Geoblocking in Digital Online Distribution: Unfair? Anticompetitive?

Transcription

1 Geoblocking in Digital Online Distribution: Unfair? Anticompetitive? Convegno Mercati Territoriali, Geoblocking ed Economia Digitale Roma Tre 24 Novembre 2016 Dr 1

2 we cannot tolerate consumers being treated differently purely on the grounds of their residence or nationality Disneyland argued when offers were properly compared there were no differences and investigators found possible but fiddly to access offers on other national websites But altered website so that consumers can now, via the homepage, choose between all different national sites and compare offers, and buy tickets online on any of the national sites for the same premium package, French consumers will pay 1,346 while British visitors are charged 1,870 and Germans 2,447 no objective reasons Disneland Paris illegally blocked access to cheap deals available to French residents residence-based payment and delivery rules, selective offers, redirecting customers to more expensive national websites 2

3 Where we (seem to) stand e-commerce Preliminary Report geoblocking -type practices (= preventing consumers from accessing or buying from sites in other countries) frequently found in retailing of goods, and *may* contravene A101 => possible enforcement on a case-by-case basis; typically/prevalently found in distribution of digital content => competitive effects to be evaluated on a case-by-case basis Pending DG Comp enforcement action against Hollywood Studios/ Sky for restrictions to passive online distribution of Audiovisual Modernisation of EU Copyright Rules draft proposals seen as fudge to allow online passive sales for some services only, while preserving territorial restriction for key (premium) content Draft legislation on geoblocking excludes inter alia Audiovisual -

4 Do economists have much to say? Geoblocking is a form of price discrimination, conditioning on geography Price discrimination = price differences that do not reflect differences in costs. Normal business conduct in most traditional markets Different prices reflect differences in willingness to pay of different consumers no need to be justified by cost differences, pricing can depend also on demandside factors Effects on consumer welfare (compared to uniform pricing) ambiguous a priori Some consumers may pay less and others may pay more, and new groups of consumers may be served: depends on output effects: effects unclear ex ante eliminating restrictions supporting price discrimination may lead prices to converge, but not necessarily decline on average OUTPUT? Price discrimination can significantly enhance consumer welfare BUT no observable criteria to distinguish ex ante whether PD good/bad Where PD is allowed, the firm can target and compete directly for the marginal consumer = prices will go down. Other than this, we cannot say 4

5 Pay TV case: passive sales in Audiovisual ( Cross-Border Access to Pay TV Content ) Objection to clauses designed to restrict passive sales (i.e. individuals ability to purchase pay TV content in other countries) which are deemed per se, by object infringement Objection not to territorial licensing per se, but difficult to reconcile this with view that geo-filtering preventing passive selling is anticompetitive by object: once the benefits of territoriality are recognised, surely an empirical question whether geo-filtering is necessary to harness these benefits. And mitigating strategies may be implemented by rational content providers that could undermine benefits to consumers. SO takes as axiomatic that restrictions on cross-border purchases are anticompetitive, but from the perspective of economic analysis no presumption that eliminating restrictions on cross-border selling (whether active or passive) unambiguously benefits consumers. 5

6 What mitigating responses could be adopted? If removing the Clauses changes consumer behaviour in a way that affects the profits of studios and broadcasters, assessment should take into account responses by various actors Removal of the Clauses induces crossborder arbitrage by consumers. This reduces profitability of broadcasters Reduced value of content to broadcasters results in lower royalties for content producers Content producers take STRATEGIC ACTION to mitigate these effects Final step should be part of the assessment: - Effects on incentives to distribute content - Effects on incentives to produce content - Impact on transaction costs (monitoring compliance with copyright ) 6

7 e.g. distribution: content producers may have incentive to employ a sliding scale of responses to limit arbitrage Potential response Reduces arbitrage risk by: Consumer impact Increase per-subscriber royalty, particularly in low-wtp countries Making content more expensive in low-price countries Higher prices; weaker incentives for broadcaster promotion/ investment; double marginalisation issues Degrade quality in low price countries (e.g. no HD content, later releases) Requiring dubbing into local language (in place of subtitling) Making content less attractive in low-price countries Making available only content consumers in other countries cannot understand Worse-quality content for consumers in low price countries Harms consumers who want English content. Marginal content just not provided Favour geographically-limited infrastructure like cable in lowprice countries Withdraw content altogether from low-price countries Making available content to cable distributors who can t sell cross-border Making content unavailable in low-wtp countries Reduced consumer choice; hampers development of OTT and competition across platforms Consumers either pay high prices or go without entirely 7

8 Likely that some of these effects would materialise Prices for Pay-TV content vary significantly across countries Broadcasters typically provide multiple language options The EPL s response to Murphy shows owners of content will take steps to prevent arbitrage opportunities EEA revenues substantially driven by a handful of core markets 8

9 Large disparities in studios revenues across countries Subscription Pay-TV & SVOD TVOD Would a rational distributor let revenues in core markets be eroded by arbitrage into insignificant markets without reacting somehow? 9

10 Outcome pending meanwhile, Copyright Modernisation and draft legislation Modernisation of EU Copyright Rules current compromise proposals Extension of country of origin principle (=copyright-relevant act takes place solely in the member state were broadcaster is located) for online ancillary services (catch up services but not VOD) essentially would allow passive sales for online broadcasters BUT does not deal with contractual restrictions between rightsholders and distributors (pending pay TV case) meaning geofiltering of premium AV content (sport, films) allowed Draft geoblocking legislation explicitly excludes Audiovisual sector but e-commerce Report leaves door open to case-by-case analysis 10

11 Back to e-commerce Report on geoblocking Single market principle as a major policy motivation is not competition policy as we normally understand it. Indeed can conflict with competition policy s overarching goal of promoting consumer welfare Concern that possible follow-up competition enforcement could be a rollback against discrimination, instead of anticompetitive foreclosure (which should be the benchmark) Preliminary Report acknowledges free riding as motivation for territorial restrictions, and for selective distribution, opens the door to dual (online/offline) pricing. But major outstanding issues in our treatment of vertical restraints that haunt us (on steroids) in an online world at time when online distribution is growing exponentially, multisided platforms, firms rethinking distribution formats and experimenting with multichannels 11

12 Big Ideology, but economic merit?. 1. Internal Market agenda forever lurking, now official mainstream goal (Digital Single Market Strategy, online inquiry) 2. Consumers hate high prices is the only policy everyone can agree on. 3. Unfinished business with the Vertical Guidelines coming to haunt us with a vengeance in the online world 4. The return of discrimination as abuse => Antitrust enforcement in online space in danger of becoming less effects-based and more ideological than ever 12

13 London Tel +44 (0) Bishopsgate London EC2M 3XD United Kingdom Brussels Tel +32 (0) Avenue Louise B-1050 Brussels Belgium Paris Tel +33 (0) Avenue de l Opéra Paris France Sydney Tel +61 (0) Level 23, Tower Oxford Street Bondi Junction NSW 2022 Australia ccaffarra@crai.com Dr 13