Broadcasting of Sports Content in Brazil
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143 Broadcasting of Sports Content in Brazil: Relevant Discussions from a Competition Law Perspective Ricardo Ferreira Pastore, Felipe Zolezi Pelussi and Raíssa Leite de Freitas Paixão* Competition in the market for the broadcasting of sports content has been a matter of concern for the Brazilian antitrust authority (Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica or CADE)) for the past two decades. Overall, during this period, CADE has undertaken investigations into negotiations between football leagues, content producers, channel programmers and pay-TV operators for the licensing of the transmission rights of major sports events, as well as reviewed relevant merger cases affecting these negotiations and other aspects of the market. Furthermore, CADE has more recently started to discuss to what extent – if any – over-the-top (OTT) platforms are able to compete with traditional players in the pay-TV industry, such as programmers of sports channels and pay-TV operators. As the authors argue in this article, these discussions put into perspective CADE’s primary concerns related to the broadcasting of sports content – namely, access to sports content and how this content is delivered to end consumers. * Ricardo Ferreira Pastore LLM, Stanford Law School, is a partner at Pereira Neto | Macedo Advogados; Felipe Zolezi Pelussi LLB, University of São Paulo Law School, is an associate at the same firm; and Raíssa Leite de Freitas Paixão is a trainee at the firm and a law student at FGV-SP. The authors would like to thank Daniel Favoretto Rocha for his support and assistance with the research of the precedents discussed in this article. 144 BUSINESS LAW INTERNATIONAL Vol 21 No 2 May 2020 Introduction In Brazil, the pay-TV market is subject to intense public scrutiny, as seen in recent discussions held before the national competition authority, the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica or CADE).1 Indeed, recent cases brought before CADE have clearly shown the importance of understanding how this market works, given that it involves negotiations between players across the value chain with potentially different interests, and, perhaps more importantly, how consumers have been accessing audio-visual content more recently. This discussion applies, in particular, to sports channels. In Brazil, sports broadcasting is one of the most successful segments in the pay-TV market. In December 2018, according to official data released by Ancine,2 the Brazilian audio-visual regulator, sports-dedicated pay-TV channels accounted for 13.2 per cent of total subscriptions in Brazil, meaning it was the third-most- representative category of pay-TV channels in terms of numbers of channels and subscribers.3 In addition, according to data compiled by Kantar Ibope Media, a local rating company, five of the 30 most-watched channels in pay- TV in September 2019 were exclusively dedicated to sports content.4 Under Law No 12,485/2011 (the ‘SeAC Law’), agents in the audio-visual industry are separated into four categories, according to their activities in this market: content producers, programmers, packagers and operators (or distributors) (see Figure 1). Also, according to this legislation, while producers, programmers and packagers are subject to regulation and inspection by Ancine, pay-TV distributors are regarded as telecommunications 1 CADE has three departments, the Administrative Tribunal (the ‘Tribunal’), the General Superintendence (GS) and the Department of Economic Studies (DEE). The GS is responsible for investigating anti-competitive conduct. On the conclusion of such investigations, the GS issues an opinion recommending that the Tribunal either dismisses the investigation or imposes fines and other applicable sanctions on the defendants. The GS is also responsible for investigating merger cases and at the end of such investigations may recommend the approval of these mergers or challenge the mergers before the Tribunal for the blocking or imposition of conditions for the approval of these mergers. The Tribunal is composed of seven commissioners and is responsible for issuing final decisions on antitrust investigations and merger cases challenged to the Tribunal. Finally, the DEE provides economic support to both the GS and the Tribunal. 2 Agência Nacional do Cinema or Ancine (National Film Agency). 3 Ancine, ‘Assinantes no Mercado de Programação na TV por Assinatura 2019’ (Ancine 2019), 15, available at https://oca.ancine.gov.br/sites/default/files/repositorio/pdf/ informe_assinantes_no_mercado_de_programacao_-_versao_diagramada.pdf accessed 16 September 2019. 