, been put forward on the basis that Sky channels would feature largely in the programme output of the new broadcaster. The ITC was not willing to allow the licence application to be altered. Accordingly arrangements were made for Sky to supply its channels to ONdigital.

52. The final form of broadcasting which we must mention is "pay per view" ("PPV"). The essence of this form of broadcasting is that the viewer pays a price for each programme watched. This payment is often, but not always, additional to a periodical subscription. Pay per view can be delivered to the viewer by satellite, cable, or digital or analogue terrestrial signal. A requirement is that the viewer must be able to communicate with the broadcaster in order to be able to order the broadcast he wants to see. In the present state of the relevant technology cable appears to have an advantage over the other platforms so far as pay per view is concerned, because the viewer can communicate with the broadcaster via the television controls and the cable which delivers the signal. For the other platforms communication by ordinary telephone is necessary. In the United Kingdom PPV is so far largely untried in the field of televised sport, although it is fairly well established for the broadcast of movies. It presents many kinds of problem for the broadcaster. In particular the broadcaster has to devote considerable resources to publicising what is available and establishing the necessary organisation for communication with the viewer and operating the necessary customer accounts. The viewer also needs to accustom himself to the practice of ordering up the television broadcasts which he wishes to see and has to put in place a mechanism for payment of the broadcaster's charges, usually in the form of a direct debit mandate.

 

Football on Television prior to 1992

53. In the 1960's and 1970's the BBC and ITV negotiated jointly with the Football League for the television rights in football matches played as part of the Football League competition. The BBC was particularly interested in broadcasting recorded highlights. It obtained the right to broadcast 45 minutes of highlights of two league games a week. From 1964 these highlights were broadcast on a Saturday evening in a programme called Match of the Day. The agreement between the Football League and the BBC ensured that all the first division clubs were visited at least once a season, but none more than three times. There were also arrangements to ensure a certain degree of exposure for clubs in the lower divisions. In 1968 London Weekend Television ("LWT"), one of the ITV franchisees, began to broadcast a programme called "The Big Match" at 2.30 on Sunday afternoon and other ITV franchisees broadcast similar programmes. In general, however, coverage was very limited.

54. In 1979 Mr. Michael Grade, then Director of Programmes for LWT, in which capacity he had a measure of responsibility for the whole of ITV's sports coverage, negotiated a deal with the Football League under which LWT obtained exclusive rights to broadcast, each Saturday evening during the season, recorded highlights of all the Football League matches played on that Saturday. This deal provoked strong objection from the BBC and a degree of intervention from the Office of Fair Trading on competition policy grounds. The result was a compromise under which ITV and the BBC entered into a joint contract with the Football League whereby the television rights (mainly if not wholly in respect of recorded highlights) were shared between them during a four year period, lasting until 1983. The Football League was paid a total of �9.2 million over the four year period for these rights. In 1983 another joint contract was made for a period of two years (until the end of the 1984/85 season). The BBC was given the right to broadcast five matches during each season live on Friday evenings, ITV having the right to another five matches live during the season on Sunday afternoon. For this two year contract the Football League received �5.2 million.

55. When the second of these joint contracts came to an end at the close of the 1984/85 season, the BBC and ITV were able to obtain for the next season only an allocation of three live matches each during a six month contract. In 1986 they entered into a contract for two seasons (1985/86 and 1986/87) under which they each had the right to broadcast seven live league or league cup matches.

56. In 1988 ITV acted unilaterally and secured for itself a four year deal (to the end of the 1991/92 season) under which it obtained exclusive rights to show on television both a specified number of live matches, which were played on Sunday afternoons, and highlights of these and other league matches. ITV paid a total of �55 million for this coverage over the four seasons.

57. During the periods which we have mentioned the television rights to other football competitions, notably the Football Association Cup, were sold to other broadcasters. We do not propose to go into detail about these arrangements except to say that, in 1988, the BBC and BSB (as it then was) jointly bid for the television rights to matches played in the Football Association Cup and England's home internationals, offering �6 million per year. This bid was successful. BSB took the rights to broadcast matches live and the BBC took the highlights rights. At about the same time Sky TV obtained the television rights for matches played in two competitions for third and fourth division clubs.

UEFA Statutes and Football on Television

58. English football clubs, and probably also football clubs elsewhere in the world, have a somewhat ambivalent attitude to football on television. On the one hand there is a strong and almost universal belief that if a football match is shown live on television this will have an adverse effect not only on the attendance at that match but also on the attendance at some other matches played at the same time ("the spill-over effect"). We shall say more later on about the basis for and the validity of this belief. On the other hand football clubs appreciate the publicity which is obtained by appearances on television and the opportunities thereby provided to raise income by means of sponsorship and advertising at the ground. (Sponsors need exposure on television and advertisers will pay more for advertisements at football grounds if these appear on television). During the four seasons between 1988/98 and 1991/92, when ITV had exclusive television rights in Football League matches, resentment built up at the very limited television exposure received by some clubs, some of which did not appear at all on television during some seasons, by comparison with other clubs, whose matches were shown several times each season.

59. In view of the first of these concerns UEFA's Statutes have made provision to regulate the showing of football matches on television in countries affiliated to UEFA. In 1993 UEFA adopted as Article 14 of its Statutes an Article which provides:

"1. UEFA and its member associations hold the exclusive rights to authorise the audiovisual and broadcasting transmissions or reproductions of events which take place within their respective area of responsibility, as well as any other use and distribution by whatever audiovisual and sound broadcasting media, whether the transmission be live or deferred or of full length or in excerpts.

 

2. The above-mentioned principles shall be implemented by special regulations approved by the Executive Committee which, in particular, shall govern the rights and obligations concerning the exploitation and international transmission of televised pictures among the owners of the rights and other national associations."

60. On 5 December 1997, UEFA revised its Statutes and Article 14 was renumbered Article 44. Although the wording and numbering of the article have changed, the changes do not appear to have altered the general effect of the Article, to which we will refer henceforth as "Article 14/44".

61. In August 1993, the UEFA Executive Committee approved a detailed set of regulations governing the broadcasting of football ("the Regulations"). Broadly, the Regulations established a series of time "windows" during which matches:

(a) could be transmitted within the territory of a national football association without its consent (Article 5);

(b) could be transmitted within the territory of a national football association with the consent of that association (Article 6); and

(c) could not be transmitted (Article 8).

62. The most important provision of the Regulations for present purposes is Article 8(1) which, when adopted in 1993, provided as follows:

"The transmission of football matches within the territory of the organising member association or into the territory of another member association, shall not take place on the following days and during the following periods of time:

Saturday: from 13.00hrs to 18.00hrs

Sunday: from 09.00 to 11.30hrs [and] from 13.00hrs to 17.00hrs

Local time"

With effect from 28th March 1996 UEFA amended this regulation so that it now reads:

"The transmission of football matches into the territory of another member association, either intentionally or unintentionally (technical overspill) shall not take place on the following days and during the following periods of time:

Saturday: from 13.00hrs to 18.00hrs

Sunday: from 09.00 to 11.30hrs [and] from 13.00hrs to 17.00hrs

Local time"

63. The regulation therefore does not now purport to restrict the showing of football on television within the territory of a national football association. But, except when it is delivered by cable, a television signal is no respecter of national boundaries. There is accordingly a substantial risk that a television broadcast intended primarily for reception within the territory of the national football association where the match is played will be regarded by UEFA as being transmitted into the territory of another member association if it can be received there. The problem is particularly acute in the United Kingdom, where Scotland, Wales and Ireland each qualify as the territory of a separate national football association. Instances were cited to us where national associations (in England the FA) have incurred substantial fines for breach of the regulation. In other instances payments have been made by one national football association to another to avoid the recipient of the payment making a complaint to UEFA which may result in the imposition of a fine.

64. Article 14/44 and the Regulations have been notified to the Office of Fair Trading, but they have not been referred to this court and their validity is wholly outside these proceedings. They have also been notified to the European Commission under what was formerly Article 85 of the EC Treaty (it is now Article 81) and an exemption has been sought under Article 85(3). The court was informed that the Commission has, comparatively recently, served a Statement of Objections, which is the first step in what may become a challenge to the validity of Article 14/44 and the Regulations. For the time being, however, they continue to be enforced by UEFA against the national football associations which are its members.

65. The Premier League supports both the validity of Article 14/44 and the Regulations and the philosophy which underlies them. It was said that one of the effects of Rule D.7.3 of the Premier League Rules is that it enables the Premier League to ensure that the requirements of the Article and the Regulations are complied with. Certainly the existence of the Article and the Regulations has been a factor which has been taken into account by the Premier League in deciding how it will sell the television rights to Premier League matches pursuant to Rule D.7.1. It is not, however, clear to us that the Premier League always adheres to the letter of Article 14/44. The broadcasting of a Sunday afternoon Premier League match by Sky seems on the face of it to be a contravention of Article 14/44. It was not explained to us on what basis this has been allowed or tolerated.

The 1992 negotiations for the sale of television rights to Premier League matches

66. As we have already noticed, the exploitation of the television rights in the matches played by its member clubs was an important factor, perhaps the most important factor of all, which led to the decision to set up the Premier League. Even before the Premier League had been established Mr. Parry, who was to be its first chief executive, began negotiations with television companies. In his evidence he gave a detailed account of these negotiations, the accuracy of which was not challenged. For our purposes, however, a brief account of what happened will suffice.

67. Mr. Parry had detailed discussions with a number of broadcasters and with certain other organisations, including Swiss Bank Corporation ("SBC"). SBC made a proposal for a dedicated football channel to be shown on Pay-TV and to be run as a joint venture between SBC and the Premier League, which was to receive a minimum guaranteed payment and a share of profits. Mr. Parry said that he regarded such a venture as interesting but something for which the Premier League was not yet ready. Attention was therefore concentrated on the BBC, ITV and Sky, each of which showed interest. These were, in substance, all the broadcasters who were active in 1992. The cable companies had not then entered the television market to any significant extent and digital terrestrial television lay some years in the future.

68. In the negotiations the attitude of ITV, at least as it was perceived by Mr. Parry, was that it wanted exclusive rights to Premier League matches. It wanted to show 30 live matches each season, effectively one a week. It did not want to commit itself to showing all the Premier League clubs. It wanted to concentrate on the most successful clubs because their matches would be the most attractive to advertisers.

69. The BBC was not really in the bidding for the television rights in live matches. Its main interest was to gain the right to show highlights, which would enable it to bring back the programme Match of the Day, which had been limited to certain broadcasts of FA Cup matches and to highlights of England home internationals during the period that ITV had exclusive rights.

70. This left Sky as the main rival to ITV. Mr. Parry said that he was initially unconvinced by the idea of selling television rights in the new league for distribution by a Pay-TV satellite broadcaster, whose business was in its infancy. He was, however, impressed by presentations made by Sky to demonstrate its technical capabilities and its business case. An additional factor was that Sky indicated that it would be willing for the BBC to have the highlights rights, which would alleviate concern about giving exclusive rights to a Pay-TV broadcaster with a limited subscriber base.

71. Mr. Parry described the outcome of these negotiations as follows (Witness statement para 128):

"Bids were received from ITV, [Sky] and the BBC. Over the five seasons the ITV bid, for exclusive live rights and recorded highlights, was worth �165 million. On a comparable basis the [Sky] bid for exclusive live rights, taking into account the BBC's offer for exclusive recorded highlights, was worth �214 million. In the end both broadcasters guaranteed at least one television appearance for each Premier League club in each season. The [Sky] bid was for 60 live televised matches compared with the 30 offered by ITV. I recommended that the clubs accept [Sky's] offer for live rights and the BBC's offer for highlights."

72. This summary omits to record, although the Premier League clubs were, of course, made well aware of it, that the 60 live matches included in the Sky bid were to be played on 30 weekends during the season, one match being played on a Sunday and the other on a Monday in each weekend. This was proposed partly because it fitted in with Sky's programming and partly because it met the requirements of the UEFA Article 14/44 (subject to the actual timing of the Sunday match) and the desire of the clubs that live matches shown on television should not conflict with matches not shown live on television.

73. The offers and Mr. Parry's recommendation were considered at a meeting of the Premier League held on the 18th May 1992 .There was considerable discussion. Some clubs were concerned that 60 live matches per season on television would be too many. Others preferred the ITV bid to the Sky bid on the ground that it would be better to have fewer matches on free to air television. Others thought that it was undesirable for Premier League matches to have to be played on a Monday. Eventually the clubs voted by 14 to 6 to accept the Sky and BBC offers. Following on this decision formal contracts between the Premier League and Sky and the BBC respectively were prepared.

 

 

The 1992 Sky Agreement

74. On 13th August 1992 the Premier League and Sky entered into a formal written agreement. So far as they are relevant to these proceedings its terms can be summarised as follows:

(1) The Agreement recited the desire of the Premier League to grant to Sky "the sole and exclusive right to attend for the purpose of live and delayed satellite television transmission" within a defined area Premier League matches played during the seasons 1992/93 to 1996/97.

(2) The Premier League granted to Sky for a term beginning on the first day of the 1992-1993 season and expiring 60 days after the end of the 1996-1997 season the sole and exclusive right to attend Premier League matches selected in accordance with the provisions of the Agreement for the purpose of making live and simultaneous transmissions of those matches within a territory consisting of the United Kingdom, the Channels Islands, the Isle of Man and the Republic of Ireland (Clause 2(1)).

(3) The Premier League undertook that (other than pursuant to the BBC Agreement which we shall summarise later) it would not grant to any person

"(a) the right to attend any Premier League match(es ) at any time during the Term for the purpose of filming or recording any Premier League match or making any Transmission or Terrestrial Broadcast (whether live, deferred or recorded and whether as part of a news bulletin or otherwise) which is intended for reception within the Territory; or

(b) the right at any time during the Term to Transmit or make any Terrestrial Broadcast of any Premier League Match which is intended for reception within the Territory." (Clause 2.2)

The Term and the Territory are those mentioned in paragraph (2) of this summary. Other expressions beginning with capital initial letters are defined in the Agreement but their meanings are either obvious or not relevant to be set out in this summary.

(4) Sky was given the right (which was non-exclusive as against the BBC but exclusive against all other persons) to attend Premier League matches, other than the live matches mentioned in (2) and matches filmed by the BBC under its agreement with the Premier League, for feature coverage purposes. Sky was not to make any Transmission of any match so filmed except for the purposes of a Highlights Programme in accordance with further provisions of the Agreement. (Clause 2.3).

(5) Sky assigned to the Premier League the copyright in "the B SKY B Footage", but retained the right to broadcast such footage and to include it in a cable programme service within the Territory. (Clause 3(2)).

(6) The Premier League granted to Sky the right to transmit "PL footage" as part of highlights programmes for reception within the Territory (Clause 3.5). "PL Footage" means pictures and footage of Premier League matches made by or on behalf of the Premier League.

(7) Other parts of Clause 3 contained detailed provisions governing the use by Sky of the rights obtained by it, but it is not necessary to go into these.

(8) Clause 4 provided for the payments which were to be made by Sky to the Premier League. The amounts payable during the five year term of the Agreement were as follows:

1992-1993 �35.5 million

1993-1994 �37.5 million

1994-1995 �39.5 million

1995-1996 �39.5 million

1996-1997 �39.5 million

Total �191.5 million

(9) Clauses 5 and 6 regulated the manner in which and the extent to which Sky was to exercise its right to attend live matches for the purpose of broadcasting them on television. Under Clause 2.1 (summarised in paragraph (2) above) Sky was, on the face of it, given a general right to attend and broadcast Premier League matches. Under Clauses 5 and 6 this general right was limited in various ways, of which the following are the most important:

(a) Sky was not to attend and broadcast more than 60 live matches per season;

(b) Sky was not to attend and broadcast more than two, or in certain exceptional circumstances three, live matches per week;

(c) Sky was to procure that each Premier League club was to be featured in at least one televised live match during each season;

(d) Live matches televised by Sky were to kick off either on Sundays between 12 noon and 8 pm or on Bank Holidays, Mondays and Tuesdays between 7.30 pm and 8.15 pm;

(e) There were further limitations in the extent to which Premier League clubs could be required to play on Mondays or Tuesdays;

(f) Sky was given certain additional rights to broadcast "Decisive Matches", that is to say matches whose outcome will determine which club is the winner of the Premier League competition or whether a particular club is to be relegated from the Premier League.

(10) Clause 7 set out the regime under which matches to be broadcast by Sky are to be selected. It is not necessary to go into the details of this except to note that the selected matches were to be re-scheduled by the Premier League so as to be played on a Sunday or Monday or, exceptionally, a Tuesday as mentioned in paragraph (9)(d) of this summary.

(11) Under Clause 8.1 Sky bound itself to make, not later than 30th November 1996, a written offer to buy equivalent rights from the Premier League for a further period of 5 years commencing on 1st August 1997, on financial terms no less favourable to the Premier League than those set out in the Agreement. By Clause 8.2 any such offer was to lapse on 1st February 1997 if it had not been accepted by the Premier League prior to that date. This provision for lapse was, however, supplemented by a proviso in the following terms:

"PROVIDED THAT the Premier League shall not grant the Rights to any other person for a further period commencing upon 1st August 1997 unless the Premier League shall first have offered to B SKY B in writing the right to acquire the Rights for such further period on the same financial terms as those offered by or to such other person and B SKY B shall have failed to accept such offer by notice in writing given to the Premier League within seven days after such offer was made."

 

(12) Clause 9 dealt with the possibility of live transmissions of Premier League matches on a pay per view basis. Sky was to be under no obligation in this respect and pay per view was not to be introduced without the written agreement of both parties, each party being obliged not unreasonably to withhold agreement if requested to give it by the other. If pay per view was introduced Sky was to make additional payments to the Premier League.

(13) Clause 11 related to the provision of certain facilities required by Sky for the making of television broadcasts of live matches. These facilities included not only physical requirements such as the provision of gantries and supplies of electricity but the provision of players and managers to be interviewed.

(14) By Clause 15.1 the Premier League warranted that it had the right to grant the rights expressed to be granted to Sky under the agreement "on behalf of the Premier League Clubs" (paragraph (a)); agreed to procure that any football club which becomes a Premier League Club at any time during the term of the Agreement "shall endorse and be bound by this Agreement" (paragraph (d)); and accepted certain further obligations.

(15) By Clause 15.2 the Premier League undertook that during the term it

"shall not permit any other broadcaster within the Territory to transmit live any football match (other than an Authorised Fixture) in which a Premier League Club may take part during a Season and which is played at the home ground of the relevant Premier League Club"

unless and until Sky has been offered the right to transmit the relevant match live and has failed to accept such offer.

(16) By Clause 17.2 Sky was given a right to terminate the Agreement with immediate effect

"at any time after any judgment ruling or decision is made or given by any competent court or authority to the effect that the grant of the Rights to B SKY B pursuant to Clause 2.1 is unlawful void or unenforceable in whole or in part."

This right is subject to limitations if any relevant right of appeal is exercised. The consequences of any such determination are dealt with in Clause 17.3

(17) By Clause 28 it was stated that the Premier League contracted on the terms of the Agreement on its own behalf and

"as agent for each of the Premier League Clubs, but only so that any obligation imposed on the Premier League under this Agreement which is referable (in whole or in part) to the ability of B SKY B to obtain access to a ground at which a Live match is, or is to be, played shall constitute also (but only to the extent that it is so referable) a like obligation of the Premier League Club at whose ground the Live Match is, or is to be, played".

75. We emphasise that this summary does not cover all the terms of the Agreement. We have confined it to those terms which are relevant to these proceedings. The terms which are particularly relevant are those which we have set out verbatim.

 

The 1992 BBC Agreement

76. The BBC Agreement is dated 14th September 1992, a month after the 1992 Sky Agreement. It was made between the Premier League and the BBC and its provisions so far as material to this case may be summarised as follows:

(1) Recital (A) referred to the desire of the Premier League to grant to the BBC

"the sole and exclusive right to attend certain football matches organised under the auspices of the Premier League during the seasons [1992/1993 to 1996/1997 inclusive] for the purpose of making recorded television broadcasts of such matches within the United Kingdom and Eire."

(2) The core provisions of the Agreement are to be found in Clause 2, the material parts of which provide

"2.1 ... the Premier League hereby grants to the BBC for the Term the sole and exclusive right to attend BBC Matches for the purpose of recording, and making recorded broadcasts of, BBC Matches ...

2.2 The BBC shall not without the prior written consent of the Premier League ... make, or attend Premier League matches for the purpose of making, any Terrestrial Broadcast of a Premier League Match other than in accordance with [certain specified provisions]

2.3 The Premier League undertakes that (other than pursuant to the B SKY B Agreement) it shall not grant to any person:

(a) the right to attend any Premier League Match(es) at any time during the Term for the purpose of making any Transmission or Terrestrial Broadcast (whether live or deferred and recorded and whether as part of a news bulletin or otherwise) which is intended for reception within the Territory; or

(b) the right at any time during the Term to Transmit any Premier League Match or make any Terrestrial Broadcast of any Premier League Match which is intended for reception within the Territory."

Clause 2.3 was subject to an immaterial proviso.

(3) The expressions beginning with capital letters in the passages quoted above are the subject of definitions in the BBC Agreement. Many of these are self evident or do not call for precise exposition here. Of the rest it is to be noted that "the Term" means the period commencing on the first day of the 1992/1993 season and ending 60 days after the end of the 1996/1997 season (i.e. it is the same as the term defined in the Sky Agreement); "the BBC Matches" mean matches played during the term which the BBC selects for recorded broadcast in accordance with the terms of the Agreement; and "the Territory" means the United Kingdom, the Channel Islands, the Isle of Man and the Republic of Ireland (i.e. the same as the Territory defined in the Sky Agreement).

(4) The BBC assigned to the Premier League the copyright in all BBC footage throughout the world, subject to the reservation to the BBC of the right to broadcast the BBC footage within the Territory or to include it in a cable programme service within the Territory (clause 3.1). "BBC footage" means all material, pictures, signals, programme feeds and film of BBC Matches filmed recorded or made by or on behalf of the BBC during the Term in accordance with the Agreement.

(5) The Premier League granted the BBC certain broadcasting rights in "the Premier League footage", that is to say all material, pictures and film of Premier League matches (other than BBC matches and B SKY B Matches) filmed or recorded by or on behalf of the Premier League during the Term (Clause 3.2).

(6) It was provided that the BBC would be entitled to broadcast various highlights of Premier League matches in defined programmes. The most important of these programmes was to be a highlights programme to be broadcast between 7 pm on each Saturday evening and 1 am on the following Sunday morning. This programme was to consist of extended recorded highlights of the two BBC Matches selected for that Saturday (the duration of which was to be between 10 and 35 minutes for each match) and short recorded highlights (not exceeding 5 minutes in duration) of each of the other Premier League Matches played on that Saturday (Clause 3.4)

(7) The BBC was to pay for the rights obtained by it the sum of �4.5 million during each of the five seasons falling within the Term, making a total of �22.5 million. (Clause 4).

(8) The BBC was given the right to select two Saturday matches each week and not more than six midweek matches each season. The matches so selected would become "BBC Matches". The BBC was to procure that each Premier League Club would be featured in at least one BBC Match each season. (Clause 5).

(9) Provision was made in Clause 6 concerning the way in which the BBC was to exercise its right of selection, in particular by avoiding the selection of matches chosen by Sky as "B Sky B Matches" (that is to say selected by Sky for live broadcasting).

(10) By Clause 7 provision was made, in terms similar to Clause 8 of the Sky Agreement, for the making by the BBC of an offer to acquire similar rights for a further term of five years on terms no less favourable to the Premier League than those of the Agreement and, in the event of the non-acceptance of such offer by the Premier League, for the BBC to have an opportunity to match any bid proposed to be accepted from a rival purchaser.

(11) Provision was made for the BBC to have facilities similar to those agreed to be supplied to Sky when it was attending Premier League Matches (Clause 8).

(12) By Clause 13 the Premier League gave to the BBC warranties and undertakings equivalent to those given to Sky by Clause 15 of the Sky Agreement.

The BBC Agreement contained no equivalent of Clauses 17.2 (express right to terminate in certain events) or 28 (stating that the Premier League contracted as agent for its member clubs so far as access to grounds is concerned) in the Sky Agreement.

 

"PL Footage" "B SKY B Footage" and "BBC Footage"

77. Having summarised the relevant terms of the Sky Agreement and the BBC Agreement we must say something more about the expressions "PL Footage" "B SKY B Footage" and "BBC Footage". Although they are defined in the two Agreements their significance is not immediately apparent from the terms of the Agreements themselves. What needs to be understood is that a film is made of the whole of every Premier League match. Where the match is one which is to be broadcast live by Sky the film is made by Sky pursuant to the rights granted to it and it is termed "B SKY B Footage". Where the match is one of those selected for the broadcasting of an extended highlight by the BBC the film will be made either by the BBC itself or by an independent company engaged by the BBC. In either case it is termed "BBC Footage". Where the match is not a Sky match and not one of those filmed by the BBC or its contractors the film will be made by contractors engaged by the Premier League. The important feature is that in each case the copyright in the film, from the moment that the film is brought into existence, belongs to the Premier League. In the case of film made by the contractors for the Premier League this is achieved by the arrangements between the Premier League and its contractors. In the case of the B SKY B Footage it is the result of the assignment on the part of Sky contained in the Sky Agreement. Likewise in the case of BBC Footage it is the result of the assignment on the part of the BBC contained in the BBC Agreement.

78. So far as copyright licences are concerned, Sky has a licence to make use of B SKY B Footage and Premier League Footage for certain limited purposes, generally being deferred transmissions and highlights programmes. The BBC has a licence to make use of BBC Footage and Premier League Footage for other limited purposes, principally highlights programmes.

The 1996 Negotiations

79. The Premier League had insisted on the inclusion in the 1992 Sky and the BBC Agreements of provisions requiring Sky and the BBC to make, not later than 30th November 1996 an offer to acquire television rights for a further term of five years on financial terms no less favourable to the Premier League than those of the 1992 Agreements. This was because the Premier League wanted to protect itself against a loss of television revenue after the initial terms of the new agreements had expired. In agreeing to this requirement Sky and the BBC had stipulated for the "matching bid" rights conferred by Clause 8.2 of the Sky Agreement and Clause 7.2 of the BBC Agreement. We shall have to consider these rights later.

80. In the event the contractual obligations of Sky and the BBC to make new bids played little or no part in the negotiations for new contracts which took place in 1996. Mr. Parry said that he was determined that there should be competition for the rights after 1996/97 between at least three potential purchasers. He therefore opened negotiations with a number of parties early in 1996. He sought bids for a package which was broadly comparable to the package sold in 1992. He said that the objectives in the 1996 negotiations were generally the same as in 1992, namely to optimise revenues subject to safeguards to protect football interests, including the desire to secure a minimum television exposure for each club, to protect attendances at matches and not to prejudice the sport through over exposure on television.

81. There were two parties, besides Sky, who were interested in securing live rights. These were an entity named "Jupiter", which was a vehicle of United News and Media Plc, and a consortium named "Goal" which was a vehicle for Mirror Group Plc and Carlton Communications Plc. Mr. Parry also had contacts with two cable broadcasters, but they indicated that they would not bid at that stage, although they might be interested in five years time. In the event bids were received from Sky, Jupiter and Goal.

82. Sky's bid was 60 matches a season for a four year period in return for an annual payment. Some clubs sought to reduce the number of matches below 60, but Sky indicated that it wanted more matches, not less, and that it would prefer to have three matches a week, making a total of 90 for the season. It offered an initial payment of �50 million to be made soon after acceptance and thereafter annual payments beginning at �135 million in 1997/98 and increasing to �180 million in 2000/2001. Sky also stipulated that if pay per view was exploited in the currency of the new agreement this would be by mutual agreement between Sky and the Premier League.

83. Goal's proposal was for a joint venture company involving the Premier League and the members of the Goal consortium. The television rights to the Premier League competition, including rights to televise matches on a pay per view basis, would be vested in the joint venture for a term of five years. The Premier League would receive an annual payment from the joint venture company and 50% of its profits. The joint venture company would have sought to secure the broadcasting of Premier League matches on a variety of platforms. It was particularly interested in exploiting new cable distribution systems, initially on an analogue basis but eventually moving to digital.

84. The Jupiter proposal was for a somewhat similar joint venture proposal, but with the venture being established for an initial ten year period. The Premier League was to be rewarded by a share of the profits of the joint venture, the minimum amount of such share being guaranteed by United News and Media. This proposal envisaged analogue satellite distribution initially, but was, as Mr. Parry put it, "heavily biased to future digital satellite transmission".

85. All three bids proceeded on the basis that the rights granted to the successful bidder would be exclusive. The Premier League also received bids for exclusive highlights rights from ITV and the BBC. ITV's bid was for �16.6 million per annum for four years, making a total of �66.4 million. The BBC's was for �73 million over four years.

86. The three bidders for the live television rights made presentations to a general meeting of the Premier League held on 6th June 1996. After receiving these presentations the Premier League agreed to accept the bids of Sky (for live matches) and the BBC (for highlights).

 

 

The 1996 Agreements

87. The 1996 Agreement between the Premier League and Sky is embodied in a letter from Sky to the Premier League dated 5th June 1996 and the Premier League's reply dated 11th June 1996. The effect of this exchange of correspondence is that Sky was to have the same exclusive rights to live Premier League matches for the four seasons 1997/98, 1998/99, 1999/2000 and 2000/2001 as it had enjoyed under the 1992 Agreement. It was to pay the Premier League �50 million within seven days, �135 million for the 1997/98 season, �145 million for the 1998/99 season, �160 million for the 1999/2000 season and �180 million for the 2000/2001 season. The total payment for the four seasons was thus �670 million. Highlights rights were reserved to the BBC as before. Clause 8 of the 1992 Sky Agreement (requiring Sky to make an offer to acquire television rights for a further term and giving Sky the right to make a matching bid if the Premier League proposed to sell elsewhere) was not to apply to the new agreement.

88. It appears to have been envisaged that the new agreement would be embodied in a full form of written agreement which would, no doubt, have been modelled on the 1992 Agreement. Such a full form of agreement has, however, never been entered into. It seems that the parties had difficulty in agreeing certain variations of detailed provisions and for this and, no doubt, other reasons (including the fact that these proceedings were pending) no full form of agreement has been entered into. There is, however, no doubt that a binding agreement was entered into by the exchange of correspondence we have mentioned and that, except for Clause 8 and variations reflecting the new term of the agreement and the new payments, the 1992 Agreement continues in effect.

89. The agreement between the Premier League and the BBC also took the form of an exchange of correspondence. On 4th June 1996 the terms proposed by the BBC were set out in a letter of offer from the BBC. On 12th July 1996 Mr. Parry responded on behalf of the Premier League, accepting the main proposals put forward by the BBC but making counter proposals in respect of certain details, notably that there would be omitted from the long-form agreement intended to be entered into terms analogous to the provisions of Clause 7 of the 1992 Agreement (i.e. requiring the BBC to make an offer to renew the agreement and giving it the right to match any bid received from another purchaser). The payments to be made by the BBC to the Premier League are in accordance with its proposal of 4th June, that is to say �17 million in 1997/98, �17.5 million in 1998/99, �18.5 million in 1999/2000 and �20 million in 2000/2001, making a total of �73 million over the four years. As in the case of Sky no long-form agreement was in fact entered into, but it is common ground that a binding contract was brought into existence in accordance with the exchange of correspondence.

90. In view of this contractual history it is convenient to speak of the "Sky Agreement" and the "BBC Agreement" respectively as including both the agreement with the relevant broadcaster which was entered into in 1992 and that which was entered into in 1996, save where there is some special reason for identifying the 1992 Agreement or the 1996 Agreement separately.

 

Sale of overseas television rights

 

91. The 1992 and the 1996 Agreements with Sky and the BBC dealt only with the broadcasting of Premier League matches within a limited territory consisting of the United Kingdom, the Channel Islands, the Isle of Man and the Republic of Ireland. There is, of course, considerable interest in the Premier League on the continent of Europe and elsewhere in the world. Rule D.7.1 enables the Premier League to sell the television rights for the entire world and it has done so for many markets. Between 1992 and 1998 it did so through an agency named CSI Limited . Since 1998 its agent has been Trans World International Inc ("TWI"). Mr. Bistany of CSI and Mr. Croker of TWI gave evidence on behalf of the Premier League. We do not find it necessary to review their evidence in any detail. It will suffice to say that they both deposed to the strong interest in Premier League football outside the territory in which Sky and the BBC have held the television rights by virtue of the Agreements already summarised and to the considerable sums raised by the Premier League in respect of the sale of the overseas rights.

92. Mr. Bistany and Mr. Croker said that the agreements made with foreign broadcasters were always, or almost always, on terms which gave the foreign broadcaster exclusivity within a defined territory. We were not taken to the details of any of the agreements with such broadcasters. These agreements are clearly outside the scope of the present reference. In any event it may well be the case that they are in the form of licences to exploit the Premier League's copyright in the various recorded footages which we have already mentioned. If this is so it seems probable that provisions giving the broadcaster exclusivity do not involve the acceptance of obligations which amount to restrictions for the purposes of the 1976 Act. This is a matter which we discuss below in relation to the Sky and BBC Agreements.

 

 

 

 

The Restrictions alleged to be accepted under the Agreements

 

93. We now propose to set out the terms of the relevant restrictions which are said by the Director General to be accepted under the provisions of the registered agreements which are referred to in the Order of 24th October 1996. Generally we shall follow the formulation of the restrictions which is set out in the schedule to that Order, but we shall attempt to simplify the language to the extent that it appears to us that this can be done without affecting the sense. We shall follow the schedule in indicating before each restriction the provisions of the relevant agreements under which that restriction is said to be accepted. We emphasise that, at this stage of our judgment, the description of an obligation does not indicate any view on our part as to whether or not it is a relevant restriction (in the sense in which we have used that expression earlier).

