Antitrust Alert: EU Court Restricts Member State Freedom to Impose "Must Carry" Obligations on Network Operators

The Court of Justice of the European Union (CJEU) has ruled that Belgian must-carry rules are incompatible with EU law, as they lack clearly defined, transparent and non-discriminatory criteria for awarding must-carry status to broadcast content.  Must-carry rules obligate network operators (essentially cable and DSL operators) to carry radio and television broadcasts that are considered of general interest.  The CJEU's 3 March 2011 judgment restricts Member State discretion when imposing must-carry obligations on the basis of public interest objectives and provides more legal certainty.

Background.  The judgment follows an infringement action brought by the European Commission against Belgium.  The Commission sought a declaration from the Court that a Belgian Law on distribution networks for broadcasting did not correctly implement Article 31 of the Universal Service Directive (Directive 2002/22/EC of 7 March 2002, hereafter "USD"): 

• the general interest objectives, on the basis of which must carry obligations could be imposed on network operators, were not clearly defined
• the procedure for granting must-carry status to TV broadcasts was not sufficiently transparent
• the legislation at issue disregarded the scope of the obligations that can be imposed on telecoms operators under Article 31 USD.

The Court upheld all three complaints, concluding that the Belgian law did not correctly implement Article 31 USD and was therefore also incompatible with the Treaty on the Functioning of the EU (TFEU), which guarantees the free movement of services within the EU.

Requirement to base must-carry obligations on clearly defined public interest objectives.  The challenged legislation justified imposing must-carry obligations on the need to maintain plurality and cultural diversity.  The Court accepted that "a cultural policy may constitute an overriding requirement relating to the general interest which justifies a restriction of the freedom to provide services."  The Court also conceded that, since "the maintenance of pluralism…is connected with the fundamental right of freedom of expression, the national authorities have a wide margin of discretion in that regard."  However, the Court stressed that "measures designed to implement a cultural policy must in no case be disproportionate in relation to their aim, and that the manner in which they are applied must not bring about discrimination against nationals of other Member States."  The Court then concluded that "the mere statement of a general policy objective, which is not accompanied by any additional factor capable of enabling operators to determine in advance the nature and effect of the precise conditions and obligations to be fulfilled if they apply for the award of must-carry status," does not fulfill this proportionality requirement.  Building further upon its earlier case law, the Court held that the manner in which the must-carry obligations are applied must be subject to a transparent procedure based on objective non-discriminatory criteria known in advance.  It found that the concerned national provisions lacked the requisite clarity.

Requirement to assess must-carry status on a channel by channel basis.  The Court also struck down the national provisions that automatically granted must-carry status to all broadcasts of private broadcasters designated as beneficiaries of such obligations.  Relying on earlier case law, the Court held that must-carry status should not be automatically awarded to all television channels transmitted by a same private broadcaster, but must be strictly limited to those channels having an overall content that is appropriate for the purpose of attaining the public interest objective pursued by the measure. Consequently, national authorities must in each case specify which channels are to be granted must-carry status.

The attributing authority must show that must-carry obligations are proportionate.  The Court noted that under Article 31(1) USD, must-carry obligations may be imposed on operators of electronic communications networks only where a significant number of end-users of those networks use them as their principal means of receiving radio and television programs.  By contrast, the Belgian law permits the Minister to relieve an operator from the must-carry obligations if this operator shows that there are insufficient end-users who use such network as their principal means of receiving broadcast television programs, such that the necessary investment for implementing the obligations would be unreasonable.  The Court concluded that shifting the burden of proof – to demonstrate that a significant number of end-users use a given network to receive broadcast content – away from the national authorities and onto the network operator, was inconsistent with Article 31(1) USD.

Conclusion. The judgment more narrowly circumscribes Member State discretion when imposing must-carry obligations on network operators.  Merely stating a public interest objective is not enough to justify such obligations: the national authorities must be able to justify, on the basis of objective and transparent criteria provided in advance, why awarding must-carry status to a specific channel is necessary to achieve that objective.  In addition, Member States cannot shift the burden of proof to network operators to demonstrate that a significant number of users use a network to receive television broadcasts.  Thus, national authorities can no longer impose must-carry obligations on network operators without proper justification. At the same time, private broadcasters must be informed in advance of the objective criteria to be met in order to qualify for such status.  The judgment reduces Member State's margin of discretion in granting must-carry status and gives more legal certainty to all parties involved.

Lawyer Contacts

For more information, please contact your principal Jones Day representative or either of the lawyers listed below.

Serge Clerckx
Brussels
+ 32.2.645.15.03
sclerckx@jonesday.com

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