Let's GO, Melita!

Finally, something actually worthwhile that I can write about.

I have to admit, when reading the recent news that Melita had lost the rights to transmit Barclays Premier League matches from season 2010/11 through to season 2012/13 to GO plc, I was extremely shocked. To say the least. This means that a large chunk of sporting action that I see on the weekends would indeed be gone from my very eyes, provided that I remain with Melita for the next three odd years. Which, judging by the way how it's going downhill, I don't think will really be the case, but anyway. Anyhow, as a response to this, Melita claimed that they are still the leaders in providing sports to local households, and they also still retained exclusive rights in items such as the UEFA Champions League, UEFA Europa League, Serie A and the Bundesliga.

So far, all is fine and dandy. It was the typical response that I expected from Melita, one which obviously tried to make them look in as little a bad light as possible while, at the same time, promoting the programmes which they show. Of course, they did forget to mention that Saturday afternoons will probably be spent, after August 2010, with replays of old Italian and German football matches being shown on their (now excessive) eight different channels dedicated to sport; these interspersed with everyone's favourite show, a bout of horse racing from Sweden. Naturally, I'm hoping you're noting the sarcastic tone here. Furthermore, they also conveniently forgot to tell us customers that the price of the sports package will probably still be going up due to some fabricated administrative cost, or something of the sort. In brief, Melita will indeed become more pathetic than they already are come the end of Summer 2010.

However, while thinking over it, I ended up by coming to another conclusion vis-a-vis what is happening with GO and Melita. Perhaps it is a bit far-fetched, but I think it's worth stating it nonetheless. I noticed a trend in Melita's declining sporting list year after year: in 2007, GO announced that they would be transmitting Wimbledon from 2008 onwards; in 2008, GO announced that they had managed to obtain the exclusive rights to transmit Formula 1 from 2009 onwards; and now, in 2009 GO announced that they will be transmitting the Premier League from 2010. (Of course, Melita's prices never decreased despite the fact that two major sporting events were not transmitted over the last two years; and I fully expect this trend to continue come 2010, hence the reasoning for my logic above). Coincidence? I think not.

My belief is that both Melita and GO are currently in breach of the law. To be more specific, I think that these two companies are breaching Articles 5 and 9 of the Competition Act (in Malta), or Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU, the ex-EC Treaty), i.e. there is collusion going on between both Melita and GO with regard their television services, meaning that there is the notion of market distortion in this sector and abuse of a dominant position. I will start with the latter point though, as this seems to be easier to tackle.

For a start, with regards abuse of a dominant position, there must be two criteria satisfied; i.e. dominant position in the relevant market and abuse. It can clearly be argued that combined, both Melita and GO have got a majority share in the television market, especially with regard to the relevant product market (sporting events), as both providers show pretty much everything, be it football, Formula 1 or wrestling. The geographical and temporal markets do not have any relevance in this circumstance. Secondary to this, there must be abuse. Now, while this is not a notion that us students have exactly tackled just yet, I can understand that there is the potential for the constant switching of services from one provider to another to be classified as abuse. Both providers may indeed be doing this to simultaneously increase their shares in the market relating to sporting events, and hence increase clientele and profits accordingly. If this is proven, and of course, it is obviously much more difficult to do so other than just stating that which I am currently stating, then there already is a breach of Article 9 of the Competition Act or Article 102 of the TFEU.

This brings me to my second point. Is there collusion going on between Melita and GO, which are, for the purposes of the law, classified as two undertakings? If I had to apply my theory, as I briefly outlined in bold above, then one could argue that there is a horizontal agreement between both television providers. However, such a horizontal agreement would have to be proven by means of oral or written communication; and quite frankly, I doubt both companies would do something as stupid and as ridiculous as that; and is hence extremely difficult to prove. Prima facie, one might also argue that this could fall under the heading of a concerted practice between undertakings, but upon further examination of this notion, one must realise and understand that this is "a form of coordination between undertakings which, without having reached the stage where an agreement properly so called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition". Therefore, one cannot classify that happening between both companies as such a concerted practice, for the purposes of Competition Law.

The second part of Article 5(1) speaks of market distortion. The law states that "any agreement between undertakings... having the object or effect of preventing, restricting or distorting competition" is prohibited. It is necessary to look at the conjunction 'or' over here, as this means that not both the object and effect must be proven, but if one is proven, then it is enough. One could seriously argue that both undertakings' actions are currently having the desired effect. But do these actions fall under the exceptions to the articles in question? After analysing the law accordingly, I cannot see how the exceptions as outlined in Article 5(3) or 101(3) apply to absolve both companies of colluding to distort competition. However, it must be noted that this line of attack, I believe, is significantly weaker than that found in Article 9/Article 102.

Of course, being just a student, I could be wrong in both circumstances. Indeed, after theorising a bit too much about it, I'm starting to doubt the validity of these arguments myself. But I'll leave it to anyone else with proper judgement to go ahead and comment on the situation at hand; even though I still believe that something fishy is going on between these two major players within the Maltese communications market.

God Bless You all!
Matti