1. Restriction accepted under Rule D.7.3

A restriction accepted by each "member club" to the effect that it will not, without the consent of the board of directors of the Premier League, supply "programme material services" for the purpose of facilitating the televising, recording or transmission by cable or satellite or any similar method of Premier League matches.

We comment that the expression "programme material services" is used in this and other formulations of the restrictions as a compendious description of a bundle of facilities the most important of which are the right to enter the football stadium where a Premier League match is to be played for the purpose of seeing the match and using television cameras to translate the spectacle into a form whereby it can either be immediately broadcast on television or recorded for broadcast at a later time. One of the issues which we have to decide is whether the provision of these facilities amounts to the supply of a service for the purposes of the 1976 Act. The restriction does not prevent the making of closed circuit television broadcasts which are to be received only within the stadium where the match is played, but this exception is of no significance for present purposes.

The expression "member club" is used in this and other restrictions to denote every club which is for the time being a member of the Premier League.

Although the first restriction set out in the schedule to the 1996 Order is drafted by reference to Rule D.7.3 as printed in the 1995/96 Premier League Handbook it is common ground that the Rules of the Premier League have, at all times since the Premier League was formed, contained a rule to this effect and items 9 and 10 of the schedule to the 1996 Order bring within the scope of these proceedings the restriction accepted under every version of Rule D.7.3 for the time being in force.

 

2. Restriction accepted under Clause 2.2 of the 1992 Sky Agreement and Clause 2.3 of the 1992 BBC Agreement and continued by the 1996 Agreements.

A restriction accepted by each member club to the effect that it will not during the period specified in each agreement supply to persons other than Sky and the BBC programme material services for the purpose of filming or recording any Premier League match or of making any terrestrial broadcast or transmission by satellite or cable which is intended for reception within the specified territory.

 

The "specified territory" referred to in the formulation of this and later restrictions is the United Kingdom, the Channel Islands, the Isle of Man and the Republic of Ireland.

3. Restriction accepted under Clause 15.2 of the 1992 Sky Agreement

A restriction accepted by each member club to the effect that it will not during the term specified in the 1992 Sky Agreement supply to any person other than Sky programme material services for the purpose of making a live satellite broadcast within the specified territory of a football match played at the member club's home ground which is not a Premier League match or a match played in certain other specified competitions, unless such services have first been offered to Sky on the same terms and that offer has not been accepted by Sky within a specified period

95. As in the case of restriction 2 set out above, a similar obligation was accepted under the 1996 Sky Agreement during the further term mentioned in that Agreement (i.e. in effect until the end of the 2000-2001 season) and it is accepted that this extended obligation is within the scope of the proceedings.

4. Restriction accepted under Clause 8.2 of the 1992 Sky Agreement.

A restriction accepted by each member club to the effect that it will not, during the term mentioned in the 1992 Sky Agreement (i.e. in effect until the end of the 1996-1997 season) supply to any person other than Sky programme material services for the purpose of making satellite broadcasts of Premier League matches intended for viewing within the specified territory unless an offer to supply such services on the same terms shall first have been made to Sky and has not been accepted by Sky within a specified period.

96. This obligation was expressly excluded from the 1996 Sky Agreement, so that the restriction was spent when that Agreement was entered into.

5. Restriction accepted under Clause 7.2 of the 1992 BBC Agreement

A restriction accepted by each member club to the effect that it will not, for the period stated in the 1992 BBC Agreement, supply to any person other than the BBC programme material services for the purpose of making terrestrial broadcasts of Premier League matches in recorded and edited form unless an offer to supply such services on the same terms has been made to the BBC and not accepted by the BBC within a specified period.

97. Like the obligation arising under Clause 8.2 of the 1992 Sky Agreement this obligation was not continued in 1996 and became spent when the 1996 BBC Agreement was entered into.

6. Restriction accepted under Rule B.20 of the Premier League Rules

A restriction accepted by each member club to the effect that it will not, by taking part in matches other than Premier League matches, provide football entertainment services (i.e. a component part of what we have referred to as programme material services) which interfere with the home Premier League matches of other member clubs through offering competition for potential viewers or spectators.

98. As with restriction 1 set out above and restrictions 7 and 8 mentioned below, it is common ground that Rules to the effect mentioned have been contained in the Premier League Rules since the formation of the Premier League.

7. Restriction accepted under Rule B.27 of the Premier League Rules

A restriction accepted by each member club to the effect that (subject to certain exceptions) it will not play in any competition other than the Premier League competition without the consent of the board of the Premier League.

8. Restriction accepted under Rule D.6.1 of the Premier League Rules

A restriction accepted by each member club to the effect that it will not, without the consent of the board of the Premier League provide football entertainment services by playing in any football match outside England and Wales.

 

Other reports bearing upon the position of the Premier League and its television arrangements.

99. While the present proceedings have been pending there have been three other reports which have a bearing on the matters which we have to decide. We have been referred to these with varying degrees of enthusiasm by the parties to this reference and we think that we can and should take note of them, although none of them is or purports to be decisive of any issue in these proceedings.

The reports in question are:

(a) A "Review of B SKY B's Position in the Wholesale Pay-TV Market" made by the Office of Fair Trading and published in December 1996. We shall refer to this report as the "Wholesale Price Review".

(b) The Report of the government appointed Football Task Force under the chairmanship of Mr. David Mellor QC. This report was published on 11th January 1999, the day before the hearing in these proceedings began.

(c) The Report of the Monopolies and Mergers Commission into a proposed merger of Sky and Manchester United Plc. This report was submitted to the Secretary of State for Trade and Industry on 12th March and published in April 1999, shortly before the conclusion of the hearing. As is now well known, the Secretary of State refused to approve the proposed merger, which has now been abandoned.

We propose to deal briefly with each of these reports.

The Wholesale Price Review

100. It has been the practice of Sky not to confine its television channels to its own broadcasting system. At all material times it has made them available to other Pay-TV broadcasters, notably cable broadcasters and, latterly, ONdigital. Naturally Sky has required to be paid for this availability. Its policies in respect of price and other terms of supply have, however, brought forward criticisms from the broadcasters who wish to have Sky's channels. These complaints have led to two investigations by the Office of Fair Trading acting in performance of its functions in relation to monopolies. The results of these investigations are described in the Wholesale Price Review. We do not propose to go into the details of this. The relevant facts for present purposes are that the Director General has exercised, in respect of Sky's wholesale pricing policy, supervisory powers which are independent of the 1976 Act and has obtained from Sky certain undertakings. These undertakings are lengthy and complex and govern many aspects of Sky's pricing and other terms of supply. In particular Sky's wholesale price list and discount policy have to be submitted to and agreed by the Director General.

 

The Football Task Force Report

101. In 1998 the government set up a body named "The Football Task Force" to consider various matters relating to the encouragement of football at all levels in the United Kingdom. Its chairman is the Rt. Hon. David Mellor QC, who was called by the Premier League to give evidence to us, and it has a distinguished membership consisting mainly of persons having an interest in the welfare of football. On 11th January 1999 it submitted a Report to the Minister for Sport which deals with various aspects of the matters within its remit. In particular it recommended strongly that the Premier League should continue to re-invest a significant part of its income in developing football at the lower levels, particularly in what it called "grassroots facilities". Amongst its conclusions the following passages appear:

"7.3 English football depends on the re-distribution of income. It has been a feature of the game since it began, but resources generated by clubs have traditionally remained within professional football. Our proposals are based on the continuation of this reinvestment principle but with funding going deeper, out of the professional game and into the grassroots. Such a development would show how football at the highest level can successfully balance its new-found commercial success with its wider responsibilities as the national sport.

7.4 English football's ability to invest in its own future is critically linked to there being no break up in the present collective bargaining arrangements. These arrangements create the central pot for sharing out. The ability to engage in collective negotiations is about to be challenged by the Office of Fair Trading (OFT) on the grounds that it is anti-competitive and contrary to the interests of the consumer. Should the Office of Fair Trading win its case, football clubs would have to act individually in selling broadcasting rights. For this reason, the timing of this report is critical.

7.5 The Football Task Force is united in the belief that this outcome would have a negative impact on English football.

7.6 We cite two reasons to support this claim. First, there is a strong chance that it would spell the end of the re-distribution of income within football. If clubs sell television rights individually this would affect the opportunity to collect resources centrally for re-investment throughout the game. Whilst we would encourage individual clubs to make a percentage of income available for investment outside of the FA Premier League, it is unlikely that sufficient funding would be forthcoming for the vital work we have outlined.

7.7 Second, it would throw the future of many clubs in the lower divisions into doubt. Many Football League clubs are under great financial pressure and rely heavily on income from collective television agreements. The combined effect of this with the lack of income being made available through the FA Premier League would severely damage many clubs and almost certainly force some out of business. That would deprive communities across the country of an important asset.

7.8 The consumers in this case are football supporters. Their interests would not be served by either of these developments. Football is the national sport and, as we have argued throughout this report, its interests are bound up with the national interest. Neither would be served by the ending of the current arrangements.

7.9 Maintaining a re-distributive function within football is vital to the future health of the game at all levels. The consequences for football of a negative outcome in this case are so far-reaching that we would recommend that the Government give early consideration to alternative means for how the objectives we have set out can be achieved.

7.10 In the aftermath of the Hillsborough disaster, the country's leading football clubs were the beneficiaries of millions of pounds of public money to bring stadia up to acceptable standards of safety. Since then, the turnover of these companies has increased beyond all predictions. Should existing systems of re-investment end, there would be a strong case for clubs being asked to repay this money through a voluntary levy scheme whereby a percentage of each new TV deal is paid into a central pot.

Recommendation

FA Premier League clubs should:

retain the ability to sell rights to the television broadcasting of league games on the present collective basis through the FA Premier League"

Clearly we have to form our own judgment about these matters but we include this powerful expression of opinion among the considerations which we take into account.

The MMC report on the proposed Sky/Manchester United Merger

102. On 9th September 1998 the boards of Sky and Manchester United Plc announced the terms of a recommended offer under which Sky would acquire all the shares in Manchester United in exchange for shares in Sky, with a cash alternative for those Manchester United shareholders who did not wish to take Sky shares. Based on the cash offer Manchester United was valued at �623 million. On 29th October 1998 the Secretary of State for Trade and Industry referred the bid to the Monopolies and Merger Commission to report, inter alia, whether the merger would operate against the public interest.

103. The Commission presented its report to the Secretary of State on 12th March 1999. In reaching its conclusions the Commission was much concerned with the outcome of the present case, particularly in respect of Rule D.7.3. It was scrupulous in its recognition that the determination of such outcome was not a matter for it.

104. There is some overlap between the tasks of the Commission and this court respectively and the Director General and the Premier League both sought to obtain support for their arguments from the Commission's report. Nevertheless the essential question which the Commission had to answer is very different from the questions which we have to answer and we consider that a great deal of caution is required before individual passages in that report are invoked in relation to the different issues which are raised by this case. We do not, therefore, explore the report further for the purposes of this judgment.

 

Agreements for broadcasting of football matches which are not Premier League matches

105. The lengthy hearing before us has been focused so sharply on Premier League football that it has become easy to lose sight of the fact that Premier League football represents only a fairly modest proportion of the total amount of football that is played and a far from overwhelming proportion of the football which is shown on television in this country. Indeed during the season there is scarcely a day in which football of some kind does not feature on at least one television channel. In order to help to keep matters in perspective we propose to give a short account of some of the arrangements for the broadcasting of non-Premier League football about which we were told in evidence.

(a) The Football Association Cup

106. This is universally recognised as a highly important competition attracting great interest, particularly during the later stages when Premier League clubs may be expected to feature prominently. Under the rules of the FA Cup competition the FA itself has the exclusive ownership of the television rights in all matches played in the competition. Over the years the FA has sold these television rights to various broadcasters on various terms. Under the most recent arrangements, applicable in the four seasons 1997/98 to 2000/2001, the FA has licensed these rights to Sky. Sky has in turn granted sub-licences in respect of certain live matches and highlights to ITV and in respect of highlights only from round 3 onwards to the BBC.

(b) The Football League competition

107. In 1995 the Football League entered into an agreement with Sky under which Sky has the exclusive right to televise Football League matches live for five seasons starting with the 1996/97 season and ending with the 2000/2001 season. Sky has the right to broadcast 60 matches per season plus the play-off matches at the end of the season. The Football League receives �25 million per season from Sky.

(c) The UEFA Champions League

108. As we have already mentioned, this is being expanded for 1999/2000 and future seasons. The television rights in this country were acquired by Carlton with a view to them being made available to ITV. But Carlton is part-owner of ONdigital and, under an arrangement between Carlton and ONdigital, television coverage will be shared between ITV and ONdigital. Champions League matches will be played on a Wednesday or a Thursday evening. Generally ITV will broadcast live those matches which are played on a Wednesday and ONdigital will broadcast live the Thursday matches. As a subscriber to ONdigital can receive ITV channels as well as ONdigital's channels, all Champions League matches will be available to ONdigital's subscribers. There was general agreement among those witnesses who were qualified to comment that Champions League football is popular on television. Mr. Ashley Faull, who is currently Executive Director of Broadcasting for ONdigital but was previously with Telewest, accepted a suggestion that the acquisition of television rights in the Champions League was a "massive coup". Mr. Wakeling, of Sky, described the Champions League as now a "very glamorous competition".

 

(d) Italian Serie A

109. Serie A is the senior Italian football league. Since 1992/93 Channel 4 has shown one match a week of Serie A football. Mr. Michael Grade, at that time the chief executive of Channel 4, gave evidence that his channel was not interested in acquiring the television rights to live football matches played in England because its mandate is to provide programming which is not available elsewhere. He said that his channel's acquisition of the television rights to Serie A

"was seen as quite a coup in the industry, a brilliant opportunist move"(Witness statement para 10)

Although Serie A does not attract high ratings in absolute terms, Mr. Grade said that the quality of the audience was very high from an advertiser's point of view. It therefore constitutes valuable programme material for Channel 4.

(e) UEFA Cup and European Cup Winners Cup

110. Under UEFA Rules the television rights for matches played in these competitions belong to the national association of the home club. In the case of English clubs this is the Football Association. However it appears that there is an arrangement between UEFA and the various national associations under which these rights are ceded to the participating clubs. This gives rise to most of the exceptional cases in which television rights have been sold by individual clubs in this country. Sales inevitably have to be made on a season by season basis, because it is not known which clubs will be participating in these competitions until the end of the preceding season. In 1998/1999 four English clubs participated in the UEFA Cup. Their matches were broadcast live by Channel 5 and the BBC, who divided the matches between them.

111. As to the Cup Winner's Cup, the television rights have, in recent years, been sold on a non-exclusive basis to various broadcasters. In 1998/1999 Channel 5 concluded an agreement to show Chelsea's matches live throughout its reception area and Tyne Tees Television broadcast Newcastle United's matches in its region only. ITV showed recorded highlights in some of the matches.

112. The evidence which we heard indicated that the results of efforts to sell the television rights in a club's matches were variable. There are occasions, especially during the early stages of the relevant competition, when there are no buyers at all for the rights, or the sums offered are very small. Much seems to depend on what other football matches are to be shown "head to head" with the match being sold. Uncertainty about how long a particular club will remain in the competition reduces the attractiveness of the matches to broadcasters. Generally it appears that participation in these competitions cannot be relied upon as a means of generating substantial television income.

(f) Other competitions

113. The market for television rights is evolving constantly with new competitions being introduced and others re-marketed. The Intertoto Cup is an example of the former and the Champions League an example of the latter. Another new competition, the World Club Championship, is to begin next year, but the arrangements for the sale of television rights to matches played in the course of it have not yet been announced. A suggested European Super League has been discussed, but the discussions appear to have been shelved for the time being.

 

Consideration of the Football League Rules by the OFT

114. There is one other matter which we think we ought to state as part of the factual background. The Football League has at all material times had a rule which is similar in substance to Rule D.7.3 of the Premier League Rules. In 1991/92 the relevant rule, then Rule 25 (c), provided as follows:

"Individual League or Rumbelows League Cup Matches ... in which clubs take part (with the exception of the Football Association Cup Final Tie) shall not be televised or recorded or transmitted by satellite or cable except with the consent of the Management Committee"

 

 

115. For the 1998/99 season the relevant rule, now Rule 66.1 was in the following terms:

"No match in any competition conducted by The League shall be televised or recorded or transmitted by satellite or cable or any similar method except with the written consent of the Executive nor shall any Club take part in any match (except matches in the Football Association Challenge Cup Competition) which is to be televised or recorded or transmitted by satellite or cable or any similar method without first obtaining the written consent of the Executive."

116. Particulars of the agreement between the member clubs of the Football League, including the Rules of the Football League were duly furnished to the Director General under the 1976 Act. It is manifest that many, if not all, of the considerations which apply to Rule D.7.3 of the Premier League Rules apply equally to the old Rule 25(c) and the current Rule 66.1 of the Football League Rules. The Director General has, however, neither referred the Football League Rules to this court nor placed them on one side for further consideration when the result of the present case is known. What was done was that on 10th January 1994 representations were made to the Secretary of State with a view to the Secretary of State giving a direction under Section 21(2) of the 1976 Act. The representations cover much ground in addition to that which is relevant to the restriction which was accepted under what is now Rule 66.1, which the Director General listed as restriction xvii. We were shown the full representations. It was emphasised that these are confidential and we would wish to protect such confidentiality except to the extent that the public interest demands disclosure. However we think it is right that we set out the substance of what the Office of Fair Trading submitted to the Secretary of State in relation to restriction xvii and certain other restrictions. The material part of the representation was as follows:

"Restrictions xiv - xviii govern matters relating to commercial activities. Although in theory there is scope for anti-competitive behaviour here, we do not consider that in the context of these agreements the restrictions have a significantly detrimental effect on competition in the sport. In devising a framework of rules and regulations the management committees of football associations and leagues have created a specific product - the relevant ... competitions which attract revenue from spectators, advertising sponsors and broadcasters. Clubs accept that it is in their commercial interests to work within this framework in spite of the curtailment of their complete freedom of action which this entails."

117. In due course, on 28th July 1994, the Secretary of State gave a direction under Section 21(2) discharging the Director General from his duty to take proceedings in this court in respect of the Football League Rules.

118. It is, perhaps, not surprising that the Premier League complained in this court about the way in which it had been treated differently from the Football League. Mr. Vos sought to explain this by saying that it was the Director General's case that the 380 matches played in the Premier League form a completely different market from Football League matches and the arrangements concerning them have a greater economic effect than those concerning other football competitions. The representations to the Secretary of State were made almost two years before the Football League secured its current broadcasting contract with Sky. Mr. Vos also pointed out that no Section 21(2) direction has been sought in respect of the broadcasting contract entered into between the Football League and Sky. He indicated that this matter, and also the possibility of a representation being made to the Secretary of State that he should withdraw his Section 21(2) direction in respect of the Football League Rules on the ground that there has been a material change in the relevant circumstances, would be reconsidered by the Director General when the outcome of the present case is known.

120. We say nothing by way of criticism of the way in which the Director General has dealt with the Football League Rules. We merely note that the Football League appears to have been treated differently from the Premier League. This difference in treatment will, if we condemn Rule D.7.3, produce an anomaly.

 

 

Section II: Are all or any of the alleged restrictions set out above relevant restrictions for the purposes of the 1976 Act?

121. The argument on this question raised issues under three main heads, namely

(a) Are the obligations accepted in relation to the facilities (to use a neutral term) comprised in what have been referred to as "football entertainment services" or "programme material services" restrictions for the purposes of the 1976 Act?

(b) Are any of those facilities properly to be treated as services for the purposes of the 1976 Act?

(c) Are the obligations accepted in relation to those facilities accepted by two or more parties (i.e. by each member club) or only by one party (i.e. the Premier League itself)?

122. We shall deal with these issues in turn. In doing so we shall address them first in relation to Clause 2.2 of the Sky Agreement and Clause 2.3 of the BBC Agreement (which we refer to together as "the exclusivity clauses"). We shall then deal with the same issues in relation to Rule D.7.3 separately, since the relevant language is slightly different and issue (c) in particular is much more straightforward.

(a) Are the obligations accepted in relation to the facilities previously referred to restrictions for the purposes of the 1976 Act?

123. Two main arguments were presented to us on this issue. The first was that the obligations cannot be regarded as restrictions because they do not constitute the closing of a door which was previously open. The individual clubs never had any freedom to admit broadcasters to Premier League matches for the purpose of broadcasting those matches on television or filming or recording them for television. There would be no Premier League matches to which broadcasters could be admitted if it were not for the Rules of the Premier League which govern the playing of matches in the Premier League competition and those Rules reserve the exploitation of television rights to the Premier League itself and correspondingly deny the clubs freedom to exploit television rights in Premier League matches save with the consent of the Premier League.

124. The second main argument was that obligations of the kind accepted under the exclusivity clauses are so usual in the field of exploitation of television rights in sporting events, and there would be such anomalies if they were treated as amounting to the acceptance of restrictions, that they should be regarded as outside the scope of the 1976 Act.

125. There is a non-exhaustive definition of "restriction" in Section 43(1) of the 1976 Act. It is in the following terms:

" "restriction" includes a negative obligation, whether express or implied and whether absolute or not."

We do not find this definition of much assistance in addressing the arguments which were put to us.

(i) No closing of a door that was previously open

126. The concept that an obligation must involve the closing of a door that was previously open if it is to be regarded as a restriction for the purposes of the 1976 Act and the legislation which preceded it first emerged in Re Telephone Apparatus Manufacturers' Application (1963) LR 3RP 462 where Willmer LJ, in expressing the view, without formally deciding, that a particular agreement did not involve the acceptance of restrictions, said (at page 483):

"This, in the picturesque phrase used by [counsel for the Association], did not have the effect of closing any door that was previously open to the contractors; its effect was merely to open a door through which the selected contractor might pass."

127. The same concept was expressed, in relation to the common law doctrine of restraint of trade. in the decision of the House of Lords in Esso Petroleum Co. Ltd v Harper's Garage (Southport) Ltd. [1968] AC 269. At page 298 Lord Reid said:

"It is true that it would be an innovation to hold that ordinary negative covenants preventing the use of a particular site for trading of all kinds or of a particular kind are within the scope of the doctrine of restraint of trade. I do not think they are. Restraint of trade appears to me to imply that a man contracts to give up some freedom which he otherwise would have had. A person buying or leasing land had no previous right to be there at all, let alone to trade there, and when he takes possession of that land subject to a negative restrictive covenant he gives up no right or freedom which he previously had. ... But there is some difficulty if a restraint in a lease not merely prevents the person who takes possession of the land under the lease from doing certain things there, but also obliges him to act in a particular way. In the present case the respondents before they made this agreement were entitled to use the land in any lawful way they chose, and by making this agreement they agreed to restrict their right by giving up their right to sell there petrol not supplied by the appellants. In my view this agreement is within the scope of the doctrine of restraint of trade as it had been developed in English law."

Similar reasoning was applied in that case by Lords Morris, Hodson and Pearce and seems to have been applied by the Court of Appeal in Cleveland Petroleum Ltd v Dartstone Ltd [1969] 1 WLR 116.

128. The reasoning was applied once more in this court in Re Ravenseft Properties Ltd's Application [1978] 1 QB 52 ("Ravenseft") to the question whether restrictive covenants in relation to services which were accepted by a tenant under a lease were "restrictions" for the purposes of the predecessor of the 1976 Act. Mocatta J held that they were not, save possibly in a case where the lease was granted as part of a sale and lease back transaction.

129. In the present case counsel for the Director General, while arguing that the "open door" principle did not assist the respondents here - an argument which we will consider in a moment - invited us, if necessary, to find that Ravenseft was wrongly decided on this point. They pointed out that this part of the decision has been vigorously criticised by writers on competition law, notably Whish on Competition Law, 3rd edition 1993 at page 134 and elsewhere, and that, if it is correct, it appears to render otiose the provisions which are now Sections 9 (3) and 18(2) of the 1976 Act and the exceptions in respect of certain intellectual property licences which are now contained in Schedule 3 to that Act.

130. While we see the force of this argument we are not convinced by it. Ravenseft is a decision of this court of comparatively long standing. Moreover the Director General has stated publicly his view that the case is of general application for the purposes of the Act. In his Annual Report for 1976 he referred to the decision on Ravenseft at page 36 and went on:

"It may be helpful to add that the Office has taken the view that the principles laid down in the judgment in this case are of general application to proprietary rights and the grant of an industrial property licence including, e.g. a copyright licence does not constitute the supply of a service within the meaning of the legislation."

131. In these circumstances it would be wrong, in our view, not to follow the decision in Ravenseft even if we considered it to be incorrect, which we do not. We consider that, in this court, the relevant part of the Ravenseft decision remains applicable and that only a higher tribunal can decide that it was wrong.

132. We turn, therefore, to the question whether the Ravenseft principle produces the result that the relevant obligations in the present case are not restrictions. On this the critical issue seems to us to be what one treats as the starting point. The argument for the respondents seems to us to depend on the assumption that this starting point is the Premier League as a going concern, complete with Rule D.7.3 and its potential for ensuring, as the Sky and BBC Agreements negotiated by the Premier League have ensured, that particular broadcasters have exclusive television rights to broadcast Premier League Matches on television. If this is treated as the original structure then it is plausible to argue that, as clubs can only participate in Premier League matches by bringing themselves within the structure, they cannot be said to be giving up a freedom which they previously had.

133. f, however, the starting point is taken as one in which there exist a number of individual clubs free to arrange football matches with whichever other clubs they may choose and free to admit (subject to any necessary concurrence on the part of the visiting club) any broadcaster to their grounds for the purpose of broadcasting such matches on television, whether live or on a recorded basis, a different picture emerges. By entering the Premier League (or for that matter the Football League before it) and accepting the regime in respect of television contracts imposed by the Rules and the contracts made by the governing body pursuant to the Rules, the clubs may, it seems to us, accurately be said to have curtailed a freedom which they once had. They cannot, in our view, divide their football matches into two categories, one designated "Premier League matches" and the other "non-Premier League matches" and then contend that as the Premier League matches are played under rules which prevent individual clubs from selling the television rights, those clubs have given up no freedom to make their own arrangements in respect of the sale of television rights. The fact that, as it appears to us, an individual club is probably unable, by itself, to sell the television rights to any particular match does not affect this point. If it were not for the rules and the contracts entered into pursuant to the rules, any two clubs could, acting jointly but without the concurrence of any other party, sell the television rights to a match played between themselves at a ground owned or controlled by one of them. Once they have subjected themselves to the regime imposed by the Rules and the contracts entered into under the Rules they have given up or curtailed this freedom.

134. It is important, in our view, to attribute due weight to the fact that the Premier League is the creature of its member clubs. It only exists because the member clubs have formed it and desire to keep it in existence. It is governed by the votes of its members in general meeting. It would be strange if parties could, by forming an organisation governed by themselves, subject themselves to an anti-competitive regime prescribed by the rules of the organisation and then claim that they have not individually accepted restrictions because they are not entitled to trade within the area to which the regime applies except subject to the restrictive provisions of that regime. In our judgment such a claim would be invalid.

135. We conclude that the analysis which takes as its starting point individual clubs not organised in a league and which gives weight, in the manner we have indicated, to the fact that the Premier League is the creature of its member clubs is the truer one. We therefore conclude that the Ravenseft principle does not prevent the negative obligations assumed in respect of the facilities referred to in the exclusivity clauses being restrictions for the purposes of the 1976 Act.

 

 

(ii) Negative obligations of the kind in issue here ought to be regarded as being outside the scope of the 1976 Act

137. The argument to this effect was developed only by Mr. Carr on behalf of the BBC, but as Sky gave general support to Mr. Carr's arguments on the scope of the 1976 Act we understood it to adopt this argument as well.

138. The argument proceeded as follows. A broadcaster wants to show a programme consisting of a broadcast of a particular sports event because he thinks it will attract a large audience. But he does not want to find that one or more other broadcasters are showing the same event. He will therefore naturally tend to seek exclusive rights and he will be likely to pay a substantially higher price for rights which are exclusive than he would pay for rights which are non-exclusive. This is well understood by the organiser of the event who is seeking to sell the television rights and whose interest would normally be to maximise the price which he obtains. He may seek to achieve this by selling exclusive rights to a single broadcaster for a high fee, or he may think he would do better to sell non-exclusive rights to several broadcasters, each of whom will pay less than he would for exclusive rights but who may, in the aggregate, pay more for non-exclusive rights than any one broadcaster would pay for exclusive rights. The resolution of these conflicting aspirations is an example of competition at work which one would expect the legislature to favour and promote, not to impede or outlaw. But the view of the scope of the 1976 Act which the Director General urges on the court is one which would achieve the latter effect.

139. Mr. Carr submitted that the position becomes even more incongruous because of an anomaly. If the sports event is filmed by the organiser of the event or by an independent programme maker, the copyright in the film can be licensed to a broadcaster on an exclusive basis without there being any question of the acceptance of a restriction for the purposes of the Act, because copyright licences are generally outside the scope of the Act. Where, however, the television rights are sold not by the owner of a copyright in a film or similar item but by the organiser of the event, who licences the broadcaster to make his own broadcast or film, a sale of exclusive rights will be within the Act unless matters can be so arranged that restrictions are accepted by only one party.

140. The anomaly then becomes even more intense, because the ability to do this may depend heavily on the way the event is organised. Where the event is a competition organised by a single promoter at a venue owned or controlled by him (for example a boxing contest at a venue hired for the occasion by the promoter, a golf tournament at a single golf course or a snooker championship at one hall) it will not be difficult for the broadcaster to be given exclusive rights without the acceptance of restrictions by more than one party, namely the promoter. The same might well be the case in respect of a tournament organised by a single promoter at a number of different venues, each hired by him to enable the tournament to take place. But where the sports event is like the Premier League competition, organised by an entity which is the creature of the participating clubs and played at a number of different venues each of which is owned or controlled by a participating club then, unless some of the arguments which we consider later are upheld, it will not be possible to avoid the acceptance of a restriction by two or more parties.

141. Mr. Carr argued that the way in which this indefensible position should be avoided is for the court to hold that all such arrangements are outside the scope of the 1976 Act. He cited two authorities by analogy with which he suggested that this might be done. The first was Universe Tankships v International Transport Federation [1982] ICR 262. There are dicta in that decision of the House of Lords which suggest that in certain circumstances the policy of an Act may be extended so as to apply to a situation which is strictly outside the scope of the Act. We do not find in this decision anything which helps us towards the conclusion which Mr. Carr invited us to reach.

142. Mr. Carr's second authority consists of certain passages in the speech of Lord Wilberforce in Esso v Harpers, a decision which we have already referred to on the preceding argument. The passages in question are at [1968] AC, pages 332G, 335G and 336A. We do not propose to set them out, but in them Lord Wilberforce suggested that there were certain transactions of such a well-established type that, even though they involved an element of restraint of trade, they would not call for investigation under the common law doctrine of restraint of trade. There are many difficulties in applying these passages even to cases where it is the scope of the common law doctrine that is in issue. Amongst other things it is not clear to us that any of the other members of the House who sat to hear that case went along with what Lord Wilberforce said. Further it is not clear whether Lord Wilberforce was saying that such well-established transactions were wholly outside the common law doctrine or whether he was saying that they would so obviously pass the test of reasonableness which that doctrine applies that there was no need to investigate this point.

143. We do not find in these passages from the speech of Lord Wilberforce anything which would justify us in applying such a specific and technical statute as the 1976 Act otherwise than in accordance with its terms construed in accordance with the established principles of construction. We accept that the Act may give rise to anomalies of the kind identified by Mr. Carr and that there may well be others. We think that these are the inevitable consequence of an attempt to promote competition by striking down commercial provisions which have to be identified by applying the highly technical provisions of the 1976 Act. No doubt this was one of the reasons why Parliament has now repealed the 1976 Act so far as future cases are concerned and replaced it with the Competition Act 1998.

(b) Are any of the facilities referred to properly to be treated as "services" for the purposes of the 1976 Act?

144. The Act contains no exhaustive definition of "services". Instead there is, in Section 20 of the Act, a non-exhaustive definition which, so far as material, is as follows:

" "services" -

(a) does not include the application to goods of any process of manufacture or any services rendered to an employer under a contract of employment ... but, with those exceptions,

(b) includes engagements (whether professional or other) which for gain or reward are undertaken and performed for any matter other than the supply of goods"

There is a third paragraph of the definition, which was inserted in 1985, but it relates only to public transport and is not relevant in this case.

145. It might at first sight be thought that the definition is wide enough to bring within "services" every commercial transaction which does not involve a process of manufacture or things done under a contract of employment. However a more restricted view of the scope of the expression was taken in Ravenseft. That case concerned the possible registrability of certain commercial leases on the ground that they involved the provision of relevant services. In this court Mocatta J held that only very exceptionally would commercial leases be registrable. In the course of arriving at this conclusion he may fairly be said to have given somewhat tentative approval to an argument advanced in that case on behalf of the Director General to the effect that what is now Part II of the 1976 Act deals with the transfer or supply of property to people, the property being limited to goods, whereas what is now Part III (with which we are now concerned) deals with doing things for people (see [1978] 1 QB at page 66). Mr. Aaronson, the economist called to give evidence by the BBC, referred to the contrast between the characteristics of services and goods. A service is a product which is consumed at the time of production, whereas a good can be produced and then stored for consumption later. Mr. Aaronson also referred to the concept of a "public good" and quoted from a textbook on economics ('Economics', by Begg, Dombusch and Fisher, 4th edition (1994) at p.281) where it is said:

"The defining characteristic of a public good is that it is non-rival: consumption of it by one individual does not actually or potentially reduce the amount available to be consumed by another individual. Examples include radio and television broadcasts and national defence. Any individual can listen to or watch the output of a broadcasting station, without preventing any other individual who possess a radio or television receiver from consuming the same output."