4 Ricardo Feltrin, ‘Exclusivo: 30 canais mais vistos por quem assina TV paga no Brasil’ Uol (São Paulo, 21 September 2019) https://tvefamosos.uol.com.br/noticias/ ooops/2019/09/21/exclusivo-30-canais-mais-vistos-por-quem-assina-tv-paga-no-brasil.htm accessed 28 October 2019. BROADCASTING OF SPORTS CONTENT IN BRAZIL 145 services providers and, as such, are subject to the jurisdiction of Anatel5 – the Brazilian telecommunications regulator. Finally, under Law No 12,529/2011 (the ‘Competition Law’), CADE has the authority to control mergers taking place in this industry (provided that certain legal thresholds are met), as well as to investigate and punish any conduct found to be in breach of competition rules. Figure 1: Pay-TV value chain in Brazil Adapted from AT&T Inc, Time Warner Inc Merger Control no 08700.001390/2017-14 (2017), GS Opinion 5, p 13. Overall, from an antitrust standpoint, two main discussions can currently be identified concerning sports broadcasting in Brazil. The first relates to access to sports content. Historically, the more pay-TV sports channels can broadcast significant events – notably, local events, such as the Brasileirão, the most relevant professional football league in Brazil – the more they are popular with consumers and advertisers. As a result, content producers and programmers often compete between themselves and with other market players (notably, public networks) for the transmission rights of major events. In contrast, pay-TV operators frequently engage in negotiations with programmers to license sports channels and to have a competitive line-up in the market. In recent years, CADE has investigated commercial negotiations between the owners of transmission rights (football clubs and their associations), programmers and pay-TV operators to determine whether there is any indication of anti-competitive behaviour in this respect. Another discussion relates to how pay-TV content – and, therefore, sports content – is delivered to end consumers in Brazil. As in other jurisdictions, Brazilian regulators have increasingly been dealing with the provision of audio-visual content through the internet by over-the-top (OTT) platforms. In particular, they have been keen to understand to what extent these agents may – or will – affect competition in the pay-TV market. 5 Agência Nacional de Telecomunicações or Anatel (National Telecommunications Agency). 146 BUSINESS LAW INTERNATIONAL Vol 21 No 2 May 2020 Access to sports content: negotiations between owners of broadcasting rights, programmers and pay-TV operators As noted, the current regulation of the pay-TV market in Brazil rests on the view that the value chain of this market is composed of content producers, programmers, packagers and operators (or distributors). Since these players perform activities that are vertically related across the value chain, they often have to negotiate access to content and other assets with other companies to carry out their activities.6 In the sports channels segment, two types of negotiation stand out in this respect: (1) negotiations between owners of transmission rights for sports events (such as football clubs and associations)7 and content producers or programmers, related to the granting of such rights; and (2) negotiations between programmers and packagers or pay-TV operators, related to the licensing of pay-TV channels. Over the past 20 years, CADE has assessed the relationship between the rights holders of transmission rights, programmers and pay-TV operators and its likely effects on competition through antitrust probes or merger reviews. To date, CADE has not unilaterally imposed fines or any other penalties or blocked a transaction altogether based on a finding of potential or actual anti- competitive effects in the market. However, CADE has negotiated settlements or merger remedies in relevant cases that are further discussed in this article. Overall, CADE’s concerns regarding negotiations between the owners of broadcasting rights, programmers and pay-TV operators have involved potential or actual horizontal or vertical anti-competitive effects in the pay- TV sports channels segment. The proceeding subsections briefly summarise the main concerns raised by CADE from both a horizontal and a vertical standpoint, as well as the remedies adopted to address such concerns, in the past two decades. 6 Also, it is noteworthy that the SeAC Law limits cross-ownership between content producers/programmers and pay-TV operators. Under this legislation, content producers and/or programmers cannot hold 50 per cent or more of a pay-TV operator’s total and voting capital. Conversely, pay-TV operators cannot hold 30 per cent or more of a content producer and/or programmer’s total and voting capital. These restrictions are subject to intense discussions before Anatel, the telecommunications regulator,