Friday, 21 November 2014

The ref shouldn't reach for his pocket

You've got a valuable piece of intellectual or physical property. What, from a competition law perspective, can you do with it?

That might seem a daftly broad (or broadly daft) question to ask, but it keeps coming up, and it rather bothers me, since if there isn't a clear answer, you'd imagine that there could be a potentially costly chilling effect on the (often sizeable and specialised) investment involved.

What got me thinking about it, again, is the current fuss in the UK over the television rights to live coverage of Premier League soccer games. Ofcom, the relevant regulator, has agreed to take a look: here's its news release, which doesn't give a great deal of context, so here are a piece in the FT and a piece in the Daily Telegraph which give some background (hopefully neither is paywalled for the casual browser - I can't easily tell, as I've got a sub to both of them). Or here's the Guardian's coverage.

The gist is that the rights to the Premier League coverage have been vigorously contested at auction by Sky and BT, sending the price up, and in turn (allegedly) leading to high prices for end consumers watching the games on the box. Virgin, who have lost out on the rights, have complained. Ofcom has said it'll have a look, while pointing out that agreeing to have a look doesn't mean it's accepted that there is indeed a competition issue.

I don't think there is. For the life of me I can't see a competition problem here.

I don't see any issue with the clubs getting together to sell the rights to all the games. Alternatives would have large, inefficient transaction costs and wouldn't be attractive to broadcasters or end consumers. And in any event I'd say a football league would fly through any 'joint venture' provisions in competition law.

And I don't see any issue with an auction of the rights to the highest bidder. Competition for the market is fine by me, especially (as seems to be the case here) the auction opportunities come along reasonably often and are open to anyone with enough zeroes in their bank account. Indeed, I would say that Virgin's gripe is entirely because there has been robust competition for the prize.

And I'm not enamoured of the logic behind the European Commission's approach, which (I gather) at one point required the rights to go to at least two parties. Should J K Rowling have had to offer the Harry Potter books to two different publishers?

I can see instances where there may be an essential piece of infrastructure (spectrum, for example), where (unless you're a rapacious sell-the-airwaves-for-the-most-I-can-get government, and if you don't believe they exist, then you didn't notice how the Aussies privatised Sydney Airport) you wouldn't want to award a monopoly because of the adverse consequences of downstream market power.

But football?

I'm not saying that it's always going to be in football's own best interest to maximise their short-term profit: a longer-term view of the end game might see a better outcome from a wider consumer base rather than a narrower one, for example. It may not even be in a broadcaster's best long-term interests to hoover up all the rights on offer: not if you don't want to make yourself the target of populist regulation. And sometimes non-economic factors will need to get a look in, too (in spectrum allocation, for example, you might want to think of concentration of media ownership from a democratic point of view).

But normally, if someone's decided, eyes wide open, that they want to auction a right for the best short-term price, and someone's decided, also eyes open, to put the cash down and buy it, I can't see from a competition perspective why anyone should stand in the way.

And while we're in the general territory of football and what people can do with what they own, can the owner of a football stadium provide the chips and beer itself? Or must it allow third parties access to the chips and beer 'markets' at its stadium? Will it be okay (Premier League style) to award the concessions for beer and chips to the highest bidder, or must it spread the market around? And if you think this a fanciful example of competition law overreach, it's actually cropped up in New Zealand: can an airport award one onsite 'duty free' franchise to the highest bidder?

There'll be exceptions, but for me, there won't often be good reason to interfere with a competitive auction where willing buyer meets willing seller.

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