146. While Mr. Aaronson cited this passage in connection with a discussion of the characteristics of intellectual property rights, it seems to us that it may be valid in relation to at least some types of service where no intellectual property right is involved. However in the field of personal services the rendering of the service to one person may limit the capacity of the person rendering the service to render it to someone else, just as the supplier of goods cannot sell again goods which he has already sold.

147. We think that all these concepts are fully compatible with what was said in Ravenseft and that, taken in conjunction with each other they come as near as it is possible to get in general terms by way of stating what is meant by "services" in the 1976 Act.

148. The important consequence of this is that it recognises that certain engagements which are not the application of a process of manufacture or contracts of service are outside the definition of "services", even though the statutory definition does not expressly exclude them. In particular the grant of an interest in land (including a licence to enter land) and the grant of a licence to exploit intellectual property, such as a copyright licence, do not by themselves amount to the provision of "services" for the purposes of the Act. So much was, we think, accepted by all parties before us.

149. The respondents have from the outset disputed that the restrictions which are accepted under the exclusivity clauses are relevant restrictions on the ground, inter alia, that they do not involve any restriction on the supply of "services". We therefore look to see how, in his pleadings, the Director General has sought to put forward the case that they do involve such a restriction. We take as the basis of our discussion the pleadings against the BBC. Those against Sky are in similar form.

150. In paragraph 11 (3) of his Answer to the BBC's Statement of Case the Director General pleaded that

"Under clause 2.3 of the BBC Agreement and clause 2.3 of the BSkyB Agreement, the Premier League clubs and each of them accept an implied obligation under [the relevant agreement] not to supply programme material services relating to League Matches to any person other than the BBC and BSkyB."

"Programme material services" had earlier been defined so as to include a variety of rights and facilities including in particular "football entertainment services". The latter consist of the performance of a Premier League match for the benefit of television viewers and spectators at a football stadium. Programme material services also include the provision of access to the football ground where the match is played and ancillary facilities such as the provision of a commentary box, facilities for the placing of cameras and cables, parking facilities and floodlighting.

151. In response to a request for particulars made by the BBC the Director General pleaded that under the Clauses of the Agreements previously referred to the clubs "impliedly agree and are obliged" not to provide football entertainment services relating to League Matches or other specified services to any person other than the BBC and Sky.

152. Later, on 8th April 1998, the Director General served an amended Answer to Sky's Statement of Case. In this Amended Answer the original paragraph 11(3) was deleted and replaced by a series of new sub-paragraphs. In particular the new paragraph 11(3G) said (so far as material):

"In the premises, it is averred that under clause 2.3 of the BBC Agreement and clause 2.2 of the Sky Agreement, each of the clubs impliedly agrees and is obliged:

(a) not to provide football entertainment services relating to League Matches to any person other than the BBC and BSkyB where .... ;

(b) not to provide other services (including the other programme material services referred to at paragraph 11(2) above .... to any person other than the BBC and BSkyB ....

It is averred that the said implication arises by obvious inference from the express terms of clause 2.2 of the BSkyB Agreement and clause 2.3 of the BBC Agreement."

153. The first point taken on this pleaded case by Mr. Sumption on behalf of Sky and Mr. Carr on behalf of the BBC, supported by Mr. Aldous for the Premier League, was that no implication such as that apparently sought to be made by the Director General could, as a matter of law, properly be made. We were referred to the principles applicable to the implication of terms in contracts, notably as encapsulated in the well-known passage from the opinion of the Privy Council, given by Lord Wilberforce, in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1978] 52 ALJR 20 at page 26. It was submitted, amongst other things, that the suggested implication was not necessary to give business efficacy to the Agreements in this case and that it would be contrary to principle for the court to imply a term as part of a process intended to render the term so implied void under the provisions of the 1976 Act.

154. We do not explore these arguments in any detail. If the case of the Director General were really dependent upon the implication into the BBC and Sky Agreements of a term which they do not contain, the arguments against such implication which were deployed on behalf of the respondents would be overwhelming. But Mr. Parker, who argued this part of the case on behalf of the Director General, explained that, contrary to what might be supposed from the terms of the Director General's pleadings, implication in this sense was not relied upon. What the Director General sought to do was to advance an interpretation of the express terms of Clauses 2.3 of the Sky Agreement and 2.2 of the BBC Agreement. While we readily understand why the respondents interpreted the pleadings as showing that the case which they had to meet was one based upon an implied term, we do not consider that the Director General can or should be prevented from maintaining an argument of law as to the proper interpretation of the express terms of the Agreements. It is to this argument that we now turn. We will address ourselves to Clause 2.2 of the Sky Agreement, but exactly the same considerations apply to Clause 2.3 of the BBC Agreement.

155. We begin by setting the terms of Clause 2, part of which has already been quoted in our summary of the provisions of the Sky Agreement. They are:

"2.1 Subject to the provisions of this Agreement ... the Premier League hereby grants to B Sky B for the Term the sole and exclusive right to attend Live Matches for the purpose of making Live Transmissions within the Territory.

2.2 The Premier League undertakes that (other than pursuant to the BBC Agreement) it shall not grant to any person

(a) the right to attend any Premier League match(es ) at any time during the Term for the purpose of filming or recording any Premier League match or making any Transmission or Terrestrial Broadcast (whether live deferred or recorded and whether as part of a news bulletin or otherwise) which is intended for reception within the Territory; or

(b) the right at any time during the Term to Transmit or make any Terrestrial Broadcast of any Premier League Match which is intended for reception within the Territory."

156. The first observation which we make is that a negative obligation of some kind is clearly implicit in the grant of exclusive rights to Sky by Clause 2.1, for the grant of exclusivity to one party clearly precludes the grantor from making a similar grant to another party. We say nothing at this stage about whether the implicit negative obligation relates to the provision of services or to something of a different character. Indeed we do not propose to address this specific question at all, although the answer to it may become apparent from the answer which we give to the somewhat different question which arises on Clause 2.2. The reason why we leave the negative obligation implicit in Clause 2.1 on one side in this way is that the Director General has firmly based his case on Clause 2.2 and it may be confusing to consider Clause 2.1 and then to deal with Clause 2.2 as if it was the mirror image of Clause 2.1, which it is not.

157. It is apparent from Clause 2.2 that there are two categories of right which the Premier League agrees not to grant. Passing over the right described in paragraph (a) for the moment, the right described in paragraph (b) is, it appears to us, either a right to use copyright material for the purpose of making a broadcast or a right for the notional grantee to make a broadcast using his own equipment. While the Premier League is precluded by paragraph (b) from granting a right of either kind, we consider that the Premier League would not be supplying services if it were to make such a grant and the negative obligation which the Premier League assumes under paragraph (b) does not restrict the supply of services in any of the ways described in Section 11 of the 1976 Act and the corresponding provision of the Services Order. We did not understand the Director General to resist this conclusion.

158. The Director General's case therefore rests on the prohibition imposed by paragraph (a). This precludes the grant of the right to attend any Premier League match during the term of the agreement for the purpose of filming or recording any match or broadcasting the match in a way which is intended for reception within the prescribed territory. The respondents argued that this merely requires the Premier League (and, it is assumed for the purposes of this part of the argument, each of its member clubs) to refuse entry to a football ground to anyone, other than Sky and the BBC, desiring to enter the ground for the prohibited purpose. They contended that the restriction is therefore one preventing the grant of a licence to enter land to anyone other than Sky or the BBC who desires to obtain entry for one of the proscribed purposes. This is not a restriction in respect of any of the matters referred to in Section 11, because the grant of a licence to enter land does not involve the supply of a service.

159. The argument for the Director General was that although paragraph (a) prohibits the grant of a licence to enter land it also prohibits something more, namely the provision of at least those services which the Director General refers to as football entertainment services if not also the provision of what he refers to as the other programme material services. This element of the prohibition relates to the supply of services and brings the negative obligation within one or more of the matters described in Section 11.

160. At the heart of the Director General's case lies the reasoning which appears from Hurst v Picture Theatres Limited [1915] 1KB 1. The question in that case was whether the proprietor of a cinema, at which the plaintiff had bought a ticket to attend a film performance, could lawfully eject the plaintiff before the end of the performance. In that particular case the plaintiff had been ejected because the proprietor mistakenly believed that he had not bought a ticket, but the relevant part of the defence of the proprietor was that it was entitled, without any reason, to call upon the plaintiff to leave the cinema and, if he refused, to eject him. The Court of Appeal, by a majority, rejected this defence. Buckley LJ said, at page 7:

"The plaintiff in the present action paid his money to enjoy the sight of a particular spectacle. He was anxious to go into a picture theatre to see a series of views or pictures during, I suppose, an hour or a couple of hours. That which was granted to him was the right to enjoy looking at a spectacle, to attend a performance from its beginning to its end. That which was called the licence, the right to go upon the premises, was only something granted to him for the purpose of enabling him to have that which had been granted to him, namely the right to see. He could not see the performance unless he went into the building. His right to go into the building was something given to him in order to enable him to have the benefit of that which had been granted to him, namely the right to hear the opera, or see the theatrical performance, or see the moving pictures as was the case here. So here there was a licence coupled with a grant."

161. Kennedy LJ, agreeing with the view of Buckley LJ, said (at pages 12-13):

"Now I hold that in this case, as Buckley LJ has intimated, the contract would not be correctly expressed by saying that it was a right to come and remain for a certain time on the land of another. In this case I think there was, if you were to put this contract into terms, a contract that there should be an irrevocable right to remain until the conclusion of the performance."

The third member of the Court, Phillimore LJ, dissented. The reasoning of the majority must, however, be taken to represent the decision of the court.

162. The argument of the Director General, advanced by Mr. Parker, was that when a football club permits someone to attend a football match which is played on the ground owned or controlled by the club it does not merely grant that person a right to enter the ground and remain there until the end of the match. The purpose for which entry is granted is not merely to allow the entrant to enjoy the ground as an area of land. It is also, indeed primarily, to allow the entrant to enjoy the spectacle of the football match being played there. This is a form of entertainment which is a type of service. Thus a club which admits spectators to a football match being played on its ground not only grants each spectator a licence to enter the ground but engages itself to provide for the spectator entertainment while he is there. In principle there is no difference between entry to a football ground to see a match and entry to a theatre or cinema to see a play or enjoy a film. While the actual decision in Hurst v Picture Theatres Ltd concerned the theatre proprietor's right to terminate the licence rather than precise nature of his obligation to provide the entertainment service, it was because he had incurred some obligation of this kind that his right to terminate the licence was curtailed.

163. The respondents were, it seems to us, disposed to agree with this analysis so far as the admission of a spectator to a football match is concerned. But different considerations are, it was suggested, applicable to the admission of a broadcaster, There were two main limbs to this argument.

164. First it was said that a broadcaster seeking to make a live or recorded broadcast of a football match is not there to be entertained in the same way as a spectator is. All he wants to do is to be present on the ground and to use his own technical equipment for the purpose of making the broadcast. Mr. Sumption suggested that this means that the football club which controls admission to the ground merely grants to the broadcaster the right to come into the ground in order to do for himself something which would amount to a trespass if he had not been granted that right. That is aptly characterised as the grant of a licence to enter the land and nothing else. It does not involve the provision of any service by the club.

165. We do not accept this argument. We consider that it is correct to say that, in the case of an ordinary spectator, what is granted when he is allowed to enter a football ground to see a match is a composite "right" which includes both a licence to enter the ground and an entitlement to remain there until the end of the match in order to enjoy the spectacle. The latter involves, in our view, the provision of a service, whether or not there is strictly a contractual right to have the match played. The spectator pays for his ticket in the expectation that the match will be played. If it is not played he may or may not be entitled to a refund of the price of his ticket. That depends on the terms of the contract between him and the club. But even if that contract is not in terms which entitle him to a refund if the match is not played, the fundamental purpose of the transaction is that he is to receive the entertainment.

166. If this be right, as we think it is, in the case of an ordinary spectator we do not think it is any different in the case of a broadcaster. It may be that the cameramen and other technicians who are brought in by a broadcaster are not to be regarded as entering the ground for their personal entertainment (although such persons as commentators may well be entertained as an incident of the performance of their main duties on behalf of the broadcaster and even technicians may derive incidental pleasure from what they see as well as satisfaction in the accomplishment of their task). But it seems to us to be taking too narrow a view of what is involved in the provision of entertainment services to regard it as requiring an element of personal enjoyment on the part of the recipient. Where the service takes the form of the provision of a spectacle it may, in our view, be received and accepted in various different ways. It appears to us that someone who is present with a camera for the purpose of taking photographs of the spectacle which he intends to exploit commercially is just as much the recipient of a service as a spectator who is there to enjoy the spectacle ephemerally with his own senses. It is irrelevant that the photographer will bring into existence an item, namely the photograph, in which there will subsist a copyright the ownership of which will normally belong to the photographer. The supply and receipt of the service precedes the bringing into existence of the copyright.

167. We consider that the position of a broadcaster is identical to that of the photographer in the instance we have just considered. A broadcaster who wants to broadcast a football match does not need merely a licence to enter the ground where the match is to be played. He needs to have the match played as well, otherwise he will have nothing to broadcast except a picture of an empty football pitch.

168. The second line of argument was that, on the ordinary construction of the relevant contractual provisions in this case, the Premier League clubs (who are assumed at this stage of the argument to accept individually whatever limitations on their freedom are involved in the exclusivity clauses) have not agreed to refrain from doing anything except grant rights of entry to other broadcasters.

169. We accept the starting point of this argument, which is that the nature of the obligation accepted by the Premier League clubs has to be ascertained from the terms of the exclusivity clauses themselves, not by analysing what it is that the Premier League clubs have agreed to provide for Sky and the BBC and then treating them as obliged not to do the same things for any other broadcaster. As we have noted at an earlier stage, an argument to this effect might have been based on the fact that the rights granted to Sky and the BBC respectively were stated to be "exclusive". But this is not the way that the Director General has put his case. He relies on the express terms of the exclusivity clauses rather than upon what is implicit in the grant of exclusive rights. Nevertheless we can and do have regard to the fact that the context in which the exclusivity clauses are found is that of the grant of exclusive rights to Sky and the BBC respectively.

170. The relevant part of what the Premier League agrees with Sky not to do appears in the following words, which are taken from Clause 2.2 of the Sky Agreement:

"not [to] grant to any person

(a) the right to attend any Premier League match(es ) at any time during the Term for the purpose of filming or recording any Premier League match or making any Transmission or Terrestrial Broadcast (whether live deferred or recorded and whether as part of a news bulletin or otherwise) which is intended for reception within the Territory;"

While the language of the equivalent obligation assumed by the Premier League as against the BBC is not precisely the same, there is no difference which is relevant for present purposes.

171. Some emphasis was placed on the fact that paragraph (b) of the Premier League's obligation is expressed to prohibit the grant to other broadcasters of the right to transmit or make any broadcast of a Premier League match. This is either a prohibition against the grant of a copyright licence to broadcast recorded material the copyright in which is vested in the Premier League (in which case it is outside the scope of the 1976 Act) or a purported prohibition against the grant of something (namely a right to broadcast) which, by itself, the Premier League seems to have no power to grant and which does not, on any view, involve the provision of a service by the Premier League. This, it was suggested, adds force to the suggestion that paragraph (a) prohibits the grant of the only other right which the Premier League or its member clubs might provide, namely a right to enter the ground where a Premier League match is being played.

172. In our view this gives too restricted a scope to paragraph (a). What is not to be granted is "the right to attend any Premier League match(es)" for certain purposes connected with broadcasting. The paragraph is expressed as a prohibition not upon the grant of a right to enter land but upon the grant of a right to attend Premier League matches. Attendance at a football match certainly involves entry into the ground where the match is being played, but we consider that it involves much more, namely the playing of the match within the sight and hearing of the person who is allowed to attend. The conduct which is to be refrained from is not the grant of a right to enter land but the grant of a right to attend a match. If, as we consider for reasons which we have indicated earlier, attendance at a match involves the receipt of entertainment services in the form of witnessing the playing of the match, then abstention from the grant of the right to attend the match involves abstention from the provision of the service.

173. The respondents argued that this cannot be the case because, if it were, the Premier League and its clubs would have to stop playing the match immediately it was discovered that a broadcaster other than Sky or the BBC had been inadvertently admitted and was broadcasting or recording the match or intending to do so. We do not think that the scope of the prohibition can be tested by postulating circumstances of this kind. There would be other ways of giving effect to the prohibition if it is to be construed in the way which we favour. The broadcaster in question might be made to leave, or he might be physically prevented from broadcasting or recording the match, as by the erection of a screen. His presence and activity may even have to be tolerated, leaving Sky and the BBC to their remedy in damages. The fact that it may be difficult to enforce a prohibition by injunction or specific performance does not alter the nature of the prohibition.

174. We also do not find it helpful to consider the case of a broadcaster who seeks to broadcast a match without entering the ground where it is played, perhaps by filming it with a long range camera from a high building outside the ground. We accept that neither the Premier League nor its member clubs could prevent such a broadcaster from doing this (see Victoria Park Racing v Taylor [1937] 58 CLR 479). The exclusivity clauses do not purport to do so. The fact that they do not and could not do so does not appear to us to cast any light on the true analysis of what it is that they do prohibit.

175. It is our conclusion that the exclusivity clauses do involve the acceptance by the Premier League (we will come to its member clubs later) of a negative obligation the substance of which is that it will not grant to any broadcaster other than Sky or the BBC either the right to enter a ground where a Premier League match is being played or the opportunity to experience and use for its own purposes the entertainment which consists of the playing of the match if the purpose of the entry and the experience is, in the language of Clause 2.2 (a) of the Sky Agreement, the filming or recording of the match or the making of any transmission or terrestrial broadcast intended for reception within the prescribed territory. In our view that part of the obligation reflected in the words which we have italicised in our paraphrase involves the acceptance of a relevant restriction falling within either or both of paragraphs (b) (terms or conditions on which services are to be supplied) or (e) (persons or classes of persons for whom services are to be made available) in Section 11 (2) of the 1976 Act and the equivalent provisions of the services order.

176. The case of the Director General is that the services in question are not limited to football entertainment services of the kind we have mentioned but extend also to the ancillary services, such as the provision of commentary boxes, gantries, electricity supplies, parking places and persons for interview, which are included in what the Director General calls "programme material services". While we would accept that these, or some at least of them, are "services" for the purpose of the Act, we do not construe the exclusivity clauses as binding the Premier League not to provide them to others. This is hardly surprising. If, as we consider, football entertainment services are not to be provided to other broadcasters for the purpose of enabling them to make broadcasts or recordings of Premier League matches, those other broadcasters have no need of most of these services and there could be no objection to the Premier League supplying them with others, such as parking facilities, if this is unconnected with broadcasting or recording Premier League matches.

(c) Are the obligations accepted in relation to football entertainment services by virtue of the exclusivity clauses accepted by two or more parties (i.e. by each member club) or only by one party (i.e. the Premier League itself)?

 

177. Looking at the exclusivity clauses in isolation the only party which accepts a contractual obligation thereunder is the Premier League itself. It is an essential part of the Director General's case that, for the purposes of the 1976 Act if not under the general law, these obligations are accepted by every member club for the time being of the Premier League. If this is not the case the restrictions which we have found to be accepted under the exclusivity clauses are accepted not by two or more parties (which must be the case if the Act is to apply) but by one party only, the Premier League. The Director General proposed two alternative routes by which the result for which he contended may be arrived at. These are (i) that the Premier League is a services supply association, within Section 16 of the 1976 Act; and (ii) that the Premier League entered into the Sky Agreement and the BBC Agreement as agent for its member clubs.

(i) Services Supply Association

178. If the Premier League is a services supply association then, by Section 16(2) of the Act, a statutory fiction applies the effect of which is that every member club of the Premier League is deemed to be a party to any agreement made by the Premier League and to accept every restriction accepted under the agreement by the Premier League. There is no dispute that this is the effect of Section 16(2). The question is whether the Premier League is a services supply association.

179. Under Section 16(1) an association, whether incorporated or not, is a services supply association if, but only if, (omitting immaterial words)

"(a) its membership consists wholly or mainly of persons ... who are ... engaged in the supply of services ... and

(b) its objects or activities include the promotion of the interests of persons engaged in the supply of services ..."

180. There is, as we see it, no doubt that the Premier League satisfies the requirements of paragraph (a). This is consistent with our view that football clubs playing football for the entertainment of spectators who attend matches and football supporters who do not actually attend matches are supplying services. The contention on which the respondents, notably the BBC, based their argument that the Premier League is not a services supply association was that the Premier League does not have among its objects or activities "the promotion of the interests" of its member clubs.

181. In developing this contention Mr. Carr, for the BBC, drew attention to Section 8 of the 1976 Act which prescribes for agreements relating to goods which are entered into by a "trade association" consequences which are similar to those which Section 16 prescribes for agreements relating to services which are entered into by a services supply association. Section 43(1) defines "trade association" in language which has an obvious affinity with the definition of "services supply association" in Section 16 (1), although the origin of the definition of trade association is to be found in the Restrictive Trade Practices Act 1956 while that of the definition of services supply association is in the Fair Trading Act 1973. There is, however, a difference in the language of the two definitions to which Mr. Carr attached importance. A trade association is one which, amongst other things, "is formed for the purpose of furthering the trade interests" of its members. A services supply association is one whose "objects or activities include the promotion of the interests" of its members. Mr. Carr submitted that the change of language, from "furthering" to "promotion", must have been deliberate and that where, as here, parliament has used a different word from that which it used previously in a definition having a somewhat similar general effect, it must be assumed that it intended the new language to have a different impact from the old.

182. Up to that point Mr. Carr's argument has an obvious attraction. The difficulty comes, however, when the attempt is made to comprehend the difference between the two expressions. Mr. Carr suggested that "promote the interests of ..." is not as broad as "further the interests of ....". He said that a doctor or solicitor acts in the best interests of his patient or client and may therefore be said to further the interests of patient or client, but cannot accurately be said to "promote" such interests. He suggested other contrasts, but none of them seemed to us to be convincing. There are, of course, different shades of meaning in both "furthering" and "promoting". No doubt some actions which may fairly be said to amount to "furthering" would be less aptly described as "promoting" and vice versa. But the overlap between the two words seems to us to be a good deal more extensive than the contrasts. It is puzzling why the draftsman of the 1973 Act preferred to use the word "promotion" in the definition of services supply association when he clearly based himself in many respects on the provisions of the 1956 Act and was aware of the definition of trade association where his predecessor had thought that "furthering" was the apt word to describe what seems to have been a similar concept. But we find it impossible to draw any meaningful contrast between the two words.

183. Whatever the precise meaning of "promotion", in determining whether the Premier League is or is not a services supply association, what has to be examined are the objects and activities of the Premier League. Mr. Parker, on behalf of the Director General, was at first inclined to concentrate on its activities rather than its objects. He relied on the fact that the only members of the Premier League are the clubs and that each of them has an equal voice in its affairs. If one inquires what the Premier League does, two of its principal activities, of overwhelmingly greater importance than anything else and to which everything else may be said to be ancillary, are the organisation of the Premier League competition and the exploitation of the television rights in the matches played by its member clubs. These things are done for the benefit of the member clubs and are appropriately described as the promotion of the interests of the clubs.

184. We agree with these submissions. In our view they become even more valid when the objects of the Premier League are taken into account. We set out the most important of them at a much earlier stage in this judgment. In our judgment these too amount to the promotion of the interests of the member clubs. We therefore find that the Premier League is a services supply association.

(ii) Agency

185. This conclusion makes it unnecessary to take up much time on agency. If it were necessary to do so, however, we would find that the Premier League did enter into the Sky and BBC Agreements as agent for its member clubs.

186. At first sight this point appeared to us to be settled, in the case of the Sky Agreement, by Clause 28 under which the Premier League expressed itself to contract with Sky as agent for each of the Premier League Clubs. But this was subject to a limitation as a result of which it may fairly be said that, looking at Clause 28 alone, the Premier League was agreeing on behalf of its member clubs only that Sky would be given access to grounds at which Premier League matches are being played. Nevertheless there are other provisions which, it appears to us, point inexorably to the Premier League being agent of its member clubs in relation to the sale of television rights. This seems to us to be inherent in Rule D.7.1, under which the Premier League is, in substance, appointed to be the selling agent of television rights which, it appears to be assumed, would otherwise be available to individual clubs or to the two clubs participating in each match. It is consistent with the requirement that any contract proposed to be made under Rule D.7.1 must first be approved by the clubs. Above all it seems to us to be the consequence of Clause 15.1 (a) of the Sky Agreement and Clause 13 (a) of the BBC Agreement, under which the Premier League warranted that it had authority to grant the rights expressed to be granted to Sky and the BBC respectively "on behalf of the Premier League Clubs". There is no reason to doubt that the Premier League did have that authority.

187. Mr. Carr submitted in his opening statement that the argument that the Premier League contracted as the agent of its member clubs was "absurd". This submission was based upon such facts as that large sums of money were to be paid to the Premier League, not the clubs, and that the copyright in film made by the BBC was assigned to the Premier League. It was suggested that this was inconsistent with agency. We consider, however, that the true view is that the Premier League contracted on its own behalf as principal in respect of some matters and as agent for its member clubs in respect of other matters.

188. We add that the question of agency was in fact canvassed only to a limited extent in the course of argument. The Director General preferred the services supply association argument on which we have found in his favour. We have thought it right, nevertheless, to address agency as well.

(4) General conclusion as to "relevant restrictions" in relation to the exclusivity clauses

189. The result of this lengthy discussion is that we find that the exclusivity clauses are relevant restrictions for the purposes of the 1976 Act because

(i) They involve the acceptance of negative obligations which are restrictions for the purposes of the Act;

(ii) Those restrictions relate to the supply of services and fall within either or both of paragraph (b) and paragraph (e) of Section 11(2) and the corresponding provisions of the Services Order; and

(iii) Those restrictions are accepted by two or more persons, that is to say by each club which is for the time being a member of the Premier League, because the Premier League is a services supply association and in any event it entered into the Sky Agreement and the BBC Agreement as agent for its member clubs.

(5) Conclusion as to "relevant restrictions" in relation to Rule D.7.3

190. We now come to Rule D.7.3 which, as we said before, we would consider separately. We can, however, discuss it much more briefly than the exclusivity clauses.

191. On the two arguments which we considered in respect of the question whether the exclusivity clauses involve the acceptance of restrictions we reach a similar conclusion in relation to Rule D.7.3. We consider that the member clubs did close a door which was previously open when they subscribed to rule D.7.3. Indeed it seems to us that the circumstances make this even plainer in relation to Rule D.7.3 than it is in relation to the exclusivity clauses, because at the moment that the original members of the Premier League accepted Rule D.7.3 they were free, or prospectively free, from any equivalent restraint under the Football League rules and entitled to exploit the television rights in their matches in whatever way they thought fit. Clubs which joined the Premier League on promotion at a later date were also free, at the moment when they joined, either to join and become bound by Rule D.7.3 or to opt not to join. The fact that no football club becoming entitled to promotion would have been likely to reject it does not, in our view, affect the legal analysis that in accepting promotion a promoted club gave up a freedom which it could otherwise have enjoyed.

192. On the question whether Rule D.7.3 involves the acceptance of a restriction in respect of the supply of services, the arguments are different from those relating to the exclusivity clauses because the wording of Rule D.7.3 is different. What the member clubs agree is that

"No League Matches shall be televised or recorded or transmitted by satellite or cable or any similar method without the written consent of the Board."

193. It is, of course, correct that these words do not contain any reference to the withholding of football entertainment services by member clubs. But in this field we think it is necessary to look at the substance rather than the form. We think that what the clubs agree to refrain from doing without the requisite consent is anything which, if done, would be conducive to the televising, recording or transmission by satellite, cable or any similar method of any Premier League match. This would include the doing of those things which, by the exclusivity clauses, the Premier League has agreed with Sky and the BBC that it, and hence the clubs, will not do. Accordingly we consider that Rule D.7.3 restricts the supply of services for the same reasons as the exclusivity clause restricts them. It may well go wider, because the prohibition thereby imposed on the clubs is less specific than that imposed by the exclusivity clauses. But it is not necessary for us to consider this in order to deal with the point which was argued.

194. Finally, on the question whether the restriction accepted under Rule D.7.3 is accepted by two or more parties the answer must be in the affirmative. The contrary was not argued. This does not depend on the Premier League being a services supply association or an agent for its members. It follows inexorably from the fact that Rule D.7.3 is part of the constitutional regime under which the Premier League operates. In particular it flows from Rule A.5.1, under which

"Membership of the League shall constitute an agreement between [the Premier League] and each Club, and between each of the Clubs, to be bound and comply with:

(a) these Rules ... (as altered, revoked or added to from time to time);"

195. We therefore reach the same substantive conclusion on these questions of law in relation to Rule D.7.3 as we reached on the same questions in relation to the exclusivity clauses, although the reasons for this conclusion are slightly different.

 

 

 

Section III: Is each relevant restriction contrary to the public interest or not?

196. In this section of our judgment we propose to proceed as follows:

(A) We shall first consider some topics which seem to us to be of general importance for the purposes of this section

(B) We shall next consider whether Rule D.7.3 and the exclusivity clauses pass through gateway (b). At this stage we shall leave the tailpiece on one side.

(C) We shall then carry out a similar exercise in respect of gateway (h).

(D) We shall examine the detriments said to result from Rule D.7.3 and the exclusivity clauses.

(E) We shall carry out the exercise required by the so-called tailpiece in relation to Rule D.7.3 and the exclusivity clauses.

(F) We shall then turn to the ancillary restrictions reinforcing the positions of Sky and the BBC (i.e. the "matching offer" restrictions numbered 4 and 5 in the above list).

(G) We will consider the restriction arising from Clause 15.2 of the Sky Agreement (i.e. that numbered 3 in the above list).

(H) Finally we shall consider the miscellaneous restrictions accepted by the Premier League Clubs (i.e. those numbered 6,7 and 8 in the above list).

197. In following this scheme we shall of course refer, to the extent that seems to us to be appropriate, to the evidence of particular witnesses. But we heard a great number of witnesses. The Premier League alone called more than forty witnesses of fact, most of whom were representatives of football clubs. The number of witnesses called by the other respondents was smaller, but the evidence of several of them was substantial. Each party called a variety of expert witnesses. The oral evidence was heard over a period of some thirty days and it was only kept to this duration by the discipline asserted by counsel in their cross-examinations, which we highly commend, and extensive reliance on written material not read out in court. It would be quite impossible, within the proper confines of this judgment, for us to summarise the whole of the evidence we have heard but we have tried to take account of all of it.

 

(A) General Topics

(1) Broad exclusivity and narrow exclusivity

198. One of the threads which runs through the case for the Director General is the distinction between "broad exclusivity", which the Director General regarded as unacceptable and "narrow exclusivity", which might be acceptable although it would inevitably involve some acceptance of restrictions. The expressions come from the evidence of Professor Cave, who gave evidence as an expert economist on behalf of the Director General. He defined them in paragraph 2.10 of his first report as follows:

"In the case of live matches I shall use the expression "narrow exclusivity" to describe the situation where only one person has the right to broadcast a particular League Match; and the expression "broad exclusivity" to describe the situation where one person has the right to broadcast a particular League Match (or a number of League matches) and no other person can broadcast any other League Match."

 

 

(2) Is the Premier League a cartel and, if it is, is this relevant?

199. An important part of the general case advanced by the Director General is that the Premier League operates, in substance, as a cartel and that this mode of operation brings in its train many of the common anti-competitive consequences of a cartel, which work against the public interest. This position was clearly stated in the evidence of Professor Cave. We quote from Professor Cave's first report as follows:

"2.20 Rule D.7.3 turns the FAPL into a monopoly supplier of the rights, facilities and other services necessary for the broadcast of League Matches in whatever form (live, deferred, recorded highlights or clips). In the absence of Rule D.7.3, the PL clubs would be free to offer those services to broadcasters on an individual basis.

2.21 Well-established principles of economics indicate that, where there is only one supplier rather than a multiplicity of suppliers, prices will rise because purchasers have no alternative to the monopoly supplier and, since the monopoly supplier has complete control over the source(s) of supply, it can vary output in accordance with its own wishes and without regard to the interests of consumers. Output may therefore be limited in order to maximise the monopoly supplier's profits, and consumers will pay more and receive less than they would wish. The same can arise where there is a dominant supplier in the market even though it does not have a monopoly in the strict sense. It does not seem to be disputed that the kind of situation described above has occurred in relation to the broadcasting rights to PL football.

2.22 The FAPL itself has stated that it sought to "secure the best price for rights to televise League Matches" ... ; and that, without the collective sale resulting from Rule D.7.3, "the revenue generated by televising League Matches, from sales both in the UK and overseas, would be reduced" ... .BSkyB also says that without Rule D.7.3, the PL clubs "would not have been able to maximise the value of the right to control entry to grounds for the purpose of producing broadcasts and would have received a significantly smaller sum in total than they did ..."

2.23 Although the effect of Rule D.7.3 has been described using the language of "securing the best price" and "maximising the value of the right", it is clear that what we are looking at is something that, in more straightforward terms, would be described as a cartel designed to extract a higher price than could otherwise be obtainable under competitive conditions.

2.24 The other consequence, output restriction, is evident from the terms of the BSkyB and BBC Agreements ..."

200. Professor Cave then summarised the effect of Clauses 2.3 of the BBC Agreement and Clause 2.2 of the Sky Agreement and continued:

"2.27 In the case of both Agreements, the essence of the problem is what I have called broad exclusivity - the fact that the Agreements create a situation in which the granting of rights to one broadcaster has the effect of preventing another broadcaster from showing different material. Such exclusivity denies the public opportunities for choice and distorts competition.

