Competition and Cross-media Ownership Concerns

Competition Complaints

The Authority concluded investigations into two competition complaint cases concerning exclusivity to broadcasting rights in the year under review. The details of the two complaints were given below:

On the complaint against HKCTV's acquisition of exclusive rights to football events and the exercise of such rights, the Authority found that the duration and scope of the broadcast rights were not excessive. There was also a wide range of alternative football/sports content available for other operators to acquire and include in their services. In relation to content bundling, there were insufficient grounds to find that customers selected HKCTV primarily to access the football programming and in doing so, were forced to purchase content that they would not otherwise choose to purchase. As regards the 30-month contract period associated with the "Euro 2004" promotion, the Authority considered that commitment to a longer term contract had the benefit of reduced monthly subscription fees. Moreover the 30-month contract period was not mandatory, and subscribers could choose to purchase the same content for shorter periods. The Authority therefore concluded that HKCTV had not breached the relevant competition provisions.

Regarding the complaints against TVB and Galaxy for engaging in anti-competitive conduct in the pay TV market through the supply and acquisition of exclusive broadcast rights to the drama series "Jewel in the Palace"(大長今) and four television channels, the Authority concluded that the conduct of TVB and Galaxy did not have the purpose or effect of preventing, distorting or substantially restricting competition in a television programme service market as the scope of the exclusive content was somewhat limited and there was a wide range of alternative content available for other operators to acquire. There was no evidence that competition in the pay TV market was being adversely affected by the supply and acquisition of broadcast rights. Nor did the conduct of TVB have the effect of foreclosing the supply of Cantonese language content.

Enforcement of the TVB-Galaxy's "Firewall" Provisions

The licences of TVB and Galaxy contain a number of special conditions²⁰ in their respective licenses as a safeguard to ensure an effective "firewall" between the operations of the two companies to mitigate concerns of unfair competition and media concentration and prevent cross-subsidization or preferential treatment between the two companies. During the year under review, the Authority processed five complaint cases alleging breaches of the firewall provisions in the licences of TVB and Galaxy. The first two cases concerned the failure of TVB and Galaxy to notify other licensees of adequate material details of two transactions on exclusive supply of television channels and provision of marketing research service. TVB and Galaxy were advised to observe more closely the relevant licence provisions and to re-issue the notifications with adequate material details of the transactions.

The third case was about TVB's supply of the Cantonese-dubbed version of the Korean drama series "Jewel in the Palace"(大長今) to Galaxy's SuperSun, within 12 months of its broadcast on TVB, and the arrangement of the promotional visit of the leading actress of the drama series to Hong Kong. After investigation, the Authority concluded that the complaint was unsubstantiated. In coming to this conclusion, the Authority had taken into account all relevant factors, including whether the enhancement work done by TVB would be considered to have turned the programme into one that was substantially produced by TVB and whether there was unfair cross-subsidization between TVB and Galaxy having regard to the purpose and effect of the promotional visit.

The fourth case was about the exclusive supply of six channels by TVB to Galaxy. The Authority found that TVB, by supplying four new channels to Galaxy on an exclusive basis without an open bidding process, had deprived the other licensees of the opportunity to acquire the channels and given Galaxy a head-start in launching them. The Authority therefore decided that the allegations of undue preference and non-arm's length transaction on the exclusive channel supply was justified and imposed a financial penalty of HK$300,000 on TVB and HK$200,000 on Galaxy for the breach.

The last case was about the non-exclusive supply of the same six channels by TVB to Galaxy. The Authority noted that TVB had turned the exclusive agreement for the supply of six channels to a non-exclusive one, and extended the offer of these channels to other pay television licensees. The Authority considered that TVB, by allowing Galaxy to commence the broadcast of the six channels earlier than its competitors, had given Galaxy a head-start advantage over other licensees. The Authority therefore concluded that the allegation of undue preference on the non-exclusive supply of six channels was justified and imposed a financial penalty of HK$200,000 on TVB and HK$150,000 on Galaxy for the breach.