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EU launches antitrust probe against Disney, other film studios

The European Union contends that the studios and British pay-TV provider Sky UK are violating antitrust regulations by restricting the broadcasting of studio films to only the UK and Ireland.

Disney and other films studios may be facing legal trouble in Europe. Disney

Disney and several other US film studios are under investigation by the European Union for possible antitrust violations.

On Thursday, the EU's European Commission announced that it sent a Statement of Objections to pay-TV provider Sky UK and six US film studios: Disney, NBCUniversal, Paramount Pictures, Sony, Twentieth Century Fox and Warner Bros. The EC is charging that the studios and Sky UK have jointly set up contracts that prevent Sky UK from offering access to films to Europeans outside of the UK and Ireland.

The preliminary view outlined in the EC's Statement of Objections contends that Sky UK -- due to restrictions in the contracts it signed with studios -- does not grant requests for its pay-TV services from consumers in other parts of the European Union. Without the contract restrictions, Sky UK could choose to sell its pay-TV services beyond the UK and Ireland, according to the EC. If all this is true, the studios and Sky UK would be in violation of European laws designed to prevent antitrust agreements.

The probe fits into the EU's Digital Single Market strategy, which is seeking to reform copyright rules and remove geographic barriers across different European nations for both online "geo-blocking," which restricts content to certain countries and locations, and real-world parcel delivery. In the charge against Sky UK and the film studios, the EC wants to enable users who buy films, music and other online content at home to access them if they travel from one European country to another.

The Digital Single Market strategy is a key part of the European Commission's long-running effort to replace today's divided high-tech services with a more unified market that transcends country borders. In the view of its advocates, the digital single market will help European businesses achieve the scale needed to avoid being dominated by competitors in the US and Asia.

As part of the contract restrictions, Sky UK blocks access to films outside the UK and Ireland through its online and satellite pay-TV services using the geo-blocking technology, the EC contends. Further, some of the clauses discovered by the EC extend to broadcasters other than Sky UK, also preventing them from selling their pay-TV services outside specific areas. These other broadcasters include Canal Plus of France, Sky Italia of Italy, Sky Deutschland of Germany and DTS of Spain.

A Statement of Objections is just the prelimary step in an EC probe over possible antitrust violations. The Commission has to wait for the companies to respond to the complaint before it can proceed further.

"European consumers want to watch the pay-TV channels of their choice regardless of where they live or travel in the EU," Margrethe Vestager, the EU Commissioner in charge of competition policy, said in a statement. "Our investigation shows that they cannot do this today, also because licensing agreements between the major film studios and Sky UK do not allow consumers in other EU countries to access Sky's UK and Irish pay-TV services, via satellite or online. We believe that this may be in breach of EU competition rules. The studios and Sky UK now have the chance to respond to our concerns."

Responding to CNET's request for comment, a Disney spokesperson released this statement:

The Walt Disney Company is a leader in embracing new and innovative digital technologies that bring its unique entertainment to families and fans worldwide. Our approach is one that supports local creative industries, local digital and broadcast partners and most importantly consumers in every country across the EU. The impact of the Commission's analysis is destructive of consumer value and we will oppose the proposed action vigorously.

Update, July 24 at 5:60 a.m. PT: Adds comment from Disney.