2.28 As in the case of Rule D.7.3, the exclusivity provided for in clauses 2.3 and 2.2 of the BBC and BSkyB Agreements respectively has been justified in terms of realising the "full value" of the rights and maintaining revenues ... Once again, we are in reality looking at an inflation of the price of the rights in question resulting (here) from the imposition of a restriction on output."

 

Professor Cave gave the references to the passages in the pleadings from which the quoted words in the paragraphs set out above were drawn, but we have omitted these.

201. The economist witnesses called on behalf of the respondents took a different view. Although each of them expressed himself in his own way we think it fair to say that, on what may be called the cartel argument, they all took a line which accords with the following passage in the first report of Professor Yamey, who was called on behalf of the Premier League:

"2.2 .... In several important respects the collective licensing arrangements, viewed as a set of economic/commercial arrangements, are quite different from the ordinary business cartel.

2.3 In a widgets cartel, the cartel itself produces no output that is distinct from and additional to the outputs of the cartel members. Competition between widget manufacturers is desirable because it benefits the public as consumers by generating better and cheaper products. By contrast the FAPL produces a product, the PL competition, i.e the PL championship, which no single PL club can produce, nor even any sub-set of PL clubs. It is a product that is jointly , i.e. collectively, produced by the PL clubs. Even the least successful or the least popular clubs contribute to the PL collective product. Each club has an interest in the PL competition no greater nor less than any other. The bottom clubs can and do spring surprises playing against the top ones. Each club plays an integral part in all aspects of the competition, in determining the championship, those who qualify for European competitions and those to be relegated.

2.4 Moreover the derived products stemming from the PL competition, the individual PL matches, are such that no single PL club can produce a unit of output: it takes two clubs to produce a match. It takes only one widget manufacturing firm to produce a widget.

2.5 The PL competition consists of a series of inter-connected matches extending over a season. In a given season the public's interest in a particular PL match depends in part on the outcomes of all the preceding PL matches and on the state of the PL league table.

2.6 More generally, the value of the television rights in any particular match is affected by the value of the PL product itself, i.e. the PL competition, and the public's interest and enthusiasm it succeeds in generating. Other things being equal, the less interest the PL competition is generating, the less valuable are the television rights in any one PL match. This consideration applies to the broadcasting of live matches and also of highlight programmes.

2.7 If the FAPL were to cease operating or to disintegrate for whatever reason, there would be no PL output at all. There would be no PL competition, and there would be no saleable television rights associated with it, or with the products derived from it, i.e. the PL matches. Even if the (former) PL clubs played matches against one another, these would not be PL competition matches, and any saleable rights associated with them would be different from the rights associated with the PL competition and its matches. I have been told that friendly matches tend to be less well attended than PL competition matches, and that some PL clubs that have qualified for participation in European competitions have had difficulty in finding broadcasters of their matches in Europe. By contrast, if a widgets cartel were to break up, its former member firms would continue to produce the same widgets as before."

202. What Professor Yamey had been told was, in our view, established by the evidence which we heard. After a paragraph which we do not quote Professor Yamey went on:

"2.9 If a club were to withdraw from the FAPL for whatever reason, it could not produce the derived products it helped to produce as a member of the PL cartel. A widget producer continues to be a producer of the same widgets when it quits the cartel.

2.10 Collective licensing and the integrally associated arrangements for the distribution among clubs of the television revenues make economic sense. They reflect the fact that the PL itself produces a product towards the production of which all the clubs contribute. They also reflect the fact that the value of television rights to any one PL match is in part derived from the public's, including viewers', interest in the PL competition, i.e. the value of the rights in any particular PL match is enhanced by virtue of the fact that it is part of the PL competition towards which all clubs necessarily contribute."

203. Three other points which were made in the course of argument appear to us to be pertinent to this general discussion. First the main "product" of the Premier League and its member clubs is the 380 Premier League matches which are played during the course of a season. Neither Rule D.7.3 nor the exclusivity restrictions limit this production in any way. 380 matches, and no more, are played in each season whatever arrangements may be made for the broadcasting of some or all of these matches on television. It seems to us to be questionable whether it can be right to regard as a restriction on production the circumstance that the television rights in only some of these matches are sold.

204. Secondly the subject matter of the sales effected by the Premier League under Rule D.7.1 is of importance. The BBC has bought the highlights rights to every Premier League match (except those selected for live broadcasting by Sky), whether in the form of extended highlights of 20 or 30 minutes duration or limited highlights consisting of the goals scored and other notable incidents. The rights granted to Sky are such as to enable Sky to select its 60 live matches from the entire Premier League programme, subject to detailed requirements in respect of such matters as the number of matches to be shown each week and the guarantee that each club will be shown on television a minimum number of times each season. These features, which reflect the requirements of substantial broadcasters, lend support to the proposition that the product which has the value is the Premier League championship as a whole, rather than the individual matches played in the course of that championship.

205. Thirdly the arrangements which have been made do not, it seems to us, represent on any view a straightforward example of the restriction of output in order to maximise price. 380 matches are played in each season regardless of the number shown on television. Sky has made it clear that it would like to acquire the right to broadcast live more than 60 of these matches. 90 was the number suggested at the time of the 1996 negotiations and Sky subsequently indicated that it would be interested in acquiring the right to broadcast, in addition to its 60 live matches, a greater number of other matches on a PPV basis. It is quite clear that Sky, or any other purchaser, would be willing to pay more for a larger number of matches than it pays or would be willing to pay for 60 matches. The additional cost to the Premier League and its member clubs of allowing to be televised a match which is going to be played anyway is comparatively small and consists mainly of the risk that live attendances will fall (a matter which we consider later). If the aim of the Premier League were to realise the maximum amount for television rights it is reasonably plain that this could be done by allowing a greater number of matches to be televised. It may well be that the average price per match for 90, or come to that 380, matches would be less than the average price per match for 60 matches, but the total amount received would be greater. This represents a difference between the position of the Premier League and its member clubs and that of an ordinary producer of non-substitutable goods. Such a producer may find that he can sell, say, 100 units at a profit of �3 a unit but if he wants to sell 150 units he will have to reduce his price for all the units he sells to a level at which the profit is only �1 a unit. In such a case restriction of production to 100 units will maximise profit. In the case of the Premier League restricting the number of matches shown on television to 60, or any other figure which is less than the number of matches which are played, will reduce the receipts from the sale of television rights unless the extra costs of a match being televised (mainly if not wholly in the form of reduced live attendances) exceed the marginal price obtained from the sale of the extra match.

206. We take the view that the analysis advanced by Professor Yamey and those economists who took a similar view is to be preferred to that advanced by Professor Cave. The 1976 Act does not proceed on the basis of whether an organisation is, or operates as, a cartel. We consider that it is unsafe to evaluate Rule D.7.3 and the exclusivity clauses in terms of whether or not the Premier League may be said to be a cartel and dangerous to argue that, as cartels typically operate against the public interest by restricting production in order to maintain prices, that is what the Premier League must be regarded as doing.

(3) The quality of the Premier League competition and the importance of competitive balance

207. There was universal acceptance of the proposition that the Premier League competition offers football of a very high standard, perhaps as good as any in the world. Such dissent as was expressed to us related mainly to such matters as the degree of any improvement in standards since the formation of the Premier League (about which we express no view) and whether the Premier League clubs had spent wisely on buying so many foreign players and paying such high remuneration to their players at all levels (which are matters we shall have to come back to).

208. We cite the following as examples of the extensive evidence which we received about the quality of the Premier League:

Michael Grade, a witness for the Director General, was asked

"Q. What about the game itself? How does that strike you now?

A. More skilful. The arrival of non-UK players, with the different training and different skills and different playing patterns that they bring, has added a new dimension to the English game, which I think has proved to be very attractive." (Day 23, page 106)

209. Mr. David Mellor, the chairman of the Football Task Force which we have already referred to, said

"The quality of football in the Premier League is excellent. This quality of football runs through the Premier League clubs. We are now in the position of having large numbers of top international players playing in the Premier League. It is a joy to be able to go to Chelsea and watch players with the skills of the Italian International, Gianfranco Zola, for example. Matches are more exciting. There is a buzz in English football. It must be in the public interest that the Premier League clubs maintain this standard and quality of football. The quality is dependant on English football having the money to get the top players. Funding top quality football is very expensive. The Premier League clubs have been able to afford the top players because of the television money coming into the League." (Mellor witness statement para 7)

 

210. Mr Kenneth Clarke MP, formerly Chancellor of the Exchequer but giving evidence as a football enthusiast and supporter said

"I find the standard of football within the Premier League amazingly good. The Premier League is presently the best club competition in the world and is able to attract the top players ...There are no easy fixtures within the Premier League. Though there is a disparity of resources, even the smallest and least wealthy clubs cannot be taken for granted ... It is possible for a small club to come through the league system and not only compete within the Premier League, but establish a continued presence there. Wimbledon, Derby and Leicester City have all achieved this feat. It is essential to retain the competitive interest by having the title race and struggle against relegation each season." (Clarke witness statement paras 6-7)

211. These views from outside observers accord completely with what was said by a multitude of witnesses from within the game. Mr. Roy Hodgson, formerly manager of Blackburn Rovers, was perhaps typical of these when he said:

"...Chelsea's ability to get Casiraghe from Lazio, and Marcel Desailly, who just won the World Cup, from AC Milan, that would probably be a better example of today's pulling power of English clubs and the attraction of the League, because in the past, I do not think Italian players would have been too keen to leave Serie A without having to, in order to come to the English league, whereas now they regard it as a very viable alternative." (Day 14, pages 82-83)

 

212. It is evident from these passages that an important element in the maintenance of the quality of the Premier League competition is competitive balance, that is to say the unpredictability of the outcome of a high proportion of the matches played within the competition and thus uncertainty about which club will win the championship. Mr. Bryon Butler, a journalist for 47 years, most of them spent covering football, said that the Premier League

"has not gone the way of Spanish football and quite a few other leagues, where you have two or three clubs dominating it. It has maintained an equality and although some clubs have been always more equal than others, one has always been able to expect, for example, when the football results are read, that you are going to get a Wimbledon 1 and Manchester United 1, as opposed to Wimbledon 1 and Manchester United 25. You have always had that muscle, that equality, that expectation, which is one of the great attractions of the League, but it has always been based on the fact that it is a co-operative" (Day 13, page 109-110).

 

213. Dr. Szymanski, an economist who has carried out much research into the economics of football clubs and who was called to give evidence by the Director General, was reluctant to accept that the Premier League had maintained competitive balance to a significantly greater extent than other leagues. Asked whether the Premier League was very competitive he replied

"It is reasonably competitive, yes. That question is one where you really have to say, well, is it more competitive than other leagues, and then one gets into comparisons. It probably is a bit more competitively balanced than most other football leagues, but I do not think it is dramatically more so."

214. We think, however, that the significant point is not whether or not the Premier League is more competitive than other leagues but whether competitive balance is something which makes a football competition more attractive. We did not understand Dr. Szymanski to question this. Indeed it seems to us to be manifest that it is the case.

215. The question which then arises is how this high quality and competitive balance is to be achieved and maintained. The argument before us was that this could only be done by ensuring a measure of financial equality between clubs. It was not suggested that exact equality could be achieved and it may not even be desirable. But we accept that an increase in financial inequality will tend to result in a reduction in competitive balance. There can, in our view, be no doubt that the sharing between clubs of a major source of revenue such as the proceeds of the sale of television rights, is one way in which to promote a degree of financial equality. The question which we shall have to come to on the basis of this general discussion is whether the striking down of Rule D.7.3 would make such sharing more difficult or less effective and, if it would, whether this is a circumstance enabling Rule D.7.3 to pass through gateway (b). This is something to which we shall return.

 

(4) Collective selling and individual selling of television rights

216. A fundamental consequence of Rule D.7.1, taken in conjunction with Rule D.7.3, is that there can be no dispute amongst member clubs of the Premier League about who has the right to sell the television rights to Premier League matches. That right is, by Rule D.7.1, unequivocally conferred on the Premier League itself; and the Premier League is, by Rule D.7.3, protected from any risk that rival sales will be made by individual clubs (supposing that to be possible) or by the home and away clubs participating in a particular match.

217. It was a feature of the argument advanced on behalf of the Director General that Rule D.7.1, taken by itself, does not involve the acceptance of any restriction and is unobjectionable. What is objectionable, it was said, is the prohibition on individual selling which is imposed by Rule D.7.3. Clubs ought to be free to sell the television rights to their matches. This argument, while theoretically attractive, appears to us to be fundamentally flawed on two grounds.

218. First we find it difficult to see how collective selling could take place without some such protection as that afforded by Rule D.7.3. At this stage of the argument it is necessary to assume that, without Rule D.7.3, individual clubs or the clubs participating in particular matches would be free to sell the television rights to their matches. But it would be intolerable to find that both the Premier League and an individual club were attempting to sell the same television rights. A broadcaster would probably be unwilling to deal with either of them. Any broadcaster who did negotiate with one of them would clearly refuse to pay it a substantial price for rights which might be sold by another vendor to a different purchaser. The reality, as it seems to us, is that the striking down of Rule D.7.3 will, at least in economic terms, nullify collective selling under Rule D.7.1.

219. Secondly we regard it as somewhat facile to speak of "individual selling" in a way which assumes that each club, or the home club in each match, is entitled to sell the television rights to the matches in which it participates. We know of no principle which, in the absence of a special rule, gives a club such a right. It is true, of course, that the home club, as the owner or controller of the ground at which a match is to be played, can prevent a broadcaster having access to that ground for the purpose of making a broadcast or recording of the match. But this is a mere power of veto. It does not enable the home club to sell the television rights to a match without the concurrence of the visiting club. Moreover such concurrence may be difficult or expensive to obtain, particularly if, as will inevitably be the case if there is to be a live broadcast, it is proposed that the match is to kick off at some time other than the traditional 3pm on a Saturday afternoon.

220. In practice, therefore, "individual selling" can only be achieved by a series of trilateral deals between home and visiting clubs and particular broadcasters, such deals being limited to matches played between the clubs in question, or by putting in place a new regime to take the place of that provided by Rules D.7.1 and D.7.3. It would no doubt be possible to devise such a regime, for example by giving the home club the right to sell the television rights for its own benefit or by requiring a visiting club to accept a television deal negotiated by the home club, including any necessary re-scheduling of the match, if it is paid a particular share of the sale proceeds. Whether such a regime could be devised without the acceptance of obligations which amount to restrictions under the 1976 Act seems to us to be much more doubtful.

221. In this judgment we shall continue to refer to "individual selling" as describing the regime which would exist if Rule D.7.3 were struck down under the 1976 Act. But such references are always subject to the uncertainties and difficulties concerning the nature of such regime which we have discussed in this part of our judgment.

 

(5) Effect of televised football on attendance at live matches

222. We have already referred to the almost universal belief amongst those concerned with football that the showing of football matches on television diminishes attendance at live matches. The relevance of this to the present case is that it is said that if the collective selling of television rights under Rule D.7.1 became impossible there would be no means by which the Premier League could control the number of matches shown on television and the consequential fall in attendances at live matches. This would be left to the individual clubs. While each club would be able to make its own calculation of the advantages and disadvantages so far as attendances at its own matches are concerned, it could not or would not take account of the "spill-over" effect on attendances at matches played by other clubs at or near to the time of the broadcast. A strong and popular club, regularly able to fill its ground to capacity, might feel that it had little or nothing to lose by selling the television rights to all its matches, or to a greater number of them than would be likely to be broadcast under collective selling arrangements. But this might cause some spectators who would otherwise attend a match played by a weaker or less popular club to stay at home and watch the other match on television. Any reduction in attendances will, it is said, be detrimental in that the club which suffers the reduction will lose gate receipts and the atmosphere at the match will be adversely affected by the paucity of the crowd. This effect will not necessarily be confined to Premier League clubs. It is likely to extend to attendances at the matches of Football League clubs and will be detrimental to football generally and hence to the public.

223. The evidence that more matches on television will lead to reduced attendances fell into a number of categories. There was first the evidence of a considerable number of witnesses from football clubs, mainly Premier League clubs. While it is fair to say that much of this was anecdotal and unscientific its cumulative effect leaves no doubt in our minds as to the beliefs of those concerned. Next we were shown a number of studies by persons concerned in one way or another with the assessment of the commercial consequences of broadcasting football on television. Thirdly there was evidence from expert econometricians (Mr. Simon Bishop on behalf of the Premier League and Dr. Szymanski on behalf of the Director General).

224. Perhaps the most telling of the evidence in the second category was a report made to Sky in February 1997 by Geoffrey Cleaver, Sky's Head of Research. This report was based on an analysis of the data concerning attendances in the first half of the 1996/97 season. Mr. Cleaver began the main section of his report with the following observations:

"2. Does Sky's coverage of a game affect the gate?

The facts are that just over half the games covered by Sky delivered ground attendances which were lower than the average for the home club for the first half of the 1996/97 season. The majority of the rest were on the average, with five games actually delivering higher than average attendances.

On our club visits, there have been complaints from some clubs that gates are adversely affected by Sky coverage. ... In the past I have looked at the facts and concluded that, while there were a few instances where Sky coverage seemed to have reduced gates, overall there was no real evidence of a pattern to support the proposition.

However, the evidence of this season seems to support the thesis that Sky coverage can reduce attendances. And this is against a background of very high average gates - running at 88.4% of capacity"

225. Mr Cleaver then examined the position for each of the clubs in the Premier League and concluded:

"I am satisfied that when Sky covers a game it can reduce attendance at the ground. This is most likely to occur on a Monday night. Most fans are working that day, and getting to the ground in time may be a problem, not just for travelling away fans but for home supporters too.

Attendances are generally booming this season, and several clubs are sold out whoever the opposition is, and whenever the game is played.

However, clubs who are not in this envious position see gates fluctuate according to the opposition. Their own performance affects attendances too - with the less than 100% loyal fans being shaken out for the less attractive games. It is these games and these clubs who are most affected by Sky coverage. These 'floating' fans appear to take the option of watching Sky at home or in the pub."

226. This assessment, coming as it does from a researcher for a party whose commercial interest would seem to be to play down the effect of television coverage on attendances, seems to us to be frank and realistic. It is equally realistic in pointing out that factors other than television coverage play a part, including disappointing performance on the part of the clubs in question and the fact that some games are less attractive than others. However, what seems to be a major contributor, namely the playing of a match on a Monday night instead of the traditional Saturday afternoon, is part of the consequences of television coverage, because the match is scheduled for a Monday only to meet the requirements of the Sky Agreement.

227. The evidence of the econometricians displayed an enormous degree of expertise and diligence, but we have to say that we found it of limited assistance. Mr. Bishop and Dr. Szymanski had exchanged a number of reports dealing with the attempt to measure, by the application of statistical processes, the impact of television coverage on attendances at matches. Unfortunately there was little common ground between them. Having regard to this fact, the highly technical nature of the statistical discipline which was being applied, the limited scope of the underlying data and the difficulties involved in taking proper account of all the factors which may affect a person's decision whether or not to attend a football match, we do not feel able to prefer the evidence of one of the experts to that of the other.

228. Nevertheless it seems to us to be inherently probable that if football matches are shown on television to a significantly greater extent than hitherto there will be a tendency towards a reduction in attendances at matches. A football supporter who is determined to attend a match will not be put off from doing so by something of this kind, but a supporter who has a lesser degree of determination is more likely to stay away if the match he would otherwise attend, or a more attractive match, is being shown on television than he would be if this was not the case. We doubt if this tendency would be outweighed by any general increase in the popularity of football which might result from greater exposure on television. But it is, in our view, impossible to do more than say that there would be a tendency towards a reduction in attendances.

229. The importance of this tendency must not, in our view, be exaggerated. It was not suggested that a fall in match attendances would itself constitute the denial to the public of some benefit or advantage, at any rate if it was not so catastrophic as to destroy the atmosphere at matches. Even under individual selling of television rights the club selling the rights will have to decide whether, from its point of view, any consequential increase in the amount of football on television will be beneficial or detrimental, both in terms of the consequences to itself, whether financial or consisting of a loss of atmosphere and excitement at the match and, so far as it cares to take them into account, the consequences to football as a whole. Moreover, whether or not more Premier League matches are shown on television, the trend seems to be inexorably towards more football of one kind or another on television. A supporter who is so lacking in robustness that he will refrain from attending a match because he prefers to watch football on television may well stay away from a Premier League match in order to see on television a non-Premier League match the broadcasting of which is outside the control of the Premier League even with Rule D.7.3 in place.

 

 

(6) Collective selling, exclusivity and price

230. It seems to us to be manifest that any given package of television rights will be likely to realise a higher price if sold on the basis that the purchaser has broad exclusivity than if sold on the basis of some form of narrow exclusivity and the difference will be greater if the alternative to broad exclusivity is no exclusivity at all. It is impossible to estimate the precise size of the exclusivity premium, but we consider that it is likely to be substantial.

231. Although it is perhaps rather less obvious, collective selling of television rights is, in our view, likely to achieve a higher price than individual selling of those rights. In this respect we found certain passages in the evidence of Professor Yamey and Mr. Elstein compelling.

232. In his first report, Professor Yamey identified nine areas of uncertainty that would affect value. He said (at para 5.1):

"In a regime of individual licensing a broadcaster seeking to buy live television rights to a PL club's home matches would be faced with commercial uncertainties of various kinds or sources. These would include the following:

(a) uncertainty as to the club's performance during the season, and hence as to the viewer appeal of its home matches;

(b) uncertainty as to the club's performance in a subsequent season (or seasons), including the possibility of its relegation, if the licensing agreement covered more than one season;

(c) uncertainty as to the viewer interest in a particular home match, an interest which would depend, among other things, on the state of the PL league table, i.e. of the PL competition, at the time, and the degree of importance of that match to the eventual outcome of the competition, whether at the top or the bottom end of the league table;

(d) uncertainty as to whether it would turn out to be possible for any particular match to be re-scheduled so as to make live broadcast possible, having regard, inter alia, to UEFA rules, and uncertainty also as to the slot that might be assigned for that match if re-scheduled;

(e) uncertainty as to whether a particular match scheduled to be televised would have to be postponed, e.g. because of a FA Cup replay;

(f) uncertainty as to whether the broadcaster in question would be able to acquire, on reasonable terms, a portfolio of rights to several PL clubs' home matches sufficient in number and likely quality to enable a regular series of broadcasts to be transmitted of sufficient quality and interest to attract viewers;

(g) uncertainty as to the nature and extent of competition that the broadcaster in question might be encountering from rival broadcasters in the form of programmes of live PL football;

(h) uncertainty as to whether and how frequently (due to difficulties of re-scheduling of matches) other PL matches would be broadcast live at the same time as the broadcaster's own live broadcasts of PL matches; and

(i) uncertainty as to whether the visiting club would co-operate with the home club in allowing supplementary footage to be filmed and screened before the match, during the interval and after the match, and uncertainty as to the terms on which such co-operation might be forthcoming."

...

"5.3 The presence of the uncertainties would depress the value a broadcaster placed on the club's (or clubs') rights, and, accordingly depress the prices it was willing to pay for them. It would depress the prices even if a particular broadcaster in fact succeeded in acquiring in the primary market all the rights offered by all, or virtually all, the clubs.

5.4 To a large extent, the uncertainties are eliminated or reduced in a regime of collective licensing as regards a package of live-match rights extending to all PL clubs and to all PL matches. For example the broadcaster acquiring such a package is certain of having access to the matches of whichever clubs happen to be successful or exciting, and will be assured of the rights to matches of whichever clubs are in the PL competition from time to time, including newly promoted clubs, enabling the broadcasters to enter into a longer term contract. The lower level of uncertainty enables broadcasters to bid for more PL rights in a collective licensing regime than in an individual licensing regime."

233. Mr. Elstein explained the position from the perspective of a broadcaster (at paras 6.5 to 6.10 of his report) in the following way:

"6.5 The value of matches is in part dependent on when they are broadcast. In other words, the ability to control the fixture list is a key function of value. Currently, BSkyB knows that the 60 matches which it broadcasts will be shown on Sunday afternoons and Monday evenings on a week by week basis throughout the season with no other Premier League matches being televised at that time. It requires that regularity and exclusivity (as any pay television broadcaster would) in order to generate subscription revenues. If broadcasters buy matches directly from the individual clubs and do not know when the games will be broadcast nor how many other matches may be televised at the same time, many of the matches have little or no value. Moreover, broadcasters would not be interested in matches that had to be shown at varying times to avoid television clashes with other broadcasters. Broadcasters need certainty as to the time and regularity of broadcast before they buy a match.

6.6 Thus, for a variety of reasons, scheduling implications will affect the value to be ascribed to the rights in an individual licensing situation, from the broadcaster's point of view:

A broadcaster needs to avoid head to head broadcasts. If, for example, another broadcaster was showing Liverpool v Manchester United, Channel 5 would not want to buy the rights to Southampton v Wimbledon;

A broadcaster also needs to be able to schedule matches to its preferred slots; peak-time (i.e. 6.30pm - 10.30pm) is far more valuable than off-peak; Sunday afternoon is far more valuable than Monday afternoon;

A broadcaster in addition needs to be able to maintain a balance and regularity in the schedule;

Finally, the rights also have to become available sufficiently far in advance of the proposed date of broadcast to enable appropriate marketing to take place both in order to maximise subscription and for optimum advertising revenue to be generated.

6.7 If all clubs had been allowed to make their own deals in 1992 and/or 1996, the situation would have been greatly confused, and almost certainly the total revenues would have been greatly reduced."

234. The following exchange took place during Mr. Elstein's examination in chief in relation to a suggestion that the Premier League itself might be given the right to sell a package of live rights, individual clubs being free to sell the live rights to any match not included in the package sold by the Premier League (Day 30, pages 5-6):

"Q. The question I am going to ask you now is: what effect would that have on the value of the collective package?

A. If the collective package was sold first and if the potential buyers had no idea of how the remaining matches were to be disposed of, which kind of broadcaster, when they would be scheduled, in what kind of volume, I would have thought it would be very difficult to estimate at all the value of the first package.

Q. Would you just explain why?

A. Because, if you are buying a package of football rights, you need to know whether the matches you are showing are overwhelmingly the primary package in that particular competition. Secondly, how many other matches are going to be shown by somebody else; is it a handful, is it a large number? Who is going to control the sale of those rights? Are they going to be disposed of to terrestrial TV, free-to-air, or Pay-TV or pay per view; all very different valuations? When are those matches going to be played, on what day of the week, head-to-head, separated? All those will be immensely important issues in trying to place a valuation on the primary package, and personally, if I were in the bidding arena, I would not bid until all of that had been absolutely clarified. In the absence of that clarification, it would be impossible to place a meaningful value."

235. The Director General did not, it seemed to us, really dispute this evidence. His answer to it was two-fold. First he suggested that the loss of the exclusivity premium could be made up by the sale of television rights to more matches. He argued that this is something which is to be expected to occur if individual selling takes the place of collective selling. Secondly he suggested that a diminution in the income from television would not matter much from the point of view of the public interest. This second aspect is something we shall consider when we come to deal with whether benefits would be lost if collective selling and exclusivity were no longer possible. As to the first answer, while it is quite possible that, assuming that a regime is put in place which enables individual clubs to sell the television rights to their home matches, some clubs will be able to sell the television rights to many more of their matches than are currently shown live by Sky, we think that this will be unlikely to be the case with weaker or less popular clubs. Moreover, even if the total number of matches shown live on television increases, we think it is by no means certain that the aggregate price received by all clubs will exceed the price obtainable for a single exclusive package sold collectively. What is likely, we think, is that there will be a tendency towards polarisation. The large, successful and popular clubs may well receive more than they currently do from the collective arrangements. The weaker, less successful and less popular clubs are likely to find that they receive considerably less. In substance we accept the view expressed in graphic terms by Mr. Dein, the vice-chairman of Arsenal, who said:

"I can see a situation, if the rights are not sold collectively for the domestic league, i.e. the Premier League, there would be a free for all. There would only be about four or five clubs, who would do extremely good financial deals with television broadcasters and there would be a great temptation for the whole thing to break apart. You would probably have 14 or 15 clubs with blood on their fingers trying to hang on to the other clubs, because they were selling their rights for the League independently."

 

(7) The distribution of television income

236. The Premier League placed great emphasis on the fact that, as it claimed, the income obtained from the sale of television rights to Premier League matches goes not to the clubs whose matches are thought to be the most attractive to broadcasters but to the Premier League itself, by which it is distributed to the clubs. It is said that by this means, and some others which we shall mention, income is distributed to the benefit of the Premier League as a whole and for the benefit of football generally.

(i) Distribution within the Premier League itself:

237. The principal means by which television income is distributed is the application of the formulae embodied in the Premier League Rules. We have already described these, but for ease of comprehension we do so again. Television income in respect of broadcasts within the United Kingdom is divided :

(i) As to 50% equally between member clubs;

(ii) As to 25% between the member clubs in shares calculated by reference to their finishing positions in the Premier League competition; and

(iii) As to the remaining 25% between the clubs whose matches are shown on television, home and away clubs receiving an equal share.

Income from broadcasts overseas and from sponsorship is divided equally between the member clubs. These rules are modified in such a way as to enable recently relegated clubs to receive the "parachute payments" (i.e. a proportion of the income they would have received if they had not been relegated) which we have already mentioned and, as appears from Rule D.8.1, to provide for certain payments to the PFA which we deal with below. Certain other payments are also made outside the Premier League, as will appear later.

238. The amounts received by individual clubs under these arrangements are very substantial. The accounts of the Premier League for 1997/98 show that the total amount distributed in respect of television revenues was �136.5 million. �129 million went to clubs which were members of the Premier League during that year. Two clubs, Arsenal and Manchester United, received over �9.5 million each. The lowest recipients were Barnsley, Bolton, and Sheffield Wednesday, each of which received between �4 million and �5 million. Some �7.5 million went to five previously relegated clubs which received parachute payments of a little under �1.5 million each.

239. Having regard to our conclusion about what would happen if collective selling of television rights were made impossible, we consider that these provisions for the distribution of television income have a real and substantial effect, in that the less successful and less popular clubs receive a greater share of the aggregate income from the broadcasting of Premier League matches on television than they would be likely to receive if the present system for the distribution of such income became inoperative and was not replaced by a new system which is equally effective. If the aggregate income were diminished by the abolition of collective selling, the adverse effect on the finances of smaller and weaker clubs would, in the absence of a new system for redistribution, be serious.

240. The existence of a scheme for redistribution of television income is, in our view, an extremely important factor in the creation and preservation of competitive balance, which, for the reasons we have already indicated, is a vital factor in maintaining the quality and interest of Premier League football. We shall consider later whether the present scheme would be destroyed by the condemnation of Rule D.7.3 and not effectively replaced.

(ii) Distribution to football outside the Premier League:

241. PL income is also, to a certain extent, distributed outside the member clubs of the Premier League. There are a number of ways in which this is done.

Payments to the Football League: When the Premier League was formed the Football League was seriously concerned about losing its most successful and prosperous clubs. In order to alleviate this concern the tri-partite agreement, which we have referred to earlier in our account of the setting up of the Premier League, provided for a measure of financial support to be given by the Premier League to the Football League. The original arrangements for this support came to an end in 1997. However in June 1997 the Premier League agreed to give the Football League clubs a total of �20 million over four years to assist Football League clubs to develop football academies and centres of excellence for the coaching and development of young players.

242. It is, we think, relevant to note in this context that the Football League has in its constitution provisions under which the television rights in Football League matches are sold centrally by the Football League itself, the income thus generated being divided in accordance with a formula. In 1995 the Premier League made a proposal to the Football League that the television rights in Premier League and Football League matches would be sold jointly, the Football League receiving a percentage share of the combined revenue. This proposal was turned down by the Football League, which preferred to sell the rights to Football League matches separately. (As we have mentioned, they were in fact sold to Sky under an agreement whereby Sky has the right to broadcast live 60 Football League matches per season for five seasons from 1996/97 to 2000/2001 inclusive in return for �25 million a year). Mr. Richard Scudamore, the present chief executive of the Football League (but who did not hold that office in 1995) told us that if the offer made in 1995 were now to be repeated he considered that it would be extremely beneficial to the Football League clubs to accept it. If collective selling of the Premier League rights were rendered impossible it would, of course, be impossible for such an offer to be revived, although (as the result of the direction under Section 21(2) in respect of the Football League arrangements) the collective selling of the television rights to Football League matches could continue.

Payments to the Football Trust: The Football Trust was formed in 1979 in order to provide financial assistance to the non-professional game of football. In 1990, after the Taylor report, it was re-constituted and assumed the responsibilities of another organisation named the Football Grounds Improvement Trust, whose main function had been the provision of grant aid for safety improvements at football grounds. The newly constituted Football Trust was and still is largely funded by the football pools companies under an arrangement promoted by the government which included a reduction in pool betting duty. The Trust's income from this source has, however, been reduced as the result of a decline in football pools since the introduction of the National Lottery. The Trust also receives donations from the FA, the Scottish FA and the FA of Wales.

243. In 1994 the Premier League agreed to provide �2 million per annum to the Trust as a contribution to the grant aid which the Trust was giving, or was expecting to give, to Premier League Clubs. The amount was subsequently adjusted to �1.9 million. This sum, which continues to be paid, was ear-marked for ground improvements at Premier League football grounds. In addition, however, the Premier League agreed in 1997 to pay to the Trust a further �5 million per annum for four years. �5 million of this has been ear-marked for Southampton and Wimbledon if and when they proceed with plans for the development of new stadia, but otherwise this further annual sum is for improvements to Football League football grounds.

244. It is right to record at this point that, although the Premier League has in this way been a significant contributor to the funds of the Football Trust, the Premier League clubs have, in the period since the formation of the Premier League, received grants from the Football Trust which greatly exceed the Premier League's contributions. The Football Task Force Report contains a table (Table 3) which indicates that between 1992 and 1998 clubs which are or have been members of the Premier League have received over �88.5 million in grants from the Football Trust. The figures collated by Mr. Matthew Patient, the accountant called to give evidence by the Director General, indicate that during the same period the Premier League contributed some �12.7 million to the Football Trust (Patient Table 8-4 adjusted by adding a contribution of �5 million for 1998).

Payments to the PFA: As we have already briefly mentioned the Rules of the Premier League also envisaged that certain payments would be made to the PFA for educational , insurance or benevolent purposes. Under Rule D.8.1 such payments are made out of the United Kingdom television revenue before its division in the stipulated proportions. The payments appear to amount currently to �7.5 million per annum.

Other payments: A number of other payments to outside organisations are referred to in the Premier League's pleadings. These, together with the ones we have already mentioned, are summarised in Table 8-2 which appears in paragraph 8.24 of the first report of Mr. Patient. While there appears to be no dispute that these were made we heard little or nothing about them and, in any event, they involve much smaller sums than the ones we have earlier commented upon.

(iii) Source of the payments made outside the Premier League:

245. We were at one stage somewhat puzzled about the source from which the payments made outside the Premier League were met. Rules D.8.1 and D.8.3 of the Premier League Rules seemed to provide for the distribution of the whole of the television income received by the Premier League within the Premier League itself, subject only to the parachute payments to relegated clubs and payments to the PFA, and the Premier League appeared to have no other substantial source of income. Mr. Peter Leaver, who succeeded Mr. Parry as Chief Executive of the Premier League in 1997 and still held that office when he gave evidence to us, although he has since resigned, explained to us in a supplemental witness statement that the position in practice is somewhat different. The money paid to the PFA (�7.5 million) to the Football League for youth development (�5 million) and to the Football Trust (�5 million) is met out of the top slice of domestic television revenue, the total of �17.5 million representing about 11.5% of domestic television income for 1997/98. The running and operating costs of the Premier League are met out of the overseas television revenue. Television and sponsorship revenue is distributed between the member clubs only after these payments have been made. Mr. Leaver said that the �17.5 million distributed outside the Premier League in 1997/98 could not have been met out of overseas television revenue and commercial and sponsorship income, which are the only other significant sources of income for the Premier League.

 

(8) Foreign comparisons

246. The Director General invited us to have regard to evidence of experience of sports broadcasting in three foreign countries, Mexico, the United States and Holland. In the event this did not feature greatly in the submissions of counsel, but as reliance on it was not formally abandoned we must deal with it.

247. So far as Mexico is concerned the Director General, within the time limited for the exchange of witness statements, produced witness statements from a number of witnesses concerning football and broadcasting. On an interlocutory application the Director General sought leave to rely on the contents of these statements without calling their makers. This was objected to on behalf of the Premier League but the court ruled that the Director General was entitled to put the witness statements before it if he chose to do so. It was, however, indicated by the court that the contents of the statements might be regarded as having little weight unless the witnesses were called to be cross-examined. In the event the Director General did not call the witnesses, although he invited us to read their statements. In answer to them the Premier League called Mr. Andrew Downie, a freelance sports journalist with a particular interest in Mexican football and six years experience in Mexico.

248. The Director General seemed to put forward Mexican football as an example of a system in which, in a country where football is enormously popular and its players highly proficient, individual selling of the television rights to football matches takes place quite satisfactorily. This was not, however, the picture which we obtained from the evidence. It seems that the strongest clubs in Mexico are owned by the most important television companies, which control many aspects of football in Mexico. It is, however, extremely difficult to draw reliable general conclusions about the way in which any activity is carried on in another country, even when all the relevant witnesses appear to give their evidence directly to the court. We do not propose to go into the evidence in any detail. We say no more than that we find nothing in the evidence about Mexico which helps us to a conclusion on the matters which we have to consider in relation to this country.

249. As to the United States, the Director General called Professor Stephen Ross to give evidence. Professor Ross is Professor of Law at the University of Illinois College of Law in Champaign, Illinois. He has studied extensively and written papers in the field of anti-trust law, particularly in relation to sport. He gave us evidence about United States anti-trust law, particularly in its application to major college American football "programs" and men's basket ball "programs" and he discussed the leading case of National Collegiate Athletic Association v Board of Regents of the University of Oklahoma (1984) 468 US 85. While this evidence was interesting, it appears to us that the differences between United States anti-trust legislation and the 1976 Act and the differences between the way in which the American leagues and the Premier League operate are such that it is impossible to draw any meaningful lessons applicable to this case.

250. There was also a witness statement from Ms. Annemieke van der Beek relating to certain arrangements and litigation concerning television rights in football matches in Holland. Ms. van der Beek did not give oral evidence and we heard no submissions about the relevance of what is said in her witness statement. Without this assistance we are quite unable to draw any conclusions from it.

 

(9) Pay per View

251. We have already referred in fairly general terms to PPV broadcasting. It is a comparatively new form of broadcasting. It was referred to in the 1992 Sky Agreement, but Mr. Elstein, who was then with Sky, said that at that time

"It was something you took precautions against rather than [made] immediate plans for" (Day 30, page 44)

252. It was submitted on behalf of Sky that until about 1995 PPV was not feasible for technical reasons. The Director General suggested that it could have been made available earlier, but we doubt this. The first time that an event was made available on PPV television was when Sky broadcast the Bruno/Tyson boxing match in 1995. Even then, according to Mr. Elstein, Sky had "hugely disproportionate management issues in putting analogue PPV together".

253. There are many who think that PPV represents a large untapped source of additional revenue for Premier League clubs. We were shown consultants' reports concerning the prospects for PPV which cite some very large numbers, but the difficulty with projections of this kind is that they are entirely dependent on the validity of the underlying assumptions on which they are based. These are as yet untested by experience. The anecdotal evidence which we received concerning PPV in Italy, France and Spain, which have introduced it earlier than this country, indicated that initial results have been disappointing.

254. Early in 1998 Sky put a proposal to the Premier League for Premier League matches to be shown on a PPV basis. Sky indicated that in addition to the 60 matches which it broadcasts live each season the remaining 320 matches could be covered on a PPV basis, although it recognised that clubs might prefer "a more limited first season experiment of four/five games per weekend". It was proposed that the subscription revenue obtained by Sky for PPV matches would be split between Sky and the Premier League. Sky stated that its preference was for PPV games to be played on Saturday at 3pm, but it recognised that there would be opposition to this and suggested moving all games to Sunday, to kick-off at either 2pm or 4pm. This was, it seems, very much a proposal for discussion. It was considered by the Premier League which, in May 1998, unanimously decided to reject it. In deciding to take this course the Premier League clubs appear to have been motivated by a number of factors including the generally untried nature of PPV, the apparently disappointing results achieved in Italy and elsewhere, the impact on gates, the unpopularity of the large scale re-scheduling of matches away from the traditional Saturday 3pm kick-off and misgivings of the police about the suggested new days and times for re-scheduled matches. Although it was anticipated that these matters would be discussed further between the Premier League and Sky, no real progress appears to have been made.

255. Having made no significant progress with the Premier League Sky has persuaded the Football League to enter into a PPV experiment. On 27th February 1999 the match between Sunderland and Oxford, which kicked off at 6pm, was offered to Sky subscribers on a PPV basis at the price of �7.95 per domestic subscriber. The results of this experiment are not known to the court, but we were shown a press report which suggested that many football fans had watched the match in bars and clubs, which were charged �160 each by Sky.

256. We are satisfied that a good deal more will be heard of PPV football, but we are uncertain whether it will become established on a large scale basis. Many unresolved factors need to be taken into account. These include the balancing of demand for PPV, and hence subscription levels, with the costs of production; the fact that, if PPV becomes sufficiently attractive it could have a much more serious effect on gate receipts, particularly season ticket sales, than the occasional broadcasting of a club's matches on Sky's ordinary channels; and the problems connected with the re-scheduling of matches. On top of all this the yield from PPV is speculative. It seems unlikely that broadcasters will be prepared to pay to the Premier League or to clubs large fixed sums for PPV television rights. A revenue sharing scheme seems more likely, although from the point of view of the clubs this will bring risks as well as the hope of rewards. In short we think that there will be experimentation with PPV whether the existing restrictions remain in place or not. But we have no great confidence that these experiments will bring early success, whether to broadcasters or to football clubs or to football supporters.

 

 

(10) The Nature of Competition between Broadcasters

257. This is a very important subject which requires discussion at some length. We divide our treatment of it into a number of separate sections in the hope that this will make it more manageable.

(i) Some features which govern the nature of competition between broadcasters.

Mr Aaronson, an economist with considerable experience of the broadcasting market who was called as a witness by the BBC, gave us a useful overall view of the way broadcasters compete. His evidence is the source of most of what we summarise in the next few paragraphs, but generally speaking what he said was confirmed by the other witnesses with significant broadcasting experience and we accept it.

Broadcasting is an unusual market in that free-to-air television broadcasters offer their product to viewers at no charge. There is therefore no price competition between them. They must compete on quality, meaning the merit of the programming and its appeal to segments of the viewing population. They are subject to certain constraints in respect of the content of their programming. In the case of the BBC these arise from the terms of its Charter. In the case of the ITV companies, Channel 4 and Channel 5 they arise from contractual commitments which they have entered into with the body granting their licences and the requirements of their advertisers. All measure their audience shares and the demographic profiles of their audiences as indicators of their performance and success.

258. Free-to-air television remains the dominant feature in the industry. In 1997, despite the growth of Pay-TV, terrestrial free-to-air channels accounted for 88% of all TV viewing. (see the BARB statistics set out in Annex 4, Chart 2 to the witness statement of Mr. David Chance, formerly the Deputy Managing Director of Sky).

259. Pay-TV broadcasters are not subject to significant external constraints on content. For them the main constraint is that they must offer programmes which make a particular appeal to viewers if they are to persuade them to subscribe to the Pay-TV service rather than content themselves with the offerings available on free-to-air TV.

260. Competition may take place at any of three levels. Programme makers make programmes which they sell to channel providers. Channel providers make their channels available to distribution platforms. In Pay-TV distributors sell subscriptions to viewers. Some broadcasters may be involved at more than one of these levels. Sky is involved at all three. But in the Pay-TV industry the ultimate consumer competition only takes place at the distributor and channel level. Consumers only make a choice in the real market place when they decide to subscribe to a distributor and select the channels they will pay for. Even in the case of the apparent exception, PPV programmes, the consumer can only choose to pay and view if he already subscribes to a platform offering the event.

261. A complicating factor is that free-to-air channels are distributed by Pay-TV distributors. The main reason for this is that without access to free to air channels subscribers to a Pay-TV service would be disadvantaged by having to arrange for separate reception of these channels in addition to the equipment required for Pay-TV reception. So BBC and ITV channels are available on cable and satellite and Channel 5 is available on the latter. Even in homes subscribing to Pay-TV services, free-to-air channels account for 62% of viewing (see the BARB statistics already referred to).

(ii) The Pay-TV Distributors

262. As we have already noted, Sky is at the same time programme maker, channel provider and distributor. As a programme maker and a channel provider it has an incentive to sell its programmes and its channels to other distributors such as cable companies. As a distributor it competes with the cable companies. It is the largest provider in the UK of non-terrestrial channels, accounting for about half of the total viewing of all such channels. Its channels are broadcast via the Astra satellite system, either directly to the viewer's home or indirectly through the cable network. Sky has the largest share of the Astra satellite capacity directed at UK homes and the licence for the satellite encryption system which has become the UK standard.

263. While Sky is both a channel provider and a distributor, cable companies are largely distributors of the channels provided by other parties, although this situation is changing. They have been dependent on Sky for much of their television programming, particularly the premium channels. (A premium channel is one for which viewers are required to pay an additional subscription over and above the basic subscription to the Pay-TV service. The main content of premium channels is movies and live sports, these being the programmes most popular with viewers). The terms on which the cable companies buy programming from Sky have been the subject of the Wholesale Price Review undertaken by the OFT, which we have previously referred to.

264. Cable companies use telephone services as a significant aid to their sales. Some witnesses suggested that the primary strategy of some cable companies had been to sell telephone services, with low-cost non-premium TV channels being added as an incentive. This, they said, explained why the take-up of premium channels was relatively low on cable. It is unnecessary for us to decide which of the two services is the more important. What matters is that the ability of cable companies to offer telephone services, at an advantageous price to the consumer which nevertheless appears to leave the cable company with an acceptable level of profit, is a factor in the ability of cable companies to compete with satellite in the Pay-TV market

(iii) The economics driving Pay-TV competition

265. The economics of Pay-TV are characterised by high sunk costs invested in the early stages of development. For the cable industry these costs are incurred during the building of the cable networks. For satellite broadcasters they consist of the price of the acquisition of satellite transponder capacity and the costs of encryption and other technologies. There are other high fixed costs in the form of the cost of making or acquiring the necessary programme material.

266. In comparison to these high sunk and fixed costs the incremental cost of providing a service to an additional subscriber is negligible. It follows that the economic aim of a Pay-TV broadcaster is not merely to cover his incremental costs with incremental revenues, but to aim for a large enough excess of revenue to recover his sunk costs and fixed programming costs. Since viewers always have the choice of remaining with free-to-air television, and since alternative modes of Pay-TV carry many of the same programmes, high pricing is not a readily available strategy. The Pay-TV broadcaster must aim to balance price and volume in such a way as to optimise his revenue.

267. In addition to revenue from subscriptions a Pay-TV channel provider will earn some advertising revenue. The amount obtained from advertising will depend on audience figures which, in turn, are very much dependent on the broadcaster's success in obtaining subscribers. Over the period with which we are concerned it seems that advertising revenue has been comparatively small, because the subscriber bases of Pay-TV companies provide relatively small viewer numbers compared with the audience reach of free-to-air channels.

(iv) Differentiation and Exclusivity

268. What does a Pay-TV broadcaster need to do to attract a high volume of paying subscribers?

Dr William Bishop, an economist called as an expert witness by Sky, gave evidence that Pay-TV companies can only attract subscribers, who have the option of free-to-air television, by significantly differentiating their services from those of rivals. The main method of doing this is to acquire exclusive rights to a defined category of material. Exclusive rights are the main competitive tool used by Pay-TV broadcasters and to some extent by all broadcasters. Pay-TV broadcasters need them to persuade viewers to invest in set top box and to pay a subscription.

269. These contentions were borne out by most of the broadcasting witnesses and all of those with substantial Pay-TV experience. Some of the witnesses from free-to-air TV were less certain of the need for exclusivity in sporting competitions. To them sporting rights were attractive programming material but exclusivity might not be essential. We conclude that this difference of view was at least partly attributable to the factor, described by a number of witnesses, that free-to-air channels have limited capacity for sporting events because of their obligation to maintain balanced programming. All witnesses accepted that Premier League football had been a major contributor to the growth of Sky and other distributors who offered Sky Sports viewing.

270. Mr Victor Wakeling, who has been head of Sky Sports for many years, gave what seemed to us to be cogent evidence of the features which Sky and, in his view, all Pay-TV companies looked for in their purchasing and production to drive new subscriptions and retain existing subscribers. These features are listed in the headings set out below. Where it seems appropriate to do so we append to each heading an extract from Mr. Wakeling's witness statement.

(a) Differentiation;

"36. Programming, or event coverage, must be distinctive from that being shown by other broadcasters and, in the case of sports, differentiation is generally achieved by the grant of an exclusive right to cover a sporting event or competition. Using tennis as an example, if the rights to Wimbledon and the US Open were shared by a free-to air broadcaster and a satellite or cable broadcaster, there would be no incentive to a tennis fan (or a general sports fan) to invest in a subscription. They would simply settle for the free-to air service. It is fundamental to be able to deliver a clear programming proposition to potential subscribers. They must know where they can follow the complete tournament and watch their favourite players. The marketing message to potential subscribers is confused if you have less than total exclusivity to the events you propose to cover."

 

(b) Term;

"38. The length of the exclusivity is important for two reasons, namely to ensure that the event attracts subscribers to the channel and to ensure that, as a broadcaster, we can produce an adequate return from the programming."

(c) The popularity of the competition;

(d) The atmosphere generated by live events.;

(e) Timing;

"48. Viewers like certainty and are more likely to tune into a programme regularly if they know that it is broadcast at the same time each week so that they can make an "appointment to view". Sports which provide substantial quantities of broadcast time are better in this regard since you can create a weekly "appointment to view" by providing a regular diet of the sport (a game or match at the same time each week)."

(f) Quality of coverage; �

"51. ... It is important from the editorial point of view that the programming has a coherent and balanced content. In the context of live sports coverage, this may mean covering the entire event or competition or a selection of individual matches or games within that competition in a way which tells the story of the competition."

(g) A single seller;

"52. Purchasing rights which allow the broadcaster to generate programming to meet the above criteria is a complex and time consuming exercise. ... The broadcaster will obviously prefer rights which can be acquired simply and with the certainty of allowing the broadcaster to achieve the above features. This is most easily achieved with a single seller."

271. These principles were echoed by many other witnesses and we think that they accurately set out the main requirements of broadcasters generally. Many, though not all, sets of sporting rights are sold on an exclusive basis. They are thus valuable to a programme maker for differentiation purposes and more valuable to the organiser or group that sells the rights.

(v) Alternatives to exclusivity for live Premier League rights

272. The Director General contended that broad exclusivity (in the sense defined by Professor Cave) was not necessary for broadcasters' purposes. A form of narrow exclusivity would suffice to satisfy the proper requirements of broadcasters and would afford the Premier League clubs better value than individual selling of rights by the clubs. He suggested that two (or perhaps more) packages of rights, each giving the broadcaster exclusivity in the matches comprised in the package, might be sold collectively. Alternatively one package might be sold collectively by the Premier League, clubs individually being left free to sell further matches not comprised in the package sold centrally.

273. This suggestion was treated with caution by the witnesses we thought most convincing. They pointed out that the bidder for the first set of rights offered would be wholly uncertain what further rights would be sold, to whom they might be sold and how used for programming. This would inject such uncertainty into the transaction that the price would be substantially lower than that for an exclusive package. Pay-TV broadcasters would fear that some other matches might be shown on free-to-air television. They could not be sure that some of the separately sold rights might not be shown head to head with their own programme.

274. The possible consequences of splitting rights into separate packages was illustrated in 1998 when the Scottish Premier league sought to sell two separate packages of television rights to matches played in the Scottish Premier League, one package consisting of 30 live matches and the other of six live matches. Mr. Donald Emslie, managing director of the Broadcasting Division of the Scottish Media Group Plc ("SMG") which owns two of the three ITV franchisees in Scotland, said that his companies were not interested in the larger package of 30 matches because they did not have the capacity to broadcast that number of live matches. The larger package was bought by Sky for �44 million spread over four years. SMG would have been interested in the smaller package but was unwilling to pay the price of �350,000 per match demanded by the Scottish Premier League, although it did buy certain highlights rights. At the time when Mr. Emslie gave evidence the smaller package remained unsold. It seems likely that the price which Sky paid for the larger package was depressed by the fact that the smaller package was on offer and may yet be sold to another broadcaster. For the time being, however, Sky enjoys de facto exclusivity in the broadcasting of live Scottish Premier League matches without having had to pay an exclusivity premium.

 

275. Looking at the matter more generally, we consider that, from a broadcaster's point of view, Premier League football would generally make attractive programming and would always be worth having, but its value on a non-exclusive basis, or on the basis of narrow exclusivity, would be substantially less because it would have lost its differentiating power and would not satisfy the criteria which Mr Wakeling set out. It appears to us that diluting exclusivity for live matches would devalue the rights very substantially. It was contended for the Director General that this loss of value might be recouped if significantly more matches were sold. This is possible, but we think it unlikely. We shall look at it in more detail when we discuss the effect on price of loss of exclusivity and collective selling.

276. We conclude that Pay-TV broadcasters compete primarily on the differentiated characteristics of their channel content, and only secondarily on price. This is true of many other commercial markets where competitors strive to differentiate themselves. Price must always be a factor, but not the over-riding factor if the supplier can offer a product or service that differs in essentials from that of competitors.

 

(vi) The significance of differentiation in relation to the arguments about Sky's position in the market

277. One consequence of the view that competition in Pay-TV depends on differentiation is that some aspects of economic theory dealing with competition cannot readily be applied to this case. If products or services in a market place are homogeneous it may be possible to identify a competitive level of price and so determine whether a competitor in that market place is extracting excess profits by its strength in the market or by a monopoly position. In a market place where products are differentiated and thus heterogeneous both in nature and price, such conclusions cannot reliably be drawn.

278. Professor Cave sought to identify whether Sky was so dominant in its market place as to be able to impose onerous terms on other parties which would not otherwise be possible. The considerations set out in the previous paragraph seem to us to cause great difficulty both in identifying the appropriate market (because there is a risk of concluding that any differentiated product forms its own market) and in identifying a competitive price level (because competitive price levels can only be readily determined in homogeneous markets).

279. We were not convinced by Professor Cave's arguments and calculations in other respects. His argument, for example, that Sky had made excessive profits as a result of the restrictions was necessarily predicated on the implicit proposition that all of Sky's profits are derived from Premier League football. Sky has many other business operations besides those which depend on Premier League football. Mr. Wakeling produced statistics which show that out of 7776 hours of programming on Sky 1 in the period 1st March 1997 to 28th February 1998 only 203 hours (2.6%) were devoted to live Premier League football, including support programming.

280. It was urged in submissions on behalf of the Director General that the paramount importance of Premier League football to Sky was illustrated by the proportion it represented of Sky's spend in the year to June 1998. This was �165m out of a total of �287m spent on sports programming costs of all kinds, or about 57%. But as Mr. Sumption pointed out, Sky could be more sensibly regarded as having made its profit on those rights it had purchased at inexpensive prices, rather than on those which are expensive or, as he put it, "bought from less exacting and skilful sellers".

281. We think it important to maintain perspective in the discussion of the effect of Premier League football on broadcasting competition. While it is clear to us that Sky enjoys a very strong position in the provision of specialised sports channels, and that this position is attributable in part to its possession of the rights to Premier League live matches through the period of the two contracts, the arguments that this had improved, sharpened or enabled competition seems to us to be more convincing than the arguments that it has distorted or discouraged it. We return to these issues later.

(vii) Entry to the market

282. There was much discussion with witnesses as to whether it would be possible to develop a premium sports channel without Premier League rights. Some thought that this could be done, others that it could not. Such evidence as is available of actual attempts to do this lend no support to the view that Premier League rights are essential.

283. Thus in 1995 a group of cable companies planned a joint venture known as CPP-1 to create channels including a new sports channel. Its budget for acquiring sports rights was extremely low. In the end the venture did not proceed. The reasons for its collapse were not clearly established by the evidence, but it was not suggested that the lack of Premier League rights was one of them. Secondly, in 1997 a company named DTN made proposals to the ITC for a digital terrestrial licence. These proposals included the establishment of a sports channel. The application claimed that a British Sports Channel could succeed without Premier League rights. The project did not proceed because the ITC chose the ONdigital proposals instead. Thirdly, a company named Eurosport UK is developing a UK channel which is expected in due course to become a premium channel. There is some expectation that ONdigital will in due course set up a sports channel.

284. We heard no direct evidence that the failure of any alternative sports channel to appear earlier was directly due to the lack of Premier League rights. One obvious disincentive to entry is that Sky Sports is generally available to competing distributors. They told us that they had some reservations arising from Sky's heavy branding of its products. These reservations were accentuated by the fact that Sky is a competing distributor as well as a channel provider. But cable companies have always been distributors of other programme makers' branded products and we think that the reservations were somewhat exaggerated.

 

285. Two further points are worthy of mention in this context. First, the removal of the exclusivity clauses would mean that exclusive rights would no longer be available to a new entrant for use as a driver of subscriptions and a provider of a differentiated programme. If it be the case, as some of the witnesses whose evidence was favoured by the Director General seemed to think, that it is impossible to establish a new premium sports channel without exclusive Premier League rights, then the establishment of a new premium sports channel will become more difficult, if not impossible, as the result of exclusivity not being available.

286. Secondly there is a danger of regarding Sky as the only broadcaster which will ever have the right to broadcast Premier League matches. Certainly Sky is in that position now and, dependent on the outcome of this case, will remain there until the end of the 2000-2001 season. But in respect of subsequent seasons there must be new negotiations and new arrangements. It is impossible to say precisely what the Premier League will propose or broadcasters will be prepared to offer. It is possible that quite different arrangements will be made. But even if the broad framework remains unchanged, other broadcasters will be able to compete with Sky for a new contract. There are now more broadcasters than there were in 1992 and even 1996 and the advent of digital television means that they have more channels available to them. The evidence which we heard suggested that competition for a new contract from 2001 will be strong.

(vii) The competition specifically faced by Sky

287. Although it was argued on behalf of the Director General that Premier League football is unique and has no rivals as a driver for Pay-TV we find this hard to accept. There are certainly other attractive football rights available to television. Mr Wakeling was asked in the course of his evidence about the joint agreement, which had recently been announced, between ITV and ONdigital to cover the next four seasons of Champions League football at a price, he estimated, of �2.2 million per match. He described the Champions League as an extremely attractive competition. Asked how this affected the competitive position as between Sky and ITV and Sky and ONdigital, he said:

"As far as ITV is concerned, it makes it increasingly difficult for us to maintain our audience share. What has happened over the past two seasons in particular, and I think it is probably the advent of Channel 5, who have bought into a lot of European and international football, is that our audiences have declined. After four years of steady growth, last season we showed a 3 per cent drop in audience. So far this season, our audiences are down by 11 per cent, and what is happening, of course, is the public now are picking and choosing their matches. There is football available on television virtually every night of the week in some weeks through the season, and the football fan is picking and choosing which matches they choose to watch. So the immediate problem with ITV is a reduction in our audience share, which obviously impacts on revenue, through commercial sales.

As far as ONdigital are concerned, it gives them a competitive edge, in that in addition to Sky Sports 1 and 3, and the sports events that are carried on those two channels, they now have something else to market, and I am sure they will do when the Champions League begins next season." (Day 19, pages 9-10)

288. This evidence also bore out the contention that free-to-air television is a powerful part of the competition faced by Pay-TV channels. Additionally it raised the question, though the point was not pursued in the evidence we heard, whether the decline in Sky's audience was a sign that it has achieved the penetration available to it from existing programming, including Premier League football, and will need to resort to new strategies to maintain or increase its audience share. There are undoubtedly other factors at work. Mr Chance said (Day 21: 102)

"Because Sky was aware that digital was about to be introduced, clearly there was a growing degree of caution about the amount of expenditure it should make on driving analogue dish sales, knowing that the digital platform was about to be launched."

Other witnesses described the competition and loss of market share being experienced by Sky. Dr Bishop provided statistical data (Bundle 180 pp 79C-79F). Mr East, the deputy managing director of Sky Sports, said that Sky's audience share this year for Premier League had dropped by 11 per cent as a result of the amount of live football on terrestrial channels.

289. Although much was made in the evidence and submissions of the power of Premier League rights and the ascendancy which Sky had gained from them, we find it necessary constantly to remind ourselves that the audience for sports channels remains a relatively small part of television audiences, that there are many powerful distributors in the market place showing other programmes of wide appeal, and that, as Mr. Michael Grade, who has held senior positions in the BBC, ITV, and Channel 4, agreed in cross-examination (Day 23, page 63):

"the result of the challenge posed by the rise of Sky and the response of the terrestrial broadcasters has been that there is more first class football available than ever before, not just on television generally, but specifically on free-to-air terrestrial television"

 

(viii) Exclusivity and recorded broadcasting of football matches

 

290. It is easy to slip into the habit of treating the broadcasting of highlights as the only alternative to the broadcasting of a live match. In reality, once one leaves aside the broadcasting of a match as it is played, the possibilities for types of programming are wider than the term "highlights" may suggest. They range from the delayed transmission of a recording of the whole of the match, through such possibilities as a comprehensive highlights programme such as the BBC's Match of the Day (which itself includes a mixture of extended highlights and shorter items), to a variety of possible magazine programmes, perhaps concentrating upon a particular club or region. We shall therefore avoid the use of the term "highlights" in this part of our judgment and refer instead to the broadcasting of "recorded football".

291. To a considerable extent what we have said about a broadcaster's need for differentiation, and hence exclusivity, applies both to broadcasters of live matches and to broadcasters whose programmes consist of recorded football. There is, however, the important, if obvious, distinction between the two, arising from the fact that, while a live broadcast can only be made as the match is played, the recording of a match, whether in full or edited form, can be made at any time after, and possibly long after, the match is played. Exclusivity in the broadcasting of recorded football, unless confined to a limited period, thus has a somewhat different effect from exclusivity in the broadcasting of a live match. We think it would be wrong to speak of one being more restrictive than the other. One broadcaster's exclusivity in respect of a live match means that the opportunity for another broadcaster to broadcast that match live is destroyed for ever, and in a sense nothing could be more restrictive than that even though it may make good sense commercially and even from the point of view of the public. But indefinite exclusivity in recorded material means that no other broadcaster can use the recorded material for any purpose, however different his intended programme is from that of the broadcaster with exclusive rights and however long afterwards he proposes to broadcast it.

292. The effect of the Sky and BBC Agreements is such that Sky has the exclusive right to broadcast live Premier League matches and Sky and the BBC have between them the exclusive right to record Premier League matches for future broadcasting in accordance with the terms of those Agreements. During the term of the Agreements no other broadcaster is to be permitted to attend Premier League matches for the purpose of recording them and using the recordings in future broadcasts; and no other broadcaster may be granted a copyright licence to use in a broadcast recorded material the copyright in which is vested in the Premier League. Thus the Agreements operate in a way which prevents any other broadcaster broadcasting recorded Premier League football in any way until after the end of the 2000-2001 season, whether or not the intended use of the recorded football material would adversely affect Sky or the BBC. It is, we think, possible to envisage ways in which such material might be used without having such an adverse effect.

293. We think that Mr. Will Wyatt, who has been with the BBC since 1965 and is currently Chief Executive of BBC Broadcast, one of the five directorates into which the BBC is now divided, accepted, albeit with some caution and subject to some reservations, that the degree of exclusivity which the BBC now enjoys exceeds what it really requires. We cite the following passage from his cross-examination by Mr. Parker:

"Q. I am certainly putting to you, Mr Wyatt, if that were the hypothesis, that you would have reasonable confidence that you could put up Match of The Day in its present format and obtain a very large audience indeed; very similar to the audience you obtain at the moment, if the only possible competitor was going to be a subscription service for which the customer would have to pay?

A. I would certainly approach it with that hope, certainly, yes.

Q. And if I moved it one stage further and gave you exclusivity, not only in relation to a subscription channel but quite generally, so terrestrial, free-to-air and subscription channels cannot put on a competing highlights programme before, let us say, 1 am on Sunday morning, what would you have to fear in those circumstances, Mr Wyatt?

A. I guess there comes a point somewhere between where we are now and somewhere else, in terms of a window, where one would say, well, actually, if someone wanted to do that, that would not be a problem. I would not necessarily say that 1 o'clock on a Sunday morning was that space, but you could say at some point, if there were broadcasters who had commercial propositions to the Premier League to buy some other package of highlights rights, there would be a point at which one would say, well, that is probably all right.

Q. Quite clearly, that would be a far less restrictive position than the one currently prevailing, because it would mean that highlights could be exploited after your time window of 1 am on the Sunday morning, or 7 pm on Sunday, by other broadcasters, club channels, fanzines; all the things we have heard about in this court could be developed later on in the week without affecting your programme at all?

A. At some stage, if someone could make that stack up as a business ... I certainly would not rule that out.

Q. At the moment we have the absolute restriction that it is ruling out these possibilities, however significant you say they may be in the market and I am suggesting that a far less restrictive arrangement which would give you the ability to put on exactly the programme that you do at the moment with exactly the same type of audience could be implemented?

A. We have a bundle of rights which, when we negotiated them, were the ones which were on offer to my knowledge at that time. There was no significant challenge to other highlights rights, thus, that is the contract we have and thus, one starts off with the premise, we would like to protect that. If there are other propositions which come forth, then clearly we would consider them."

 

294. We think that this frank and wholly credible series of answers by Mr. Wyatt illustrates the fact that, while blanket exclusivity may be appropriate to the broadcasting of a live match, which is essentially a transitory event, somewhat different considerations may be relevant to a broadcast of recorded football, which can be so arranged that it does not significantly impinge upon another broadcaster's offering of similar material.

295. We add in passing, although it is really a matter which comes into our consideration at a later stage, that there is an additional aspect to the broadcasting of recorded football, namely that it is to be expected that a broadcaster will, at least to a substantial extent, make use of recorded material belonging to someone else rather than make his own recordings. But what he needs in order to do this is not to receive a service from Premier League clubs but to be given a copyright licence by the owner of the copyright in the recorded material. As we have already mentioned, a restriction on the grant of such a licence is not within the 1976 Act and there is nothing which we could do in these proceedings which would remove such a restriction.

 

 

(B) Do Rule D.7.3 and the exclusivity clauses pass through Gateway (b)?

296. As it is some time since we set out the wording of this part of the 1976 Act we think we had better do so again. So far as material, what the respondents have to show in relation to each restriction is

"(b) that the removal of the restriction ... would deny to the public as users of any services ... specific and substantial benefits or advantages enjoyed or likely to be enjoyed by them as such, whether by virtue of the restriction ... itself or any arrangements or operations resulting therefrom;"

297. Surprising though it may be in respect of a provision which has been much relied upon in the 40 years or so since it was first enacted in relation to restrictions concerning the supply of goods and which is now in its last days of life, there was some argument about precisely what comparison this paragraph requires the court to make. It was argued on behalf of the Director General that, in order for a restriction to be steered through this gateway it must be shown that it is no wider than is reasonably necessary to enable the relevant benefit to be enjoyed. The argument was put in two slightly differing ways.

298. Mr. Parker, who made the closing submissions on the law on behalf of the Director General, referred to the language of some of the other paragraphs of Section 19. Thus paragraph (a) requires it to be shown that the restriction is "Reasonably necessary ... to protect the public against injury"; Paragraph (c) requires that the restriction is "reasonably necessary to counteract measures" taken by another person; paragraph (d) refers to the restriction being "reasonably necessary" to enable the parties to the agreement to negotiate fair terms; and so on. Mr. Parker submitted that this reflects the requirement of the common law doctrine of restraint of trade that a restraint shall be no wider than is reasonably necessary in the interests of the parties and in the public interest. He contended that a requirement of reasonableness is implicit in gateway (b) as well. The court should therefore follow what was said in the following passage from the judgment in Re Water Tube Boilermakers' Agreement [1959] 1 WLR 1118 at page 1143:

"It seems to us clear that the rule as it stands is not reasonably necessary for that purpose, for the simple reason that it applies not only to contracts with the Electricity Board but to all other contracts for home industrial boilers and all contracts of every kind situate in a large number of overseas territories. It is in fact quite unnecessarily wide. It is said that if rule 5 is to operate only in connection with Electricity Board orders, it will be operated so seldom that it will not fulfil its purpose of enabling members to judge of the general level of prices. We cannot accept this argument. Under this paragraph the object of the rule is not to enable members to obtain knowledge of the general level of prices, but to negotiate fair terms with the Electricity Board. Therefore, the application under paragraph (d) fails upon this ground."

 

299. That case, as the passage cited indicates, concerned an attempt to steer a restriction through gateway (d), so the requirement of reasonableness did not have to be imported. Mr. Parker sought also to obtain assistance from Re National Sulphuric Association Ltd's Agreement [1963] 3 All ER 73 at page 92. The passage cited there does suggest that the Registrar (the predecessor of the Director General) raised an argument under gateway (b) which was similar to the Director General's argument in this case, but the observations of the court were, we think, confined to paragraph (d). Mr. Parker cited the recent decision of the House of Lords in Associated Dairies Ltd v Baines [1997] AC 524, where reliance upon fine differences in language were held not to justify a difference in meaning in this legislation, but we do not find that principle of much help in relation to the argument we have to consider. Finally Mr. Parker referred us to an extract from the parliamentary debate which took place during the committee stage of the passage of the Bill which became the Restrictive Trade Practices Act 1956, the predecessor of the 1976 Act (Hansard 3rd May 1956, col 628). We find this extract wholly inconclusive and obtain no assistance from it even if material of this kind is admissible for the purpose of construing the provision, which, on a proper application of what was said in Pepper v Hart [1993] AC 593, we doubt.

300. Another way of putting what appears to us to be substantially the same argument was adopted at an earlier stage by Mr. Vos. He referred to Section 26 of the Competition Act 1980 under which the court has power to consider a revised agreement and to declare that the restrictions contained in it are not contrary to the public interest. Mr. Vos submitted that the result of the existence of this power is that, if the court considers that to abrogate a restriction completely would deprive the public of some benefit or advantage but considers also that the same benefit or advantage could be secured by a less stringent restriction, its proper course is to strike down the original restriction, leaving the parties to formulate and agree upon an appropriate, less stringent, restriction and to ask the court to approve it under Section 26.

301. Mr. Vos submitted that this is what had been done in respect of one of the restrictions considered in Re Association of British Travel Agents Ltd's Agreement [1984] ICR 12 ("the ABTA case"). There the court said (at page 45):

"[W]e are satisfied that the financial protection afforded by the new article 8 of the ABTA articles of association is necessary and a benefit to the consumer who buys at the door. We further believe that it is impossible for a first time (and perhaps once only) intending holidaymaker to test the reliability and competence of a salesman until the holiday is spent, and then it is too late. Accordingly, some qualification and experience is necessary, but the present requirements go well beyond what is necessary if such a representative is to be helpful and well-informed in the sale of these arrangements. The precise formulation of the surviving qualification restrictions will require further submission by counsel and consideration by the court."

302. The court declared the restriction accepted under the relevant article to be contrary to the public interest. Later ABTA applied to the court under Section 26(1) for a declaration that the restriction accepted under a revised article would not be contrary to the public interest. The decision of the court on this application is reported at [1985] ICR 122. It seems that there was some discussion and negotiation in the face of the court as to the precise terms of the new article, but in the end a form was evolved which the court was prepared to declare not to be contrary to the public interest.

303. Although the ABTA case provides an example - the only one so far - of the practical application of Section 26, we do not regard it as qualifying the impact of Section 19 of the 1976 Act in general or gateway (b) in particular. It appears to us that what the court did was to consider whether the relevant restriction was or was not in the public interest and, having concluded that it was not, it condemned it. But as it had become apparent to the court that a beneficial object could be achieved by a modified restriction it drew attention to that fact, as it were by inviting an application under Section 26. We do not find in the ABTA case anything to suggest that the existence of Section 26 caused the court to condemn under Section 19 a restriction which would not have been condemned if Section 26 had not been enacted.

304. In our judgment the effect of gateway (b) is clear from its language. What the court has to compare is, on the one hand, a world in which the relevant restriction exists and is given effect to and, on the other hand, a world in which no restriction at all is accepted in respect of the relevant subject matter. If the transition from the first world to the second would "deny to the public as users of any services ... specific and substantial benefits or advantages ... enjoyed by them ... [either] by virtue of the restriction ... itself ... or any arrangements or operations resulting therefrom" then the restriction passes through gateway (b).

305. When one comes to the tailpiece, of course, the test is rather different. What the court has to consider is whether or not it is satisfied that the restriction is "not unreasonable" having regard, in effect, to the balance between benefits and detriments arising from the restriction. But even at this stage Section 26 does not come into the matter. This is apparent both from the fact that Section 19 was enacted, and thus acquired its meaning, before Section 26 was passed and from the fact that Section 26, far from modifying the terms of Section 19, is only available where the court, having considered the issues in accordance with the criteria prescribed by Section 19, has declared that a restriction is contrary to the public interest.

The "denied benefits" relied upon for the purpose of gateway (b)

306. As the language of gateway (b) makes clear, what the court has to consider is whether the respondents have shown that the removal of the restriction would deny to the public "specific and substantial benefits or advantages" enjoyed or likely to be enjoyed by virtue of the restriction or consequential arrangements. A good deal of the argument before us proceeded on the basis of considering the converse question, namely whether particular benefits or advantages result from the existence of the restrictions. While we accept that if a benefit or advantage does not result from the restrictions it is irrelevant for the purposes of gateway (b), we find it unhelpful to examine the converse question. As in all our previous discussion we confine ourselves at this stage to Rule D.7.3 and the exclusivity clauses, although as will appear some of the lost benefits we shall evaluate are attributable to one of these categories of restriction rather than the other.

307. We propose first to list the benefits or advantages which, it is said, would be lost if either or all of Rule D.7.3 or the exclusivity restrictions were abrogated. This list is based on the pleadings and the submissions of counsel, but as there was a considerable degree of overlap between the cases of each respondent we have thought it right to carry out a certain amount of paraphrasing and consolidation. After listing the full range of benefits or advantages we shall consider each of them individually.

(1) If Rule D.7.3 were abrogated the ability to sell television rights in the product which both broadcaster and customer want - namely the Premier League championship as a whole - would be lost or substantially diminished.

(2) If Rule D.7.3 and/or the exclusivity clauses were abrogated the Premier League clubs would lose the ability to generate the revenue needed to improve the quality of their stadia, their facilities and their players and do other things of benefit to the public. Correspondingly the value of the rights acquired by Sky and the BBC would be much less than was agreed to be paid for them. If the Sky and BBC Agreements were now annulled or adjusted to reflect the true value of what Sky and the BBC obtained the Premier League would suffer an immediate loss of income.

(3) If Rule D.7.3 and/or the exclusivity clauses were abrogated the ability of the Premier League to achieve an equitable distribution of television revenue to the benefit of competitive balance would be lost.

(4) If Rule D.7.3 and/or the exclusivity clauses were abrogated the ability of the Premier League to confer benefits on football outside the Premier League would be lost or seriously diminished.

(5) If Rule D.7.3 were abrogated the ability of the Premier League to minimise detriments to scheduling and attendance would be lost or seriously curtailed.

(6) If Rule D.7.3 were abrogated the ability of the Premier League to secure the continuing participation of member clubs in the Premier League and thus the provision of the Premier League championship would be lost or severely diminished.

(7) If Rule D.7.3 and/or the exclusivity clauses were abrogated the ability of the Premier League to maintain and improve the quality of and interest in football in England and the quality and size of the pool of talent available to represent England internationally would be diminished.

(8) If the exclusivity clauses were abrogated the necessary consequence would be that no broadcaster could be given exclusivity in Premier League football on television, whether live or as highlights. Competition between broadcasters, which is beneficial to the public, would therefore be impeded, not encouraged.

(9) If no broadcaster can have exclusive rights in Premier League football on television this will result in the inefficient use of resources by broadcasters and a duplication of costs and will impair the quality of coverage and the continuity and regularity of the scheduling of television programmes based on Premier League football.

 

308. We now turn to the evaluation of these contentions, prefacing each section of our consideration with a sub-heading which repeats the relevant contention or the substance of it.

 

(1) If Rule D.7.3 were abrogated the ability to sell television rights in the product which both broadcaster and customer want - namely the Premier League championship as a whole - would be lost or substantially diminished

309. The substance of this contention is that (i) the continuance of Rule D.7.3 is essential to the continuance of the collective selling of television rights; (ii) the collective selling of television rights is the only, or at least the best, means of enabling broadcasters to broadcast and viewers to see matches which are representative of the Premier League championship as a whole; and (iii) this is what broadcasters and viewers both want.

310. As to (i), although Rule D.7.3 does not itself provide for collective selling of television rights we think it does provide essential underpinning for collective selling. It must be assumed, we think, that without Rule D.7.3 in place a solution of some kind would be found to the difficulties which stand in the way of the selling by individual clubs of the television rights in their own matches. Certainly the whole of the Director General's case that this would be preferable to collective selling is predicated on that assumption. But we see no way in which collective selling and individual selling could exist side by side in the absence of a regime which defines what may be sold collectively and what may be sold individually. We find it impossible to see how such a regime could be established without, to some extent or another, re-imposing some restriction on individual selling. It may be that a restriction which is less all-embracing than Rule D.7.3 could be devised, but it is by no means obvious what it would be. The Director General's suggestion that the television rights in Premier League matches might be divided into separate packages which would leave some room for individual selling is one which (except possibly in relation to the sale of PPV rights, which we mention when dealing with detriments) we found to be unattractive for the reasons we have indicated. Gateway (b) requires us to assess whether benefits or advantages would be lost if a particular restriction were "removed", which we interpret as meaning "abrogated and not replaced". We do not think it is for us to speculate how it might be partially replaced or whether a partial replacement would be approved under Section 26 of the Competition Act. We accept, therefore, the first step in the argument.

311. As to the argument that collective selling enables broadcasters and viewers to have matches which are representative of the Premier League championship as a whole, we observe first that, although it is convenient for certain purposes to distinguish between broadcasters and viewers, for the purposes of gateway (b) benefits to one category are neither more nor less important than benefits to the other. What gateway (b) requires to be considered is the loss of benefits to "the public as users of any services". Viewers are clearly users of services, the services in their case being either the broadcasting services provided by broadcasters or, indirectly through the medium of television, the football entertainment services provided by the clubs which participate in each match. Broadcasters are also the users of services, namely, for the reasons we have already stated, the football entertainment services provided by the clubs. In their case the inclusion amongst "users" of services of persons using for the purpose of trade or business (see Section 19(2) of the 1976 Act) is relevant. We would add, lest we appear to have forgotten them, that spectators who attend matches are also users of football entertainment services, but it is not said that they would lose the particular benefit or advantage now under consideration.

312. Collective selling is certainly one means of providing for such users of services a selection of matches which is representative of the Premier League championship as a whole. Is it the only or best means of achieving this and would a better means be available if collective selling were no longer allowed? We do not think it can be said to be the only means. If the television rights in Premier League matches were sold individually by clubs it would technically be possible for a broadcaster to buy up the television rights in all such matches or in a sufficient number of them to enable a proper selection to be made for broadcasting according to the development of the championship during the season. But the uncertainties and transaction costs involved in this process would make it unattractive to broadcasters and if they did not attempt to embark upon it, or were unable to accomplish it successfully, viewers would suffer as well. We think that collective selling provides a good means of enabling a broadcaster to show, and viewers to enjoy, a series of broadcast matches which is, so far as any selection can be, representative of the championship as a whole. No better means has been put forward. The free-for-all which would result from uncontrolled individual selling would not, in our view, represent an improvement from the point of view of either broadcaster or viewer. If, therefore, television broadcasts of live matches are to consist of a selection of the total number of matches which are played, we consider that collective selling constitutes the best method of ensuring that the matches which are broadcast constitute a representative selection which takes account of the progress of the championship during the course of a season.

313. Is this what broadcasters and viewers want? There seems to be no doubt that under collective selling a broadcaster can and will be found for a right to select and broadcast the sixty matches per season which have been sold to Sky. It is probable that one could be found for the ninety matches which Sky indicated in 1996 that it would like to have; and it is possible that there would be a purchaser for whatever number of matches the Premier League, as collective seller, might be prepared to sell. Would broadcasters and viewers prefer to have a larger number of matches and, if so, would they be likely to be available under a system of individual selling? We find the latter question easier to answer than the former. As we have indicated, we think that, in the absence of collective selling, popular clubs would be able to sell more of their matches than are currently shown on Sky. Less popular clubs would have greater difficulty, but they would be under pressure to drop their prices in order to obtain sales and would probably seek to sell more matches in order to maintain their revenue. There would thus be a tendency for the number of Premier League matches shown on television to increase. It seems unlikely, however, that the television rights in all 380 Premier League matches would be sold and if they were sold they would be unlikely to be sold to a single buyer. An increase in the number of matches shown live on television would not necessarily help to give a representative sample of the Premier League championship as a whole, particularly if more than one broadcaster is involved and, the broadcasters in question being almost certainly Pay-TV broadcasters, viewers were faced with the need to install a second set-top box and pay a second subscription in order to receive full coverage.

314. While there will always be some people who would prefer more Premier League football on television than they now receive, no viewer is likely to have sufficient viewing time available to watch all 380 Premier League matches, even supposing them to be available. We did not discern in the evidence any real discontent at the amount of coverage for live Premier League football under the present arrangements. Fan surveys conducted by the Premier League clubs indicate the reverse. We do not think that in a matter of this kind "more" is necessarily equivalent to "better". The realistic position, it seems to us, is that most viewers will want, and be able, only to see a selection of Premier League matches and that, bearing in mind such factors as Mr. Wakeling's evidence about an "appointment to view" they will prefer to have this selection provided by a single broadcaster who is able to select the matches which are to be broadcast from the whole range of Premier League matches which are played.

315. We therefore conclude that, if Rule D.7.3 were abrogated this would lead to the collapse of collective selling, which is the best, albeit not the only, means of providing television broadcasts of matches which are representative of the Premier League championship as a whole, which in turn is what the public, in the form of broadcasters and viewers, wish to have. This would, in our view, diminish a benefit or advantage now enjoyed under the present arrangements and thus, in the language of gateway (b), "deny" such benefit or advantage to the public to the extent that it is now enjoyed by them.

(2) If Rule D.7.3 and/or the exclusivity clauses were abrogated the Premier League clubs would lose the ability to generate the revenue needed to improve the quality of their stadia, their facilities and their players and do other things of benefit to the public.

316. We have already discussed the effect on the price of television rights of the loss of the ability to sell those rights collectively and to give exclusivity to the purchaser. For the reasons we have stated, we consider that there would be a considerable diminution in value, the more so if both collective selling and exclusivity were outlawed. We are not satisfied that the resulting diminution in the price which a broadcaster is prepared to pay could be made good by selling the right to broadcast a greater number of matches, except possibly in the case of some large and successful clubs.

317. We accept also that there would be a diminution in the value of the rights which Sky and the BBC already have under their 1996 Agreements with the Premier League. They have paid for exclusivity but, if the exclusivity clauses are rendered unenforceable (as they would be if this court declared them to be contrary to the public interest) they would not enjoy it during the remaining two seasons in which the 1996 Agreements are to run. They may, for a time, enjoy a measure of de facto exclusivity because this court cannot compel the Premier League or its clubs to sell the television rights to more matches to other broadcasters, but that is not what they bargained for.

318. During the hearing we invited the parties to consider what would happen under the 1996 Agreements if the exclusivity clauses were rendered unenforceable. Not surprisingly Sky and the BBC were unable or unwilling to say precisely what they would do in that event. We, of course, are unable to decide what the rights and remedies of the parties would be, but we think we must take some account of the possible outcomes.

319. So far as Sky is concerned, Mr. Sumption reminded us of Clause 17.2 of the Sky Agreement under which Sky has an express right to terminate the Agreement

"at any time after any judgment ruling or decision is made or given by any competent court or authority to the effect that the grant of the Rights to BSKYB pursuant to Clause 2.1 is unlawful void or unenforceable in whole or in part."

As the rights granted by Clause 2.1 were expressed to be exclusive it seems likely that this right of termination would be available to Sky in the event postulated. The contractual consequences of the exercise of such right appear to be somewhat complex and it cannot be certain that Sky would choose to exercise it. It might prefer to rely on the common law doctrine of frustration of contracts. Alternatively it might seek to renegotiate the 1996 Agreement in some way. In any of these events it is likely that the payments to be made by Sky to the Premier League would be significantly reduced, with the result that the Premier League would suffer an almost immediate fall in revenue. Only if Sky chose to continue with the 1996 Agreement without exclusivity would the income of the Premier League remain undiminished during the next two seasons.

320. The position of the BBC is slightly different, in that it does not have an express right of termination equivalent to that given to Sky. It may also be that the case of the BBC under the common law doctrine of frustration would be less strong than that of Sky. But there must, we think, be a significant prospect that the payments to be made by the BBC during the next two seasons would, as the result of litigation or negotiation, be reduced.

321. We consider therefore that the television income of the Premier League, and probably also the television income of most of its member clubs, will be significantly diminished if Rule D.7.3 and the exclusivity clauses, or any of them, are rendered unenforceable. While there was some suggestion that this reduction in income might be made good from other sources, notably merchandising which for some clubs has become an important source of revenue, we were not satisfied of this. We think that clubs are already seeking to generate as much income as they can from sources other than television and, although they will doubtless continue their efforts in this respect, it is not to be expected that large increases will be obtained.

322. The clubs will thus have less income to spend. The question we have then to consider is whether this will make them substantially less able to achieve things which constitute a benefit to the public. This makes it necessary for us to consider such matters as how they have spent their income in the past, whether this has been such as to provide benefits or advantages to the public, whether it is likely to be continued in the future if the television income of the clubs is maintained and whether it is likely to be curtailed if the television income is diminished.

323. The types of expenditure which have been identified by the Premier League as conferring benefits or advantages on the public are the sums deployed in the improvement of stadia and facilities and in the improvement of playing squads.

324. So far as expenditure on stadia is concerned, this has undoubtedly been very large. Mr. Osborne calculated that between 1988/89 and 1996/97 the total expenditure on stadia by clubs which are or have been members of the Premier League was �463 million, of which the bulk, nearly �400 million, has been laid out since 1992/93, that is to say after the formation of the Premier League and the making of the 1992 Agreement with Sky. There are wide differences in what individual clubs have done. Some have moved to entirely new stadia on new sites. Others have constructed new stands and other facilities at their old grounds. A few have, for one reason or another, done little more than was required to comply with the requirements of the Taylor report. Many of the Premier League clubs now have stadia which are of very high quality, such as to rival the standards reached by any club grounds in Europe or elsewhere in the world.

325. It seems that only a comparatively small proportion of the total expenditure on stadia has been met directly out of current income. We heard a great deal of evidence from representatives of a large number of clubs about how they have financed the work they have done. Generally this has been achieved by means of grants (particularly from the Football Trust) and loans from commercial lenders. In a few cases a club has benefited from gifts or loans on generous terms from a rich benefactor. A public flotation has for some clubs raised a substantial sum. No club seems to have had an easy time in raising the money it required, and for some the struggle has been severe. While for some clubs the availability of income from television had no impact, or only a very limited impact on the decision to build a new stand (the Director General cited the evidence of Mr. Kind of Leicester City, Mr. Davey of Notts County and Mr. Binns of Huddersfield Town as examples of this) we were more impressed by the evidence of those clubs for whom such availability was important. We find it impossible to suppose that work would have been done on the same scale without the large sums which were in fact available from the television contracts. Moreover there was evidence, which we accept, that the availability of an assured stream of income from television is an important, and sometimes crucial, factor in the decision of a commercial lender whether or not to lend money to a particular club and how much to lend.

326. An attempt was made on behalf of the Director General to qualify this picture in a number of ways. It was said, for example, that for almost all Premier League clubs the work required to be done by the Taylor report had been completed by August 1994, when the television money for only two out of the five seasons covered by the 1992 Agreements had been received and well before anything was received as the result of the large increase agreed in 1996. In general terms this is true and it is also true that the clubs have incurred expenditure on projects going well beyond anything required by the Taylor report. But we find it impossible to draw any substantial distinction between Taylor and non-Taylor improvements so far as public benefit is concerned. It is clear, we think, that the improvements required by Taylor (mainly all-seated stands and improvements in basic facilities such as toilets) are of benefit to the public as football spectators. We would accept also that a purely commercial development unconnected with football, such as a hotel or supermarket which some clubs have incorporated in their projects, are not to be regarded as providing a benefit to the public for the purposes of gateway (b). But between these two extremes there exists a wide variety of improvements which have been carried out by Premier League clubs the provision of which amounts, in our view, to the provision of a benefit to the public. These include items such as bars, restaurants and other amenities, all of which are intended to make it more attractive to spectators to attend matches and support the club in more general ways. Mr. Vos cited to us a statement made by Mr. Sheepshanks of Ipswich Town (formerly a Premier League club but now in the first division of the Football League) in the Evening Standard on 22nd December 1997. Mr. Sheepshanks said:

"our future is in the entertainment business and that means providing what our customers want, when they want it and how they want it."

327. We think that this is true but that it tells more in favour of than against facilities of the kind we have mentioned being beneficial to the public. We are unable to accept the submission of Mr. Vos that the public has not enjoyed substantial benefits from what he called "cosmetic improvements to stadium ambience, or commercial facilities ... that are incidental to the enjoyment of the primary football entertainment services provided by the clubs to fans". We think that it has.

328. Another line of attack was that much of the clubs' expenditure has been self-financing. Certainly much of it has been income-producing. Even such an important improvement as a new stand will be income producing if, as will usually be the case, it enables the club to charge a higher price for seats at its matches. Mr. Patient suggested that much investment by the clubs had been income producing to the extent that it was self-financing. We did not find the figures on which this suggestion was based to be at all conclusive. But the point is only material if it were to point to the conclusion that the same investment would have taken place even if there had been a substantial reduction in television income. In our view it does not do so to an extent on which we can rely.

329. Turning now to expenditure on players, there is no doubt that all Premier League clubs have spent and continue to spend large sums on purchasing players from other clubs, in the United Kingdom and abroad, and in paying high wages and salaries to their players. There can equally be no doubt that the object of the clubs in spending so much in this way is to strengthen their playing squads. Whether and to what extent the clubs have attained this object is a matter of debate. It is, however, the case that, with the benefit of television revenue Premier League clubs can now compete in a world market for the best players. While many factors other than money must contribute to the building of a strong and successful playing squad, a shortage of money must tend to make it more difficult to do this.

330. A number of points were made on behalf of the Director General in relation to the clubs' expenditure on players. First, responding to the claim of the Premier League that there has been an influx of top foreign players into the Premier League since 1992, the Director General has cited statistics which indicate that the main influx of foreign players has occurred since 1996 and is more likely to be attributable to the ruling of the European Court of Justice in the Bosman case (see Union Royale Belge des Societes de Football Association v Bosman , Case C-415/93) than to the availability of television income. It was also said that many of the new foreign players are more aptly described as journeymen than as top international stars. These things may be true. The court cannot form a view about them. But it seems to us that the real point is not whether an influx of foreign players has improved playing quality but whether the availability of more money to spend on players is likely to enhance playing standards. As to this, talent as a football player is, like most other talents, something which is in short supply and where, as in football, this talent is competed for in a world market, it must be advantageous to be able to participate in that market with ample funds. Conversely, to attempt to compete with inadequate funds is likely to produce a less good result so far as player quality is concerned.

331. Much the same goes for expenditure on players' wages. Certainly this expenditure is high and has increased rapidly in recent years. Some players are able to obtain from their clubs salaries which seem very high indeed and there have been large increases in the remuneration of players at all levels in the Premier League. But there is nothing at all to suggest that the clubs pay high salaries simply as a matter of largesse. Many of them are seriously concerned at the level of remuneration which they have to pay. They pay it because they are competing in a world market for playing talent. If clubs were unable to pay the salaries demanded by the top players the tendency would be for such players to seek transfers to other clubs, possibly outside the Premier League, which would satisfy their demands. Top foreign players would also be less willing to join Premier League clubs if those clubs were unable to pay the remuneration they could obtain elsewhere.

332. In all the circumstances we are satisfied that the maintenance of strong playing squads which include some of the best players in the world provides a substantial benefit to the public as spectators and supporters of football and that this benefit would be diminished to a significant extent if the income of the clubs were reduced in the way that we think would happen if Rule D.7.3 and the exclusivity clauses were abrogated.

333. One other activity of Premier League clubs requires consideration, namely their establishment of football academies. We heard evidence that many clubs have in recent years established football academies for the development of footballing talent among young people and their more general education. The main purpose of such academies is to bring on the skills of young players in the hope that the club will be able to rely to an increased extent on home-grown talent. As Mr. Ansell of Aston Villa put it:

"The academy is not income-generating. Hopefully it will be future player-generating." (Day 17, page 72)

334. We think it is fair to say that the football academies are of public benefit, both by reason of their expected contribution to the strength of a club's playing squad and the health of English football generally and because it is generally of benefit that young people are encouraged to develop their potential. Academies are, however, expensive to establish and run. We were given the figures for the initial outlay and ongoing costs incurred by several clubs in connection with their academies and they are substantial. In most, if not all, cases clubs have found it necessary to establish their academies at locations away from their main playing stadia, which tends to increase initial costs. We think that there would be a tendency for expenditure on football academies to be reduced if the television income of Premier League clubs were reduced, although the self-interest of the clubs would place a brake on this tendency. There would thus be some loss of benefit to the public. Viewed in isolation it might not be very great, but the aggregate of this and the other matters which we have considered would, in our judgment, be substantial.

335. A factor which weighs with us is that Premier League clubs do not make large profits. This is certainly the case if one takes the accounts of the clubs in the form in which they have hitherto been prepared. Mr. Patient proposed that these accounts should be adjusted by capitalising the fees paid on the transfer of players instead of treating them as paid out of revenue (or credited to revenue in the case of transfer fees received) in the year in which they are incurred or received. This may be correct in terms of proper accounting practices, although we share Mr. Osborne's reservations about the reliability of the figures so arrived at for the purpose of showing the true financial position of the club. But we accept Mr. Osborne's comment (in his third report, at para 3.5) that the figures show that

"for the majority of the clubs, even on the basis of accounting suggested by Mr. Patient, returns are well below 10% and for a significant number returns are negative. Figures at this level would be regarded as low by commercial standards, and insufficient to provide adequate shareholder returns."

336. Hand in hand with this fact is the fact that, even though a number of Premier League clubs are now public companies, they are not said to have paid substantial dividends or distributed their income to shareholders or directors in other ways. Matters might stand very differently if they had. But virtually the whole of their income has, in substance, been ploughed back into their enterprises, with the object of strengthening their participation in the Premier League competition, so enhancing the competition as a whole, and improving facilities for the enjoyment of their spectators and supporters.

337. We have to ask ourselves whether this state of affairs will be likely to continue. On the whole we think it likely that it will. Expenditure on the acquisition and remuneration of players is likely to continue at a high, and probably increasing, level, despite the efforts of some clubs to contain it. It may be that new expenditure on stadia and facilities for the public will tail off, on the basis that the clubs will have made all the improvements that it is sensible to make. We heard little or no evidence about this. We had some anxiety that a reduction in the need to make further improvements might encourage some clubs to distribute more of their income as dividends. But most clubs will, we think, remain fully committed financially in servicing and paying off the indebtedness they have incurred in order to make the improvements already carried out. Generally we are satisfied that the clubs' income will be expended in the future, as it has been in the past, in ways which provide benefits to the public. The significant fall in the income of the clubs which we expect to follow upon the abrogation of either Rule D.7.3 or the exclusivity clauses would, in our view, substantially impair the ability of the clubs to provide the same level of benefits as they would provide if there were no such fall.

 

 

(3) If Rule D.7.3 and/or the exclusivity clauses were abrogated the ability of the Premier League to achieve an equitable distribution of television revenue to the benefit of competitive balance would be lost.

 

338. Under this head we are concerned with the system for the division of television income which exists by virtue of Rule D.8.1, supplemented by the arrangements for parachute payments to be made to relegated clubs. This system applies only to "UK Broadcasting Money" which means, in substance, money derived from the exploitation within the United Kingdom of the television rights which the Premier League alone has power to sell under Rule D.7.1. It clearly includes only income received by the Premier League itself, not television income received by an individual member club. (Even with Rule D.7.3 in place a club might legitimately receive income from television rights sold by it if the Board of the Premier League has consented to such sale. If Rule D.7.3 is struck down, it will, of course, become commonplace for individual clubs to receive such income). For reasons which we have explained we take the view that the striking down of Rule D.7.3 would make collective selling under Rule D.7.1 impracticable or, at best, capable of producing only a modest return. The abrogation of Rule D.7.3 will, therefore, for all practical purposes put an end to the existing scheme for the distribution of television income between the member clubs of the Premier League and recipients of parachute payments.

339. It is, nevertheless, accepted on all sides, including the Director General, that some system for the distribution (or redistribution) of television income between clubs is desirable in order to maintain and promote competitive balance which itself is something which benefits the public. It was pointed out by Dr. Szymanski in his evidence that there has been a growing process of polarisation between top and bottom clubs for many years, and this appears to us to make it even more necessary to have in place a system under which income which would otherwise have gone to increase the strength of the already strongest clubs is, to a reasonable extent, made available to the weaker clubs. Rule D.8.1 may not be a perfect means of achieving this but it has been an effective one.

340. The essential question in respect of this head of benefit is whether it is likely that an effective system of redistribution would be adopted to take the place of existing Rule D.8.1. No one doubts that it would be theoretically possible to devise such a system. The issue is whether such a system would be practicable and whether the Premier League clubs would be likely to adopt it.

341. Dr. Szymanski put forward a number of possibilities in his evidence. These included suggestions such as a levy on the gate receipts of member clubs or a levy on their total income. All of these present quite serious practical problems. Thus a levy on gate receipts operates as a disincentive to the making of improvements which increase ground capacity or enable higher prices to be charged, although these improvements themselves provide benefits to the public. Other difficulties appear from the following passage in the cross-examination of Mr. Osborne when he was being asked about a graph which he had prepared to illustrate what degree of redistribution would be required to replicate the 1997/98 distribution of television moneys under Rule D.8.1 (Day 29, page 89):

"I think it would be fair ... to say that the problems of redistribution, or the problems that one would see in a particular redistributive mechanism, depend particularly on what one assumes to be the counterfactual position. Here what we are assuming to be the counterfactual position is that TV revenues, prior to any redistribution, would be distributed along the same pattern as the fan base data that we have used, and that is a theme that runs consistently throughout this. Given that level of redistribution, attempting to achieve it via the sharing of gates involves practical difficulties that come about simply because of the scale of the amounts to be redistributed. In doing these calculations, we have looked at different sharing ratios, i.e. one would share half of the gate between the two clubs, and then see what happens, what sort of redistribution one gets. In order to get the redistribution that is shown in orange, we had to go as high as 110 per cent of gate revenues being shared. Quite clearly, that is a lot of money, and it introduces problems in the sense that clubs would be being asked to give up more than they actually took in gate revenue, and share that with the visiting club."

 

342. As Mr. Osborne recognised in this passage, much depends on what figures one assumes. Those assumed by Mr. Osborne do not appear to us to be fanciful, although events may prove otherwise. Apart from this, as Mr. Aaronson observed in his second report (at page 533) "All taxes provoke avoidance measures". There is also the difficulty that any levy system has to be based on calculations which can only be carried out after the end of a season, when it is known exactly how much income each club has received from whatever source is the subject of the levy.

343. We do not propose to burden this judgment by going through all the points in detail. It will suffice to say that generally we found convincing the critique advanced by Mr. Aldous in Appendix 10 to his closing submissions. We are satisfied that it would be difficult to devise a system of redistribution as effective and straightforward as that achieved by Rule D.8.1.

344. We move on to consider the other issue, namely whether the Premier League clubs would be prepared to adopt a new system of redistribution, assuming that one can be devised. Clearly it is difficult to forecast how clubs would react to a proposal which has not yet been formulated. It is fair to say that almost all the witnesses who spoke on behalf of the clubs said that they supported the present system of redistribution. But it seemed to us that they were for the most part questioned on behalf of the Director General on the basis that the present system would remain in place unless the necessary majority of clubs (i.e. two-thirds) voted to change it. The true position is, in our view, that without Rule D.7.3 the present system will become largely or wholly ineffective and redistribution will only take place if a new rule, for which a two-thirds majority will be required, is substituted for it. The attitude of the clubs to any such new system is much more uncertain. Some witnesses were prepared to indicate in general terms that their clubs would support a new system, although there was some apprehension that other clubs might not do likewise. Their fears, we think, were not without some justification. Thus Mr. Parry, now Chief Executive of Liverpool, said (Day 7, page 57):

"I struggle to see how it is possible to replicate the system of distribution which rewards merit; it is certainly impossible in individual selling to replicate the exposure. That is just not possible, and I think to suggest that the clubs would put all of their revenues from individual selling into a pot for redistribution is a nonsense. We would not."

345. We think it worth citing the following passage from the cross-examination of Mr. Dein. It is somewhat long but it illustrates the conflicting influences which will come into play.

"Q. [Do you agree] ... that it does not matter that many of the clubs are public companies, because the public companies recognise that what is good for the League is good for them, as you do?

A. I would not necessarily agree with that in today's climate.

Q. You recognise it.

A. We do certainly, but you may find that some companies -- whether plc boards will say, "This is our income, and we want to keep 100 per cent of it".

Q. Mr Dein, I am only concerned with Arsenal at the moment and Arsenal's answer is that you recognise the veracity of what you say in paragraphs 15 and 16 of your witness statement, do you not?

A. Yes, I do.

Q. And if it is up to Arsenal, Arsenal will agree a compromise as to how PPV revenues are distributed.

A. Provided we consider that to be fair and equitable. If others do not think so, or our board does not think so, then we may not go along with it. We are not obliged just because half a dozen clubs say, "We want to keep 60 or 70 per cent of the income", that we will naturally go along with it, in the spirit of a compromise. We have our own shareholders. We will do what is best for our club, but always being mindful of what is good for the League. That is what I meant in here.

Q. Exactly, Mr Dein. Therefore you will agree to a redistribution formula for pay per view revenues which is fair and equitable and achieves a certain measure of redistribution so as to preserve competitive balance.

A. If our board consider they are fair and equitable. I think as a board we are fair minded people. We are not trying to wreck the League or put other clubs out of business.

Q. Exactly the same applies, Mr Dein, to the renegotiation of any other redistributive arrangements applying if there were individual selling.

A. It is hypothetical. We are not at that stage yet. I cannot answer that, but one would hope there would be a formula which was acceptable to everybody, as indeed there was in 1992.

Q. And you would search for such a solution?

A. I certainly would. Not necessarily I would be successful, but I would certainly search for it, I agree.

Q. As an optimist, Mr Dein, you would be optimistic that in a different regime, a regime of individual selling with pay per view, it would be possible to reach a formula that did preserve competitive balance and did allow all the clubs to compete reasonably evenly, as they do today?

A. We would have to wait and see. We live in hope.

Q. You hope so?

A. On a personal level, I certainly hope so.

Q. And on a club level you hope so too?

A. Yes, as I said, I think our club has always been ---- although we are mindful of our stature in the game, there are 19 other clubs in the Premier League."

346. We think that this passage reflects the commercial realities which would have to be faced by the directors of those clubs which were particularly successful in making individual sales. They would recognise the need to support the League as a whole and the need for competitive balance. But their primary duty would be to do what they consider to be in the interests of their club. We think they would be likely to find it much more difficult to agree to part with considerable sums out of their own club's income than they find it to continue to participate in the present arrangements under which what is distributed is money which never belongs to an individual club until the distribution is made.

347. Our general conclusion in respect of this head of benefit is that the encouragement of competitive balance is better served by the present scheme for the distribution of television revenue than by a hope that a new scheme can be put in place which will replicate or improve upon the present scheme. We think the public benefits more from the certainty and simplicity of the existing scheme than it is likely to benefit from the uncertainties and difficulties which would result from the weakening or destruction of that scheme.

 

(4) If Rule D.7.3 and/or the exclusivity clauses were abrogated the ability of the Premier League to confer benefits on football outside the Premier League would be lost or seriously diminished

 

348. This proposition is similar in character to the last. The benefits currently conferred on football outside the Premier League are those which consist of payments to the Football Trust, the Football League and the PFA. We accept the evidence of Mr. Leaver that, although it does not appear to be strictly in accordance with Rule D.8.1, the payments to the Football Trust and the Football League, as well as those to the PFA, are made out of the Premier League's domestic television revenue and that the Premier League does not have the resources to make payments on the current scale out of other revenue. It is likely, therefore, that these payments would be terminated, or at least scaled down substantially, if Rule D.7.3 were abrogated and central selling of television rights became impracticable or raised much less revenue, or if the exclusivity clauses were struck down and television companies were prepared only to pay a significantly lower price for television rights in Premier League football. We regard these as likely consequences of the removal of the restrictions now under consideration. We also regard the distribution of television income outside the Premier League as being advantageous from the point of view of the public. Indeed we see no reason to differ from the view of the Football Task Force that, from the public point of view, it is desirable that resources generated by professional football should be invested to an even greater extent than at present in the lower levels of the game. The removal of the restrictions now under consideration would therefore deny to the public a benefit or advantage not only in the form of the diminution of the present level of support now provided for football outside the Premier League but also in the form of a reduction in the prospect that, now that the expenditure required to meet the requirements of the Taylor Report has largely been met within the Premier League, the level of support for the lower levels of the game will be increased.

 

(5) If Rule D.7.3 were abrogated the ability of the Premier League to minimise detriments to scheduling and attendance would be lost or seriously curtailed.

349. We take "detriments to scheduling" in this context to mean the fact that matches which are to be broadcast live on television have to be played at times which avoid the traditional kick-off time of 3 pm on Saturday. The fact that the Premier League alone has the power to sell television rights in Premier League matches does certainly enable the Premier League to control the number of matches broadcast live and so to limit the need for matches to be scheduled at other times. In this way disappointment of traditional expectations and aggravation of the difficulties involved in scheduling can be limited. We think that traditional football supporters who want to attend matches find this to their liking. Those who prefer to see matches on television probably think otherwise. We do not find ourselves able to say that the diminution in the ability of the Premier League to control scheduling (it would not be lost altogether, because the Premier League would remain in charge of the fixture list) would deprive the public of specific and substantial benefits or advantages. From the public point of view there would simply be a change in the times at which some football entertainment services are available. This would be liked by some members of the public and disliked by others.

350. So far as attendances are concerned, we have already recorded our view that attendances will tend to be reduced if more football is shown on television. By limiting the number of matches shown on television the Premier League currently has the ability to limit this tendency. But we repeat what we have said about the need not to exaggerate this factor. Moreover some of the main consequences of reduced attendances, in the form of reduced gate receipts and, if the reduction is sufficiently severe, a tendency for the atmosphere at the match being televised to be less tense and exciting than would be the case if the ground were full, will have their greatest impact on the participating clubs, who can take them into account when making their decision whether or not to sell the television rights to the match. We accept that there may be a spill-over effect on attendances at other matches, but we do not think that the loss of ability on the part of the Premier League to limit this or the other consequences of a fall in attendances can be said to amount to the denial to the public of specific or substantial benefits or advantages.

 

(6) If Rule D.7.3 were abrogated the ability of the Premier League to secure the continuing participation of member clubs in the Premier League and thus the provision of the Premier League championship would be lost or severely diminished.

351. The case under this head is closely linked to the cases under several of the preceding heads. Mr. Aldous particularly linked his argument to that concerning the distribution of television income which, he said, was fundamental to the foundation of the Premier League. We accept that this was so and we have already expressed our view about the consequences of upsetting the present scheme for that distribution. We are, however, unable to accept that these consequences, and the increasing gap between the resources of the most successful clubs and those of the less successful, would produce a tendency for clubs to leave the Premier League, with the consequent break-up of the League, which is what Mr Aldous's argument seemed to suggest. No Premier League club would prefer to join the Football League. Only the very strongest clubs would be likely to be able to join some new super league, if one were formed. These clubs will be the ones which are best placed to benefit from the abandonment of collective selling of television rights in favour of individual selling.

352. There is, however, one respect in which individual selling would place the Premier League itself under strain, namely the pressure on scheduling. If clubs are left to sell their matches individually some of them may well find that the most attractive offers from broadcasters come on the basis that the matches are played at times which are very different not only from the traditional Saturday afternoon but also from the Sunday and Monday times at which Sky matches are broadcast. This is because broadcasters are likely to try to avoid head-to-head conflict with each other, as this would tend to reduce their audiences. A consequence of this is likely to be that clubs will ask the Premier League, which will continue to control the fixture list, to schedule their matches at these unconventional times. The Premier League may be unwilling to accede to such a request because of its impact on the schedule as a whole or on particular clubs or because police co-operation cannot be obtained. If this happens tensions between the clubs and the Premier League, or between the clubs themselves, will develop and individual clubs may become highly discontented. It is difficult to see this developing to the extent that the Premier League breaks up, but it is better from the point of view of the League as a whole that these tensions do not build up. It may thus be said that the public interest in having a strong and attractive Premier League competition is best served by preserving the ability of the Premier League to arrange which matches are to be shown on television and when they are to be played. A diminution in this ability is detrimental, but we do not think it can be said to be so detrimental as to constitute the loss of a "specific and substantial" benefit or advantage.

(7) If Rule D.7.3 (6) and/or the exclusivity clauses were abrogated the ability of the Premier League to maintain and improve the quality of and interest in football in England and the quality and size of the pool of talent available to represent England internationally would be diminished

353. So far as this head of benefit relates to the maintenance and improvement of the playing squads of individual clubs it is covered by what we have said in relation to head (2). For the reasons we have given we are satisfied that one of the principal objects to which clubs devote the enhanced income which the collective selling of exclusive television rights gives them is the maintenance of their playing squads and that it is a benefit to the public that this should be so. If television rights could no longer be sold collectively or on terms which give the purchaser exclusivity there would be likely to be a significant drop in the clubs' income and the clubs' ability to provide this benefit would be impaired or diminished to a substantial extent. This, as we have said, we regard as denying to the public a specific and substantial benefit.

354. We have much less certainty about those parts of what is suggested under this head which consist of maintaining and improving "the quality of and interest in football in England" and "the quality and size of the pool of talent available to represent England internationally". As to the first of these, we accept that the quality of Premier League football is high and, partly because of this high quality, interest in football in England is also high. But we have difficulty in regarding these, particularly the level of interest, as matters involving benefit to the public. We do not, of course, suggest that lower quality or a lower level of interest would be a good thing, but it does not seem to us that football can be said to have within it such an inherent merit that these things are important. It is one thing to say that on the assumption that football is played it is to the benefit of the public that it shall be played well and competitively. This is the basis on which we have approached the earlier benefits. But it appears to us to be different to say that there is intrinsic merit in promoting general interest in football.

355. As to the maintenance of the quality and size of the pool of talent available to represent England internationally our difficulty is of a different character. We are content to say that it is to the public benefit that this should be so. What we are not satisfied about is whether such quality and size would be diminished by a reduction in the income of individual clubs. It has been said that one of the consequences of the clubs having more money to spend is that more players from overseas have been introduced into the playing squads of particular clubs. This may well increase the competitiveness of those clubs, but the players in question are not generally eligible to play for England internationally. Looking at the matter from the other direction, we are not satisfied that the emergence of really talented players who are qualified to play for England would be impaired by a reduction in the resources of Premier League clubs. Even if there were a return to the days before the formation of the Premier League when English players joined foreign clubs to a greater extent than they do now, this would not significantly affect the matter because such players would, as we understand it, remain eligible to play for England.

356. We therefore conclude that there is nothing in this head which adds significantly to what we have already said about the loss of benefits under other heads.

 

 

(8) If the exclusivity clauses were abrogated the necessary consequence would be that no broadcaster could be given exclusivity in Premier League football on television, whether live or as highlights. Competition between broadcasters, which is beneficial to the public, would therefore be impeded, not encouraged.

357. We regard this as an extremely important matter but, having regard to our earlier lengthy discussion of the nature of competition between broadcasters we think that we can deal with it comparatively briefly here.

358. We accept the premise contained in the first sentence of the proposition. We have at times discerned in the course of argument what has seemed to us to be an undue concern with the positions of Sky and the BBC, rather than with the positions of broadcasters generally. While it is true that they are the parties which currently have the television rights under the 1996 Agreements this will not necessarily remain the case after 2001. What we have to look at is the position of any broadcaster who is given exclusivity in live matches or highlights of the kind given to Sky and the BBC respectively. If we were to conclude that this exclusivity is contrary to the public interest, it would be normal for injunctions to be granted restraining the parties to the present arrangements from enforcing or giving effect to the exclusivity clauses or making any agreement to the like effect. This would, we think, have the result postulated. We appreciate, of course, that an application may be made under Section 26 of the Competition Act 1980 which would modify this result to some extent, but since it is unclear what modified form of agreement might be put forward under Section 26 we must, we think, discount this possibility completely. In any event there would be a great difference between the economic effects of complete exclusivity, which is what we have to consider, and some measure of partial exclusivity, which is presumably the kind of thing that might be put forward under Section 26. This is, perhaps, particularly the case as regards live broadcasts.

359. From what we have said at an earlier stage of this judgment it will be apparent that we accept that a principal means by which broadcasters compete with each other is the differentiation of their programmes and that the acquisition of exclusive rights, particularly exclusive sports rights, is a highly important means of providing differentiation. Hence exclusivity is a powerful tool in competition between broadcasters. Exclusive rights in Premier League football were used as such by Sky during 1992 and the years which followed, when Sky transformed itself from being a company making large losses to one which makes substantial profits. It may be that this process would have happened to some extent over some period even without exclusive rights in Premier League football, but we accept that, at best it would have happened more slowly.

360. To some extent all this is, impliedly if not expressly, accepted in the submissions made on behalf of the Director General. Mr. Vos argued that Premier League football is the most important Pay-TV driver and that there is no substitute for Premier League football for Pay-TV broadcasters. We think that it is putting it too high to say that there is no substitute for Premier League football so far as Pay-TV is concerned, for this underrates such football competitions as the FA Cup and the UEFA Champions League which have been taken up enthusiastically by Pay-TV companies. But undoubtedly Premier League football is of enormous importance and it may well be right to regard it as pre-eminent. What the argument for the Director General seems to ignore is that the reason why Premier League football has been a highly important Pay-TV driver is that it has been available on an exclusive basis. We cannot envisage that it would have anything like the same importance if it were available only on a non-exclusive basis. Indeed if live Premier League football were available to any serious extent on free-to-air television it is hard to suppose that it would have any significant attraction to Pay-TV. Certainly it would not constitute a driver.

361. We think that the case for the Director General has, in this respect, within itself the seeds of its own destruction. Premier League football has, as the Director General contends, enormous importance to Pay-TV broadcasters. But the Director General is only right in this contention if it is made available to a Pay-TV broadcaster on an exclusive basis. By saying that the enormous importance of Premier League football means that it should be available to a wider range of broadcasters on a non-exclusive basis the Director General seeks to deprive the exploitation of Premier League football of the character which caused the argument to be raised in the first place.

362. What we have said so far under this head relates primarily to the live broadcasting of Premier League football. But somewhat similar conditions apply to the broadcasting of recorded football. It is, no doubt, of great value to a broadcaster to be able to show a quality programme of recorded football of the kind represented by BBC's Match of the Day. But the value would inevitably be much less if other broadcasters had a similar right. A highlights broadcaster would then be able to differentiate his programme from that of other broadcasters only by such means as his method of presentation and choice of recorded material. Whether a broadcaster of recorded football needs complete exclusivity extending indefinitely after each match is played (which is, in substance, what the BBC and Sky currently enjoy) is something to which we shall return when we consider the detriments alleged by the Director General.

363. Our conclusion under this head is that the respondents are correct. If the exclusivity clauses were struck down competition between broadcasters would be significantly diminished. It is to the benefit of the public that such competition should be vigorous. Its diminution would therefore deprive the public of a specific and substantial benefit.

 

(9) If no broadcaster can have exclusive rights in Premier League football on television this will result in the inefficient use of resources by broadcasters and a duplication of costs and will impair the quality of coverage and the continuity and regularity of the scheduling of television programmes based on Premier League football.

364. We accept the evidence that, under the 1992 and 1996 Agreements Sky and the BBC have produced television programmes of high quality. They have done this by devoting very substantial resources to the production of these programmes. These matters were not challenged to any significant extent. We also think it likely that a broadcaster who does not have exclusivity in the subject matter of a particular programme will tend to devote less resources to the production of the programme than one who does have exclusivity. We think it right to say that, subject to questions of detriment to which we shall come, it is a benefit or advantage to the public as viewers of football on television that coverage shall be of the highest quality which is reasonably attainable. As the quality of coverage is likely to be related to the amount of resources devoted to it there may, without exclusivity, be some reduction in that quality. But we do not feel able to say that this would be sufficient to amount to the denial to the public of an advantage which is substantial. We think that any broadcaster who remained sufficiently interested to produce football programmes without exclusivity would, for the sake of his own reputation, ensure that the quality of the coverage is of adequate quality. We feel unable to translate the possible differences between good and less good coverage into terms of denial of benefit to the public and certainly not to do so in such a way as to enable us to conclude that the benefit denied is substantial.

365. As to the suggested duplication of costs, we consider that this is not a matter which will have any direct effect on the viewing public. Costs are, of course, a matter of direct concern to broadcasters, who must be considered as users of the relevant services. But the costs of an individual broadcaster will not be "duplicated" and each broadcaster will, it seems to us, be unconcerned by the fact that another broadcaster is incurring costs in broadcasting the same or a similar event. He will simply devote to his coverage such of his own resources as he thinks it commercially sensible to devote to that purpose. The public interest is best served by leaving him to make his own commercial judgment.

366. As to continuity and regularity of coverage, while we can well envisage that coverage will be different without exclusivity, we cannot judge what the effect will be on continuity and coverage or what the impact will be so far as benefit or advantage to the public is concerned.

Conclusion in respect of denial of benefits

367. Our conclusion on this aspect of the case is that the abrogation of Rule D.7.3 and the exclusivity clauses would deny to the public as users of the relevant services specific and substantial benefits or advantages under heads (1), (2), (3) (4) and (8). The same would be the case under these heads if Rule D.7.3 were abrogated without the exclusivity clauses being struck down, although the loss of benefit might be somewhat less. If Rule D.7.3 were left on foot but the exclusivity clauses were struck down the public would be denied specific and substantial benefits or advantages under heads (2), (3) (4) and (8). In respect of the other heads we are not satisfied that the public would be denied specific and substantial benefits or advantages if any or all of Rule D.7.3 and the exclusivity clauses were struck down. (We are as we have said satisfied of this as regards part of head (7), but only where this overlaps with head (2). We therefore reject head (7) as adding anything to head (2)).

368. We emphasise that, in expressing these conclusions, we have not yet considered detriments or carried out the balancing exercise required by the tailpiece. We are not therefore finding at this stage that any of the restrictions under consideration passes through gateway (b). We shall come to detriments and the balancing exercise after we have considered gateway (h) in relation to Rule D.7.3 and the exclusivity clauses.

 

(C) Do Rule D.7.3 and the exclusivity clauses pass through gateway (h)?

369. For a restriction to pass through gateway (h) it is necessary that the court shall be satisfied

"that the restriction ... does not directly or indirectly restrict or discourage competition to any material degree in any relevant trade or industry and is not likely to do so."

The tailpiece requiring the court to be satisfied that the restriction is not unreasonable having regard to the balance between benefits and detriments applies as it does for the other gateways.

370. Gateway (h) was not part of the original legislation for the control of restrictive trading agreements enacted in 1956. It was introduced by Section 10 of the Restrictive Trade Practices Act 1968. A principal effect of the 1968 Act was to make certain agreements for the provision of information subject to registration and to investigation by the court. In a note to Section 10 of the 1968 Act as printed in annotated form in the second supplement to "The Law of Restrictive Trade Practices and Monopolies" by Lord Wilberforce and others the following comments are made:

"The primary object of the new ground of defence ... is to give additional protection to harmless information agreements. The original grounds of justification ... often would not be appropriate for the defence of information agreements; such agreements might be innocent of restraint of competition, but could not be shown any of the special benefits provided for [under the original legislation]. The new ground introduced by s.10 of the Act allows parties to plead that an agreement is not contrary to the public interest because it does not restrict or deter competition. It provides a defence for agreements which do no harm. It is particularly appropriate for information agreements but its use will not be limited to them."

371. These comments are by a subsequent editor rather than by the authors of the original work and cannot be regarded as authoritative. Nevertheless we think that the concept that gateway (h) is appropriate to "agreements which do no harm" is a useful one.

372. During the course of argument we were referred to no authorities on gateway (h). This gateway has in fact been referred to in a number of reported cases, in some of which a restriction was held to pass through it. The cases in question are Brekkes v Cattell (1970) LR 7RP 150; Re Scottish Daily Newspaper Society's Agreement (1972) LR 7RP 401; Re Building Employers Confederation's Application [1985] ICR 167; and Re Institute of Independent Insurance Brokers Agreement [1991] ICR 822. We have looked at these cases since the close of argument but we do not find in them anything which helps us to decide the present case, so we are not surprised they were not cited to us.

373. We were treated to expert evidence on a high intellectual plane from all the economists who were called to give evidence and also to a good deal of argument about what is the relevant market which has to be considered in relation to gateway (h) and other issues. The experts were in general agreement that the relevant test to be applied in defining a market is one expressed in or derived from "Horizontal Merger Guidelines" issued by the United States Department of Justice and the Federal Trade Commission. This test is widely used throughout the western world by economists concerned with competition matters. There was, however, a difference of view between the economists about the result of applying the test in this case. Professor Cave reached the conclusion that the relevant market is a market in the television rights to live Premier League matches. The other expert economists, particularly Dr. Bishop, the economist called by Sky, questioned this conclusion. They thought the relevant market is much wider than this. But they also doubted the utility of the entire exercise.

374. If it were necessary for us to enter this arena we would find the submissions of Mr. Sumption, as deployed in paragraphs 89-91 of his written submissions and elaborated upon orally, of great cogency. But we do not think that it is necessary for us to do this, for we are satisfied that, as Mr. Sumption submitted, the enquiry directed by the 1976 Act does not require a formal definition of the limits of some particular product market. This may well be appropriate for inquiries into monopolies or mergers or, indeed, into anti-competitive practices of the kind at which the Competition Act 1998 is directed. Section 19 of the 1976 Act seems to us to require a much less sophisticated degree of economic evaluation. In particular gateway (h) involves the consideration of two relatively straightforward issues. namely (i) what trades or industries are relevant in the circumstances of this particular case and (ii) does the restriction under consideration restrict or discourage competition to any material degree in any such trade or industry, or it is likely to do so.

375. On the first issue we are satisfied that Mr. Aldous gave the right answer in paragraph 7.100 of his written closing submissions where he said that

"the relevant trades or industries are on the one hand the supply to broadcasters of television rights relating to sporting events, and on the other hand the supply of broadcasting services."

376. Apart from its simplicity this formulation has the merit that it allows to be taken into account the provision of entertainment services by the playing of sport which is to be shown on television and also broadcasting which consists of the transmission of recorded football as distinct from the showing of a complete game while it is being played. Both of these were in danger of being neglected as the result of the adoption of the narrow definition of the relevant market for which the Director General contended.

377. The second issue is somewhat more difficult. We have to consider whether the restriction restricts or discourages competition to any material degree in the relevant trade or industry. It is to be noted first that we have to consider whether the restriction "restricts or discourages" competition, not the rather wider question whether it affects competition; and secondly that, for the requirements of gateway (h) to be fulfilled, we have to be satisfied of the negative proposition that restriction or discouragement has not happened and is not likely to happen.

378. The argument that there is no restriction or discouragement of competition in the trade or industry consisting of the supply to broadcasters of television rights relating to sporting events was, in the main, taken up by the Premier League. On its behalf Mr. Aldous contended that neither Rule D.7.3 nor the exclusivity clauses could be said to restrict competition because there are other constraints on the number of football matches which can be broadcast which are in themselves sufficient to limit that number to much the same level as under the existing arrangements. These are in the main the need to re-schedule matches which are to be broadcast live so that they are played at some time other than the traditional Saturday afternoon and the general constraints on scheduling. In addition the Premier League relied upon what it said was a wide range of football and other sporting events to which broadcasters have access, which enabled broadcasters to compete with each other while increasing the variety of sporting events available to the public.

379. We do not think that this argument is valid. As we have said, we think that the number of Premier League matches shown live on television would be likely to increase if Rule D.7.3 were abrogated. The Premier League would then be unable to control the number of matches sold in such a way as to minimise the problems of scheduling and there would be a tendency for clubs to try to maximise their income (or, in the case of the less popular clubs, to limit the reduction in their income from television) by selling the television rights to as many matches as they could. The selling of television rights by individual clubs in rivalry to each other, if it took place, would undoubtedly be a form of competition. It is currently kept in check by Rule D.7.3. In these circumstances we cannot say that Rule D.7.3 does not restrict competition to a material degree in the supply to broadcasters of television rights relating to football matches.

380. The case in relation to the supply of broadcasting services was put by Sky. On its behalf Mr. Sumption argued that Sky has the television rights in live Premier League matches as the result of participation in a fair and competitive market in which others are able to and do participate. There was strong competition from other broadcasters in 1996 and it is to be expected that it will be stronger rather than weaker when the rights for the 2001/2002 season and subsequently are offered for sale. While it is correct that a viewer who wishes to see live Premier League matches on television must subscribe to Sky, or to another Pay-TV service which takes Sky's Sports channels, and this may be said to restrict choice, this is not the same thing as restricting competition. This argument is closely connected with the factors which we have already mentioned which bear upon a broadcaster's need for distinctiveness in his programming to enable him to compete with other broadcasters. It was said that, far from restricting competition, exclusivity in Premier League football, which is derived from Rule D.7.3 and the exclusivity clauses acting in conjunction with each other, is in the hands of broadcasters the instrument of competition.

381. This is an argument which we have to a large extent accepted, so far as the exclusivity clauses are concerned, in our appraisal of head (8) of the "denied benefits" relied on under gateway (b). However, to say that the abrogation of the exclusivity clauses would result in the denial to the public of specific and substantial benefits because broadcasters would be denied a means of competing with each other is not the same thing as saying that the exclusivity clauses do not restrict competition between broadcasters to any material degree. It seems to us to be undeniable that the exclusivity clauses have a limiting effect on competition, because they inhibit the prospect that broadcasters who do not enjoy exclusivity will compete with each other by including Premier League matches in their offerings. That would not, in our view, be such strong competition as that which is brought to bear by a broadcaster having exclusivity and in our opinion the public is better served by the stronger competition. But we do not feel able to say that it would be no competition at all. The question is whether it is possible, for the purposes of gateway (h), to ignore this inhibition of the weaker form of competition on the ground that, if it were not inhibited, the stronger form of competition would be impaired.

382. We think that a careful interpretation of gateway (h) is necessary in order to resolve this issue. Can a restriction which inhibits some forms of competition but promotes others be said not to restrict or discourage competition to any material degree if, on balance, its promotional aspects appear to outweigh its inhibitory effects? Or does the statute require that the court must simply consider whether the restriction restricts or discourages competition to a material degree in some aspect of its application, without any attempt being made to carry out a balancing exercise of this kind. We regard the second of these as correct. We consider that it would be foreign to the scheme of the legislation if gateway (h) were construed in a way which requires such a balance to be struck. An exercise of this kind is not, in our view, required to be carried out until, if at all, the tailpiece is applied. Gateway (h) is, in our view, to be narrowly construed and a restriction will pass through it only if the court can be satisfied that it has no restricting or discouraging effect at all on competition.

382. On behalf of the BBC Mr. Carr supported the argument of Mr. Sumption which we have just considered. In addition he presented an argument which was based on the proposition that the market in highlights rights in Premier League football (or, as we think it would more appropriately be called, recorded Premier League football) does not constitute a separate market capable of being restricted or discouraged by giving the BBC exclusive highlights rights. As we have explained, this is not how gateway (h) should in our view be approached. Moreover recorded football is capable of being used by broadcasters in a variety of ways. Exclusivity of the kind currently enjoyed by Sky and the BBC not only prevents other broadcasters showing programmes which are similar in content and form to those of Sky and the BBC but also prevent them showing recorded football in programmes of a different format. This is a matter to which we shall return when we consider the application of the tailpiece to Clause 2.2 of the BBC Agreement.

 

383. In the light of these considerations we do not consider that Rule D.7.3 or the exclusivity clauses satisfy the requirements of gateway (h).

(D) The detriments resulting or likely to result from Rule D.7.3 and/or the exclusivity clauses

384. The detriments which are alleged by the Director General to result from Rule D.7.3 and/or the exclusivity clauses are listed in a Schedule of Detriments which forms part of the pleadings in this case. We have to say that we find this Schedule somewhat confusing and repetitious. We consider that, for the purpose of evaluation, the list of detriments set out in the Schedule needs to be consolidated. We shall therefore deal with detriments the essence of which is set out in the numbered sub-heading which precedes each part of the discussion which follows.

(1) Fewer programmes comprising Premier League matches are broadcast on television than would be the case without these restrictions and latent public demand to see more matches broadcast goes unsatisfied.

 

385. We think that it is broadly true that without Rule D.7.3 and the exclusivity clauses more Premier League matches would be shown on television than is now the case. We have more hesitation in agreeing that, as a result, latent public demand to see more matches broadcast goes unsatisfied. There was a good deal of evidence, mainly in the form of surveys of the views of club supporters and evidence from the representatives of the clubs, of a body of opinion that too many football matches are shown on television already. At the same time we do not doubt that there will always be those people, in the aggregate quite numerous, who will say fervently that they want something more than, or something different from, what is presently offered by the television companies. The removal of the restrictions will not prevent this continuing to be the case. We think that caution is required in the weighing of a detriment which consists of failure to satisfy everyone. It seemed to us that Mr. Aaronson put the matter wisely when he said

"I think it is a sad fact that there are unsatisfied demands from all sorts of consumers for all sorts of things. I mean, economics, if it is about anything, is about the allocation of scarce resources in ways that best serve the population as a whole. While I would agree that there may be some supporter of a particular club who would like to see television coverage of that club, that is not the same as saying that the interests of the public at large would be served by providing that. One needs to think, what else would have to be taken off the air in order to do it?" (Day 35, page 17).

 

386. The last sentence of this passage shows, of course, that Mr. Aaronson was particularly concerned with the lack of broadcasting capacity. But we consider that his point also has a general validity. We accept that if the restrictions were abrogated it would be likely that the desires of those members of the public who wish to see more or different matches broadcast will less frequently be disappointed than if the restrictions remain in place and, to this extent, there is a detriment to the public. It is not, however, a detriment which has great weight.

(2) The choice of programmes comprising Premier League matches is smaller than it would be if the restrictions were not in place and latent public demand for more choice goes unsatisfied. Innovation is also restricted, particularly as regards the provision of programmes to satisfy regional or local demand

387. If, as we would expect, more Premier League matches were shown on television in a world where Rule D.7.3 and the exclusivity clauses did not exist, it is likely that there would be a greater choice of programmes comprising Premier League matches. We think that a reduction of choice of this kind has to be regarded as a detriment.

388. In two respects we have been particularly concerned at the extent of this detriment, namely the inhibition of a wider range of programmes containing recorded Premier League football and the inhibition of the broadcasting of Premier League football on a PPV basis.

389. As to recorded Premier League football we are concerned that the effect of the exclusivity clauses is to prevent any broadcaster other than Sky and the BBC producing programmes which contain such recorded football, no matter how different their programmes may be from the programmes produced by Sky and the BBC or how little their programmes may detract from a programme such as Match of The Day. Moreover Sky and the BBC are themselves limited, under the terms of their Agreements with the Premier League, in the amount of Premier League football that they can broadcast. We readily understand that a high quality highlights programme, such as the BBC's Match of the Day, reasonably requires a period of exclusivity if it is to remain attractive to its broadcaster as a means of differentiation and hence to command a high price for the seller of the necessary television rights and to receive a sufficient allocation of the broadcaster's resources to enable quality to be maintained. But we do not think it needs the degree of exclusivity accorded to the BBC under its Agreement with the Premier League. We do not feel able to say precisely what would be the maximum amount of exclusivity which would be acceptable, but we consider that it ought not to prevent the broadcasting of an alternative highlights programme after a reasonable window of exclusivity has been enjoyed by a purchaser of highlights rights to be broadcast on the day, currently Saturday, when the majority of matches are to be played. Further it ought not to prevent the production of programmes devoted to some special aspect of football, such as the matches of a particular club or the progress in the championship of the clubs of a particular region.

390. There are, however, some major difficulties in giving effect to this view. First it is not possible for this court to prescribe what ought to happen. All that we could do is to strike down the exclusivity clauses in their entirety and we could only do that if we were satisfied that, looked at as a whole in the light of the tests prescribed by Section 19, they are against the public interest. We therefore have to weigh the detriment of the non-availability of a wider range of programmes based on recorded football against the denial of benefits which, as we have explained, would be a consequence of the abrogation of the exclusivity clauses. Secondly, any alternative arrangements would depend on a variety of factors including the types of programmes which broadcasters want to make, the price they are prepared to pay for the television rights they need in order to make such programmes and whether the party having the ability to sell the rights (the Premier League if Rule D.7.3 is upheld, individual clubs or pairs of clubs if it is not) is prepared to sell them at that price. All these factors involve considerable uncertainty and none of them is within the control of the court. Thirdly it appears to us that a broadcaster of the additional programmes which we have in mind would be more likely to want to acquire a copyright licence to broadcast recorded material the copyright in which belongs to the Premier League than to attend Premier League matches in order to make his own recording. But this court has no power, under the 1976 Act, to strike down the contractual obligations under which the Premier League has bound itself not to grant such a copyright licence. Nor, if such obligations were struck down, could this court compel the Premier League to grant the required licences.

391. As to PPV broadcasting of live matches, we think that this might be capable of being accommodated alongside an exclusive right to broadcast a specified number of live matches such as that now enjoyed by Sky, without producing the damaging consequences which we have earlier referred to on anything like the scale which we anticipate would be the result of the complete removal of Rule D.7.3 and the exclusivity clauses. One possibility that has its attractions is for individual clubs to be left free to sell the television rights to broadcast live on a PPV basis those matches which are not included in a primary package of rights which might be sold centrally as at present. The potential adverse consequences might be limited if the PPV broadcaster had no right to require the match to be re-scheduled from the traditional Saturday afternoon kick-off time and if he were required not to make the match available to subscribers in particular areas.

392. There are, however, many practical considerations which stand in the way of producing this state of affairs, however desirable we may think it to be. There is the limitation on the court's powers which we have already noted. There are commercial imponderables, including doubts about the existence of a desire on the part of broadcasters to acquire PPV rights on such a basis and uncertainty about the effect of a separate sale of PPV rights on the price obtainable for the principal package of live rights. Further we bear in mind that the evidence before us was that the main reason why PPV has not been used hitherto for Premier League matches was not the existence of Rule D.7.3 and the exclusivity clauses but the unwillingness of the individual Premier League clubs, voting in a general meeting of the Premier League, to allow Sky to go ahead with its proposal made in 1998. There is also the fact that so long as Article 14/44 of the UEFA statutes remains in place it is unlikely that Premier League clubs will agree to PPV without re-scheduling matches away from Saturday afternoons. This in turn will enhance some of the adverse consequences we have mentioned.

393. Balancing all these factors against each other we reach the conclusion that, although Rule D.7.3 and the exclusivity clauses do, either in conjunction with each other or separately, produce the disadvantages which we have mentioned, the weight which can be accorded to these disadvantages is limited.

(3) The prices charged to the public by Pay-TV broadcasters are higher than they would be without the restrictions

394. We do not accept this proposition. It seems to be based on the notion that a Pay-TV broadcaster prices his service by reference to the cost of providing it, so that if less has to be paid for programme material in the form of television rights in Premier League football the price of the service will be reduced. We think that this is fallacious for two reasons. First a Pay-TV broadcaster prices his service by reference to what he thinks the market will bear rather than by reference to his costs. This was the evidence of Dr. Bishop and we understood Professor Cave substantially to agree with it (Day 36, page 143). Secondly a Pay-TV broadcaster who no longer enjoys exclusivity in Premier League football will, in our view, be likely to reduce the amount of Premier League football that is broadcast because this form of programme material will no longer be a means of differentiating his programmes. Such a broadcaster may reduce his charges to reflect the fact that, without exclusive rights in Premier League football, his programming has become less attractive. But what will not happen, in our view, is that viewers will be charged less for the same amount of Premier League football on television. Indeed if the television rights in Premier League football become split between a number of Pay-TV broadcasters, which seems to be part of the scenario that the Director General considers likely to result from the removal of the restrictions and to be attractive, members of the public who wish to see more Premier League matches on television, or even the same number of matches as are now shown by Sky, may have their television costs increased by the need to buy more than one set-top box and to pay a subscription to more than one broadcaster.

395. We would add that, in the formulation of this detriment, the prices which are said to be higher are not the general rates of subscription charged by Pay-TV broadcasters but the prices charged for broadcasts of Premier League matches. This is fallacious on any basis, because Premier League matches as such are not separately charged for. (They would, of course, be separately charged for if available on a PPV basis, but this has not happened at all in relation to Premier League matches and has not happened to a significant extent with any football).

(4) The detriments so far considered are enhanced by the high price of tickets to attend Premier League matches, the restricted capacity of stadia and other factors which make it difficult for football fans to see their club perform

396. We accept that there are many factors, including those mentioned in the proposition, which may make it difficult for some supporters of a particular club or of football generally to attend live matches. Some of these supporters would, no doubt, be pleased if they were able to see on television the match which they have been unable to attend. Other supporters who could perfectly easily attend might prefer the comfort and convenience of watching the match on television. A variety of disappointed hopes and preferences may result from an arrangement which reduces the prospect of a particular match being shown on television. The danger comes, we believe, from the elevation of this phenomenon into something which amounts to a detriment to the public, or at any rate from the suggestion that it amounts to a detriment of great significance. There are many forms of entertainment provided at venues which have limited capacity, or where admission tickets are expensive or where attendance would involve substantial travelling costs. It is not usual to regard as a detriment to the public the fact that these entertainments are not available on television, even though there may exist a substantial body of persons who would like to attend if only they could be accommodated or who would enjoy the low cost of seeing the entertainment on television. We do not go so far as to say that it cannot be regarded as a detriment, but it seems to us that it is one which needs to be evaluated with caution, particularly when account is taken of the fact that most forms of entertainment (e.g. a theatrical or operatic performance or a sporting contest organised by a single promoter) would be outside the scope of the 1976 Act because a refusal to allow it to be shown on television, however unreasonable, would not involve the acceptance of a restriction by two or more parties.

(5) The presentation and coverage of Premier League matches which are broadcast is less effective in reflecting consumer preferences than it would be without the restrictions

397. We have to say that we find this generalisation difficult to support, although we accept that, with the restrictions in place fewer broadcasters would be likely to obtain television rights in Premier League matches than without them. The evidence which we heard indicated that Sky's coverage of live matches is thought to be of a very high standard and the BBC's Match of the Day is an excellent highlights programme. Although it is possible that other broadcasters would be able to devise even better and more imaginative forms of coverage, no particular area for improvement was identified. We heard no evidence which enables us to form a view about what "consumer preferences" in this area might be. The somewhat grandiloquent proposition which is advanced seems to come to nothing more than a suggestion that if a greater number of different broadcasters had the right to broadcast Premier League matches some or one of them might devise a different type of coverage or a different mode of presentation which some members of the viewing public might find more attractive than what is currently offered by Sky and the BBC. While we cannot say positively that this could never be the case, the fact that there will be no opportunity to put it to the test otherwise than by another broadcaster bidding successfully for television rights for 2001/2002 and later years seems to us to be a matter of comparatively minor significance.

(6) There is less competition overall between competing channels, distribution networks and technologies than there would be without the restrictions, so impeding the public from obtaining higher quality broadcasting services as quickly as they would otherwise do

398. We do not accept the premise set out in the first part of this proposition. For the reasons which we have sought to explain in the part of this judgment which deals with competition between broadcasters, we consider that exclusivity and the certainties which result from the present system for the collective selling of television rights in Premier League matches foster, rather than impede, competition between broadcasters. Looking at the matter the other way round, we do not accept that without collective selling and exclusivity there would be more competition overall between different channels, distribution networks and technologies. We do not propose to consider, therefore, whether if there were more such competition the public would obtain higher quality broadcasting services more quickly. We cannot, however, resist the observation that we have difficulty in knowing what higher quality broadcasting services are envisaged. We do not say that no improvements in quality could be made. But without some conception of the nature of the improvements which might be expected this part of the proposition is really no more than an unhelpful generalisation.

 

 

(7) Rule D.7.3 enables the Premier League to grant to selected broadcasters exclusive rights of the kind which have in fact been granted to Sky and the BBC, so facilitating the detriments which result from the exclusivity clauses

399. We accept that it would have been difficult for Sky and the BBC to obtain, by means of negotiations with individual clubs, exclusivity of the kind which they have in fact obtained from the Premier League. In that way Rule D.7.3, which underpins and makes practicable the collective selling of television rights, goes hand in hand with the exclusivity clauses. This is something we have taken into account in saying what we have said in respect of the earlier detriments. We do not regard this as a separate detriment.

 

(8) The prices charged to and paid by broadcasters for the television rights in Premier League matches, whether to be broadcast live or as recorded highlights, are higher than they would be without the restrictions

400. We regard this as true only in a highly qualified sense. We think that it is the case that the price paid by broadcasters for the television rights in Premier League matches would on average be less without the restrictions than it would be with them. For some matches the price might possibly be more than the average price per match now paid by Sky and the BBC, although we are inclined to doubt this. For most matches it would be less. Thus it is true that, without the restrictions broadcasters would pay less to the Premier League clubs as a whole. That is why we think that the clubs would be substantially less well off. But the reason why this would be so is that, in the absence of the restrictions, the thing being sold and bought would have very different qualities. Instead of obtaining, by means of a single process of negotiation, exclusive rights in a series of matches representative of the Premier League championship as a whole, broadcasters would obtain non-exclusive rights in a single match or, if a number of separate negotiations were undertaken, non-exclusive rights in a corresponding number of individual matches. In the result we conclude that the proposition advanced does not truly represent a detriment, or at least that it is not a detriment of significant proportions.

 

(9) The ability of broadcasters to enter and become established in the broadcasting industry is constrained by their inability to offer viewers premium sports programming containing Premier League matches

401. This proposition is part of a topic which we have already considered at some length. For reasons which we have explained, we take the view that a broadcaster who seeks to use the broadcasting of Premier League matches as a driver which will assist him to enter and become established in the broadcasting industry needs to have the right to broadcast Premier League matches on an exclusive basis for a significant period. But it is of the essence of exclusivity that only one party can enjoy it at any particular time. At present Sky enjoys the requisite exclusivity. It is no doubt now of less importance to Sky as a driver than it was in 1992, but it is still of importance to Sky to enable it to retain its position in the Pay-TV market. We see no satisfactory half-way house between preventing anyone from having Premier League football on an exclusive basis and something similar to the present system under which exclusivity is available for a limited period to whichever broadcaster makes the offer which the seller of the rights considers to be the most attractive. The first situation is the one which would exist in the hypothetical circumstances which Section 19 requires us to examine, but in those circumstances no broadcaster could effectively use the broadcasting of Premier League football as a means of entering and becoming established. The suggested detriment is, in our view, fallacious.

 

(10) The reduction in competition between Sky and competing Pay-TV broadcasters resulting from the exclusivity clauses means that detriments (2) and (3) mentioned above are likely to apply to premium sports programming on Pay-TV more generally and "possibly also to other kinds of Pay-TV programming" where competition to Sky remains limited

402. The contention here appears to be that matters such as high price, lack of choice and innovation complained of in relation to broadcasts of Premier League matches will, as a result of the exclusivity clauses, extend to other types of broadcasts. We see no basis for this.

(11) The inability of Pay-TV broadcasters other than Sky to offer, independently of Sky, programmes containing Premier League matches inhibits the development by them of PPV methods of programme delivery, digital broadcasting and new services generally and thus reduces competition overall between competing Pay-TV channels

403. We have referred in our consideration of detriment (2) to some aspects of the impact of Rule D.7.3 and the exclusivity clauses on PPV broadcasting. The detriment referred to in the sub-heading involves a separate aspect, namely the development of broadcasting technology and its effect on competition between broadcasters. The contentions advanced on behalf of the Director General were that the inability of broadcasters other than Sky to obtain live Premier League rights has led to slower introduction of PPV services and weakened competition in PPV; slower introduction of digital broadcasting services; and slower introduction of new consumer services associated with PPV and digital technology, such as internet, electronic commerce and video on demand.

404. The first point which needs to be made is that the suggested "inability of broadcasters other than Sky to obtain live Premier League rights" is not a matter of permanence. It will currently last only until the end of the 2000/2001 season. For the next and subsequent seasons broadcasters other than Sky will have the opportunity to compete for such rights and, if the decision of this court makes it possible for the Premier League to offer such rights on an exclusive basis and it decides to do so, the broadcaster who obtains such rights will enjoy the same competitive advantages as Sky has enjoyed since 1992. This is, as we have said, an important aspect of competition between broadcasters. If, at the other extreme, all broadcasters had non-exclusive access to Premier League rights, this mode of competition would be neutralised.

405. The Director General's argument as to the slower introduction of PPV services rested heavily on the evidence of Mr. Birchall, the Chief Executive of Front Row Television Limited. Front Row was formed by a consortium of cable television companies as a vehicle for the provision to the subscribers to cable television of films from major Hollywood Studios on a pay per view basis. It began operations in March 1998. At the time when Mr. Birchall gave evidence, approximately a year later, it was providing a five-channel pay per view service seven days a week throughout the year. One channel transmits for 24 hours a day, the others for shorter periods, mainly during the evenings and at night. There are about 1.6 million subscribers to the four cable companies which formed the original consortium and Mr. Birchall said that the take-up of Front Row's services by such subscribers had been very good and in excess of Front Row's own expectations. The picture which Mr. Birchall painted was one of a company which has been and continues to be successful. The part of his evidence on which the Director General sought to rely was that in which he said

"we have succeeded so far because we have managed to convince the film studios that it was right for them to depart from their previous policy of exclusively putting their film through BSkyB, to one where they were selling the product to Front Row on a non-exclusive basis. But, undoubtedly, at the time we were trying to do that, one of the factors the studios were reminded of by BSkyB was the absence of sports rights within cable and the exclusive control of those rights by BSkyB. That was a factor in them taking their time about deciding to get into this market." (Day 24, page 45)

406. We think that this evidence is too frail to support the argument which the Director General seeks to rest on it. Apart from Mr. Birchall's assertion there was no evidence that Sky had represented to the Hollywood studios that they ought not to give Front Row the non-exclusive rights which it sought because Front Row lacked a sports channel. The suggestion that it did so was not put to any witness from Sky. Apart from this, Mr. Birchall was unspecific about the extent of any delay and whether this prevented Front Row from beginning operations earlier. The fact of the matter is that Front Row got the film rights which it wanted and has used them to establish itself as a successful PPV broadcaster.

407. As to the development of digital broadcasting, we accept that Premier League football is capable of acting as a driver for digital television in much the same way as it acted as a driver for satellite television. But its ability to act in this way is strongly dependent upon exclusivity. If Premier League football were available to every broadcaster who wishes to offer digital Pay-TV its impact as a potential driver would be destroyed.

408. The Director General also argued that the absence of competitive pressures in Pay-TV meant that Sky did not introduce its digital satellite service until a month before ONdigital launched its service in the autumn of 1998, whereas it could have done so much earlier. He relied upon the fact that in France Canal Plus had launched a digital service early in 1996 and a second broadcaster had launched such a service later in the same year. Mr. Jeremy Thorp, Group Managing Director of Digital and International Services for the cable company NTL, told us that digital satellite television has been available in the United States since 1994. On the other hand the burden of the evidence of Mr. Walters, the Director of Engineering for Sky, was that Sky could not economically have introduced digital television earlier than it did because of the need to solve technical problems connected with the set-top box. We need not discuss here the details of these technical problems. While we could not express a firm conclusion as to what was the earliest practicable date at which Sky was able to introduce digital television, we were certainly not satisfied that Mr. Walters was wrong in what he said. On the contrary, his technical knowledge and competence seemed to us to be formidable. In any event, even if it was the case that Sky introduced its digital service later than it might have done, we would not be prepared to find that this was directly or indirectly attributable to the fact that Sky has had exclusive rights to live Premier League football since 1992.

409. As to the development of new consumer services, the Director General's argument was based on the fact that, as Mr. Thorp said in his evidence, the new digital technology is "a step on the way to interactive broadcasting" with cable having "the greatest potential for interactivity". The consumer services which are envisaged as being made available in this way include what are described as "internet-type services" and electronic commerce. We are content to assume that when these services become available this will constitute a benefit to the public. The question we have to consider is whether they have been delayed and, if so, whether this was a direct or indirect consequence of Sky having exclusive rights in Premier League football. We are not prepared to say that any part of this question should be answered in the affirmative. The delay is suggested to be the result of a delay in the introduction of digital television, about which we are not convinced. The causation seems to us to be inherently improbable and unsupported by any evidence.

We therefore reject the suggested detriment under this head.

(12) Since the BBC pays a materially higher price to the Premier League than it would do without the restrictions it has to charge higher licence fees or requires a greater government subsidy or has less money to devote to its other programmes and activities

 

410. This detriment, although pleaded, was largely if not wholly abandoned by Mr. Vos on behalf of the Director General. We think that we should, nevertheless, say something about it because it has some bearing on other detriments and because the position may be misunderstood if we say nothing. .

411. We think it very doubtful whether, without the collective selling of television rights whose existence depends on Rule D.7.3, the BBC could in practice put together a package of rights which would enable it to present such a highlights programme as Match of the Day. Even if it could, such rights on a non-exclusive basis would be significantly less attractive to the BBC than the exclusive rights which it now enjoys and it may be doubtful whether the BBC would continue Match of the Day in its present form or, perhaps, at all. The premise that the BBC would, in the absence of the restrictions, pay a materially lower price is thus a doubtful one. If the price was materially lower it would be because what was acquired was different.

412. Even if the premise be accepted without this qualification, the conclusion suggested in respect of licence fee or government subsidy does not follow, as Mr. Vos seemed to accept in his submissions. The BBC does not itself charge the licence fee or fix its amount, nor does it receive a government subsidy as such except in respect of its World Service. Its principal source of funds, as we understand it, takes the form of a subvention from the government equal to the amount collected in respect of the licence fee, the size of which is the subject of discussions between the BBC and government. But we find it impossible to suppose that the amount expended by the BBC on the acquisition of a particular form of programming material would be a significant matter in such discussions. As to the suggestion that if the BBC did not spend so much on the highlights rights it acquires from the Premier League it would have more to spend on other programmes and activities, the same could be said about everything else on which the BBC spends a significant amount. The BBC evidently considers it worthwhile paying the Premier League the agreed sum for what it gets under its agreement. The fact that it might be able to get something less attractive to it for less money seems to us to be irrelevant.

(13) The wholesale prices charged by Sky to other Pay-TV distributors of Sky's premium sports programming are higher than would be the case without the restrictions in place

413. We do not accept that this is the case. The wholesale prices charged by Sky were originally linked to the retail charges which it makes to its own subscribers which, in turn, depend largely upon Sky's assessment of what its retail market will bear. We do not see anything fundamentally wrong or surprising in this. It is hardly to be expected that Sky, as a wholesaler, will charge its wholesale customers a price which enables those customers to under-cut Sky as a retailer. Some wholesale customers have, however, represented that this system of charging is harsh to them. As a result Sky has given them the right to opt for a different system of charging which may work out more advantageously to them. We do not find it necessary to explore the details of either method of charging. We have no reason to believe that the rate of charging for the existing Sky channels would be lower under either system if the restrictions were removed. This is not, of course, to say that Sky might have to charge less, to both its wholesale and its retail customers, if the removal of the restrictions resulted in its inability to offer such an attractive sports channel as it does now. But the supposed detriment appears to assume that Sky would charge less for the same product and we are not satisfied of this.

414. What we have said so far leaves out of account the fact that Sky's wholesale prices are already kept under close review by the OFT. This is done by the exercise of the Director General's powers under Sections 44 and 50 of the Fair Trading Act 1973. It was as part of this process of supervision that the OFT produced the Wholesale Price review that we referred to earlier. The Director General has obtained from Sky undertakings under which it makes available its channels to other broadcasters in a manner which satisfies the Director General; it keeps separate accounts for that part of its business which consists of the wholesale distribution of its channels, so as to enable the Director General to satisfy himself that, as he put it when announcing the undertakings at the time they were first given in March 1995, "competition between satellite and cable TV services takes place on a fair basis"; and it submits its rate card to the Director General for approval on each occasion that it is changed. If it had been the case that Sky was levying excessive charges against its wholesale customers we must assume that the Director General would have detected this and brought it to an end by now. On this ground too we reject the suggestion that there would be a reduction in wholesale prices as the result of the removal of the restrictions.

 

(E) Applying the "tailpiece" to Rule D.7.3 and the exclusivity clauses

415. What the court is required to do under the so-called "tailpiece" to Section 19 is to consider whether it is satisfied that each restriction under consideration is "not unreasonable" having regard to the balance between (i) the circumstances which enabled the restriction to pass through one of the gateways and (ii) the detriments to the public resulting or likely to result from the restriction.

416. In accordance with what we have already said the circumstances which enable Rule D.7.3 and the exclusivity clauses to pass through gateway (b) are the denial to the public of specific and substantial benefits or advantages in the following respects (the numbers refer to the heads of benefit we have previously set out):

(1) Loss or diminution of the ability to sell television rights in the Premier League championship as a whole;

(2) Loss or diminution of the ability of the Premier League clubs to generate the revenue needed to improve the quality of their stadia, their facilities and their playing squads;

(3) Loss or diminution of the ability to secure an equitable distribution of the television revenue and so to improve competitive balance;

(4) Loss or diminution of the ability of the Premier League to confer benefits outside the Premier League; and

(8) Impeding of competition between broadcasters.

Of these heads (1) and (2) are particularly material to Rule D.7.3, while head (8) is particularly material to the exclusivity clauses. Heads (3) and (4) are material to all of them.

417. Turning to detriments, only those which we have numbered (1), (2) and (4) seem to us to have any weight sufficient to cause them to be taken into account and, for the reasons we have explained, we do not find that weight to be great.

418. Obviously it is not possible to carry out any precise balancing exercise, but we have no doubt that the preponderance is in favour of the circumstances which enable both Rule D.7.3 and the exclusivity clauses to pass through gateway (b). We conclude that these restrictions are, on this basis, not unreasonable and must be declared to be not contrary to the public interest.

419. It is not necessary for us to apply the tailpiece in relation to gateway (h) because, as we have said, we are not satisfied that Rule D.7.3 and the exclusivity clauses pass through this gateway.

 

(F) Application of Section 19 to the "matching offer" restrictions

 

420. What we refer to as the "matching offer" restrictions are those accepted under Clause 8.2 of the Sky Agreement and Clause 7.2 of the BBC Agreement. For convenience we repeat here the terms of the restriction accepted under the Sky Agreement:

"A restriction accepted by each member club to the effect that it will not, during the term mentioned in the 1992 Sky Agreement (i.e. in effect until the end of the 1996-1997 season) supply to any person other than Sky programme material services for the purpose of making satellite broadcasts of Premier League matches intended for viewing within the specified territory unless an offer to supply such services on the same terms shall first have been made to Sky and has not been accepted by Sky within a specified period."

The restriction accepted under the BBC Agreement is equivalent.

421. The only explanations we have received in respect of these restrictions are that they were agreed as something of an afterthought when the Premier League required that Sky and the BBC should make offers to take the rights granted to them in 1992 for a further term on a basis no less advantageous to the Premier League than the terms agreed in 1992; that they did not affect the 1996 negotiations, which were carried out as if Sky and the BBC had no right to match the bids of other parties; and that they were not carried forward into the 1996 Agreement and so became spent. While we accept that these explanations are true we do not consider that they come near to justifying these restrictions. In particular, once the agreement under which a restriction has been accepted has been referred to the court, even after a restriction accepted under it has become spent, the fact that the restriction has ceased to have effect does not relieve the court from the need to consider whether or not it is in the public interest.

422. We find that these restrictions do not pass through any of the gateways. There is thus no need to consider the tailpiece in relation to them. These restrictions must be deemed to be contrary to the public interest and we shall so declare.

 

(G) Application of Section 19 to the restriction on allowing the broadcasting of non-Premier League matches by Premier League clubs

423. The restriction with which we are concerned here is that accepted under Clause 15.2 of the Sky Agreement which is formulated as follows:

" A restriction accepted by each member club to the effect that it will not during the term specified in the 1992 Sky Agreement supply to any person other than Sky programme material services for the purpose of making a live satellite broadcast within the specified territory of a football match played at the member club's home ground which is not a Premier League match or a match played in certain other specified competitions, unless such services have first been offered to Sky on the same terms and that offer has not been accepted by Sky within a specified period"

424. The justification which is advanced for this restriction is that, without it, Premier League clubs might be free to by-pass the Sky Agreement by devoting their efforts to the playing of football matches which are not Premier League matches and selling the television rights to such matches to a broadcaster other than Sky. It is to be noted that it only applies in relation to matches that are played at a member club's home ground and that it does not restrict the clubs from playing such matches or compel them to allow Sky to broadcast them. All that the restriction requires is that if any club wishes to sell the television rights to such a match it must first offer those rights to Sky.

425. We think that the restriction is one which falls within the scope of the 1976 Act and that Section 19 has to be applied to it. But we accept the argument that without some such restriction as this the exclusivity clause in the Sky Agreement could be rendered ineffective or have its effect substantially diluted. For the reasons already stated, we consider that the exclusivity clauses operate in the public interest. We are satisfied that the restriction now under consideration is reasonably required for the maintenance of the exclusivity clause in the Sky Agreement and that, subject to the application of the tailpiece, it passes through gateway (g).

426. As to detriments, the Director General claims that this restriction extends the detrimental effects of the exclusivity clauses from Premier League matches to other matches which involve Premier League clubs playing at home. We think that it is correct that these detrimental effects are extended, but it appears to us that the extension is very modest in degree. It does not cause us to take a different view of the balance of benefits and detriments which would render this restriction unreasonable when, as we have already concluded, the restrictions resulting from the exclusivity clauses are not unreasonable.

We find that this restriction is not contrary to the public interest and shall so declare.

 

(H) Application of Section 19 to the ancillary Premier League restrictions

427. The compendious expression "ancillary Premier League restrictions" covers three otherwise unconnected restrictions which we shall consider separately, prefacing each by the repetition of the relevant formulation.

6. Restriction accepted under Rule B.20 of the Premier League Rules

A restriction accepted by each member club to the effect that it will not, by taking part in matches other than Premier League matches, provide football entertainment services which interfere with the home Premier League matches of other member clubs through offering competition for potential viewers or spectators.

428. This restriction, as the sub-heading indicates, is drawn from Rule B.20, which appears to have been in effect from the inception of the Premier League until the beginning of the 1998/99 season. The material terms of it were:

"20.1 Clubs shall not ... improperly interfere with other Clubs' home League Matches."

429. However, for the 1998/99 season Rule B.20 has been replaced by Rule E.8 which provides that

"8. A Club shall not arrange to play a friendly match during the Season:

8.1 until the dates of League Matches for that Season have been fixed and published in accordance with Rule E.1; or

8.2 so that it adversely affects a League Match."

430. The restriction is thus now confined to friendly matches and Rule E.8.2 constitutes not an absolute bar on the playing of such matches but a prohibition against doing so in such a way as to "adversely affect" a Premier League match. (We are not at this hearing concerned with Rule E.8.1. The old Rule B.20 contained a similar provision, but the Director General has not sought to bring any restriction arising from this prohibition within the range of restrictions which are to be considered).

431. We heard no evidence and little argument directed to this restriction. But it seems to us that in its present form it cannot be said to restrict or discourage competition to a material degree in any trade or industry. The only trade or industry concerned with the playing or broadcasting of friendly matches is that of broadcasting generally. But for that trade or industry the broadcasting of friendly matches cannot be of more than minuscule importance. The position is somewhat less straightforward in respect of the restriction accepted under the old Rule B.20, which related more generally to "improper interference" with another club's home Premier League Matches. "Improper interference" is a vague expression, but what seems to be aimed at is the staging of a non-Premier League match by one or more strong and popular Premier League clubs at a time or place which was likely to reduce to a significant extent the attendance at a Premier League match played between two less popular clubs. It seems to us to be entirely reasonable for the members clubs of the Premier League to have such a rule and we cannot see that it restricts or discourages competition either in the provision of football entertainment services or in television broadcasting.

432. Accordingly we consider that , both in its original form under Rule B.20 and in its new form under Rule E.8, this restriction passes through gateway (h). We do not see any countervailing detriments which are of any significance. We conclude that this restriction too is not contrary to the public interest.

 

7. Restriction accepted under Rule B.27 of the Premier League Rules

A restriction accepted by each member club to the effect that (subject to certain exceptions) it will not play in any competition other than the Premier League competition without the consent of the board of the Premier League.

433. Rule B.27 has now been replaced by Rule E.9 which is to substantially the same effect. It is, we think, quite a usual provision to find in the rules of a sports league. It is necessary in order to ensure that clubs competing in the league give the league competition a due degree of priority. In assessing its impact the crucial factor is, in our view, the extent of the exceptions. These are the European Champion Club's Cup, the European Cup Winner's Cup, the UEFA Cup, the FA Cup, the Football League Cup and certain County Association competitions. This list appears to us to cover the full range of competitive matches in which a Premier League club might legitimately wish to participate. The only omission which is apparent to us is the recently announced World Club Championship and it appears from press reports that the Premier League has given Manchester United consent to participate in this. We do not think it can be said that the residual prohibition imposed by the Rule either does or is likely to restrict or distort competition. Nor does it appear to us to involve any detriment. Indeed no consequential detriment is alleged by the Director General. We therefore find that this restriction is not contrary to the public interest.

8. Restriction accepted under Rule D.6.1 of the Premier League Rules

A restriction accepted by each member club to the effect that it will not, without the consent of the board of the Premier League provide football entertainment services by playing in any football match outside England and Wales.

434. This restriction is drawn from a rule which provides that

"All Clubs proposing to play a match outside of England and Wales must first apply to the Board on the official Football Association Form which (if approved) will be forwarded to the Football Association"

The rule is now numbered C.6.1, but its terms remain unchanged and we shall continue to refer to it by its old numbering. It reflects a FIFA regulation which requires a club's national association to give consent before the club plays abroad and Rule 12(b) of the FA Rules which require a national club which desires to play abroad to apply to the FA for consent not less than 28 days beforehand. These rules do not, however, require any consent to be obtained from a league to which the club wishing to play abroad belongs, so that Rule D.6.1 adds something to the FA rule in this respect.

435. Mr. Nicholas Coward, the company secretary of the FA, said that the FA rule requiring consent was part of a mechanism for achieving comity between national associations in the global "football family". He said it was meant not to prevent sporting events from taking place but to facilitate these events by seeking to ensure that they take place in a manner which promotes the sport. He was not aware of any case in which the FA had, under its rule 12(b), refused consent to a club wishing to play abroad. There was, however, before the court correspondence which showed that the Premier League had in 1998 invoked Rule D.6.1 in support of its resistance to what it believed to be a desire by one or more member clubs of the Premier League to join a European super league. The proposal for such a league has so far come to nothing and may never have been a realistic one, but the correspondence which took place in 1998 indicates that Rule D.6.1 may have some "bite". We are not satisfied that it can pass through gateway (h). It was also claimed, at any rate so far as the pleadings are concerned, that the abrogation of Rule D.6.1 will deprive the public of specific and substantial benefits in that it could expose Premier League clubs to sanctions imposed by FIFA which may include exclusion of Premier League clubs from European Cup Competition matches and so deprive the public of the benefit of viewing such matches involving Premier League clubs. This claim is fallacious. Premier League clubs could only be exposed to such sanctions if and to the extent that they act in breach of the FIFA and FA rules, which are not under challenge in these proceedings and will continue to have effect regardless of the fate of Rule D.6.1. In any event the notion that any infringement could lead to such dire sanctions that Rule D.6.1 is needed to protect Premier League clubs from the consequences of their own folly in defying the FA and FIFA seems to us to be so unrealistic as to provide no basis for passing through gateway (b).

We therefore find that Rule D.6.1 does not pass through any gateway and must be declared to be contrary to the public interest.

Section IV: Summary of our conclusions on the case as a whole

436. We shall declare that the following restrictions as listed by us earlier in this judgment are not contrary to the public interest:

1. Restriction accepted under Rule D.7.3

A restriction accepted by each "member club" to the effect that it will not, without the consent of the board of directors of the Premier League, supply "programme material services" for the purpose of facilitating the televising, recording or transmission by cable or satellite or any similar method of Premier League matches.

2. Restriction accepted under Clause 2.2 of the 1992 Sky Agreement and Clause 2.3 of the 1992 BBC Agreement.

A restriction accepted by each member club to the effect that it will not during the period specified in each agreement supply to persons other than Sky and the BBC programme material services for the purpose of filming or recording any Premier League match or of making any terrestrial broadcast or transmission by satellite or cable which is intended for reception within the specified territory.

3. Restriction accepted under Clause 15.2 of the 1992 Sky Agreement

A restriction accepted by each member club to the effect that it will not during the term specified in the 1992 Sky Agreement supply to any person other than Sky programme material services for the purpose of making a live satellite broadcast within the specified territory of a football match played at the member club's home ground which is not a Premier League match or a match played in certain other specified competitions, unless such services have first been offered to Sky on the same terms and that offer has not been accepted by Sky within a specified period

6. Restriction accepted under Rule B.20 of the Premier League Rules

A restriction accepted by each member club to the effect that it will not, by taking part in matches other than Premier League matches, provide football entertainment services (i.e. a component part of what we have referred to as programme material services) which interfere with the home Premier League matches of other member clubs through offering competition for potential viewers or spectators.

7. Restriction accepted under Rule B.27 of the Premier League Rules

A restriction accepted by each member club to the effect that (subject to certain exceptions) it will not play in any competition other than the Premier League competition without the consent of the board of the Premier League.

 

437. We shall declare that the following restrictions are contrary to the public interest:

4. Restriction accepted under Clause 8.2 of the 1992 Sky Agreement.

A restriction accepted by each member club to the effect that it will not, during the term mentioned in the 1992 Sky Agreement (i.e. in effect until the end of the 1996-1997 season) supply to any person other than Sky programme material services for the purpose of making satellite broadcasts of Premier League matches intended for viewing within the specified territory unless an offer to supply such services on the same terms shall first have been made to Sky and has not been accepted by Sky within a specified period.

5. Restriction accepted under Clause 7.2 of the 1992 BBC Agreement

A restriction accepted by each member club to the effect that it will not, for the period stated in the 1992 BBC Agreement, supply to any person other than the BBC programme material services for the purpose of making terrestrial broadcasts of Premier League matches in recorded and edited form unless an offer to supply such services on the same terms has been made to the BBC and not accepted by the BBC within a specified period.

 

8. Restriction accepted under Rule D.6.1 of the Premier League Rules

A restriction accepted by each member club to the effect that it will not, without the consent of the board of the Premier League provide football entertainment services by playing in any football match outside England and Wales.

438. Although we have thought it convenient to set out in this way exactly which restrictions we uphold and which we condemn, we shall be prepared to hear argument about the precise formulation of the restrictions for the purpose of our order. In view of the dispute about whether the obligations in question amounted to restrictions at all this aspect may not yet have been fully considered by the respondents.