Case C-560/15, Europa Way – denied free access to Italy’s broadcasting frequencies

Companies attempting to broadcast their programming to people living in Italy face barriers of almost epic proportions. Even a decade ago, the situation was severe enough to warrant the EU Commission bringing an enforcement action against the Italian State, an action which to this day has still not been concluded. In yet another twist to the on-going saga, the Italian legislature and institutions have now been hauled before the Italian courts by companies who complain that rules which were originally designed to remedy a bad situation have been abandoned contrary to EU law. They also complain about the rules which were subsequently introduced by the Italian legislature that make it particularly onerous, if not impossible, for new entrants to the Italian market to access the frequencies which they need to deliver their programming.

Background
The Italian State controls the frequencies used for radio, television and mobile telephones. Like other Member States, Italy decided to utilise the available radio spectrum in a different way and in that context it decided that terrestrial television would no longer be broadcast via analogue signals but via digital ones instead.

However, when that policy was translated into Italian law the legislation was written in such a way that it only allowed Italy’s existing broadcasters access to the digital frequencies. Consequently, any new broadcasters might well have radio or television programmes for people in Italy but they would not have access to the frequencies necessary to deliver them. The legislation effectively sealed off the Italian market from new entrants.

This regulatory set-up led to the EU Commission bringing enforcement actions against the Italian State, actions which were commenced almost a decade ago in July 2007. The Italian State subsequently introduced further regulatory reforms, in part at the behest of the EU Commission.

For example, in 2009 there was another policy push to increase competition on the Italian market. The Italian State would allow what it deemed to be ‘suitable’ candidate companies, the right to compete for, specific frequencies that would be available for free.

The reformed regulation consisted of two Parts, and turned on access to ‘multiplexers’ [a multiplexer is an electronic device that increases the amount of data that can be passed over a bandwidth in one go].

Part One consisted of applications for three multiplexers. They would be available to companies who would only have access to just one multiplexer. However, an important aspect of the Part One competition procedure was that it would not be open to every company. Namely, ‘incumbent’ companies belonging to the State broadcaster the RAI, or Mr Berlusconi’s MediaSet, or the State telephone company, ‘Telecom Italia’ were expressly excluded from putting in an application under the Part One competition. Part Two consisted of two further multiplexers, and any company could apply including those belonging to the incumbents.

The architects of this regulatory reform were not only the Italian State (including the Ministry of Finance, and the Italian telecoms and communication agency, AGCOM) but also the EU Commission. The Commission was in a continuous dialogue with the Italian State because of the on-going infringement action against the Italian State which, even in 2011, was still rumbling on.

With the regulatory reform eventually in place and the procurement procedure having been initiated, companies duly applied for the frequencies and the multiplexers that were up for grabs under Parts One and Two.

However, a problem emerged. A single company put in an application under Part One, a company called ‘Europa Way’. Furthermore, the only companies that had put in applications under Part Two were those that already belonged to the media empires of the RAI, MediaSet or Telecom Italia.

Consequently, the Italian Ministry of Finance suspended the tendering and procurement process in January 2012. The process was eventually nullified.

By way of response, Europa Way and other broadcasting companies, including Persidera (the latter being the name of a Telecom Italia company) brought various legal actions against the administrative decisions that had been taken by the Italian State.

Before the TAR Lazio (the administrative law court in the province of Rome), the companies claimed that the State’s decisions were contrary to the Italian Constitution, several EU Directives, EU Treaty law governing establishment and services, and even the EU Charter.

While that litigation was going on, the Italian State introduced a new procurement tendering process for the same frequencies but this process would be operated under completely new rules. The main new feature of the tendering process was that in place of free access to the frequencies, access would now become conditional on money being paid to the Italian State.

However, it transpired that when the new rules were being drawn up, some companies had been consulted whereas others had not. Furthermore, of those companies which had been consulted, some disagreed with the revised terms of the tendering process and therefore decided not to put in a tender at all for the available frequencies and multiplexers.

More litigation ensued, and eventually the disputes wended their ways up to the Italian Council of State.

At the Italian Council of State
In essence, Europa Way believes it should have been awarded access to the frequency for free. This was because the initial procurement procedure was intended to compensate for the fact that the Italian legislation had originally been deliberately set up to prevent any new entrants from accessing Italy’s broadcasting frequencies.

In that context, Europa Way also noted that the subsequent decision of the State not to allow access to frequencies for free but to do so only on the basis of offering money to the State, was a decision that belonged to a new regulatory set up which, in turn, had also failed to generate new competition in Italy. After all, the only company that had been awarded access to an Italian frequency was a company called Cairo Network – a company which could hardly be described as a small company because it already owned and ran the Italian national television channel known as ‘La 7’ (a channel which can also be watched via Sky, another broadcaster active in this litigation).

The Italian Council of State also heard the complaints of Persida, a former Telecom Italia company. It too was objecting to the way in which the Italian State had handled the procurement procedure for access to the frequencies. Persida believed that the State’s U-turn from offering free access to frequencies to only an ‘access for money’ procedure meant that the new scheme merely protected those incumbents that were already on the Italian broadcasting market, and the new scheme simply served to reinforce their established market positions.

Faced with uncertainties about the correct interpretation of EU law, the five judges in the Third Chamber of the Italian Council of State decided to make a preliminary reference to the CJEU.

Questions Referred
My unofficial translation of the Questions asked by the Italian Council of State reads:

1. Do the contested regulations and subsequent implementing acts contravene those rules which deem the regulation of the televisual market to fall within the competence of an independent administrative authority, as per Articles 3 and 8 of the ‘Framework’ Directive 2002/21/EC, as amended by Directive 2009/140/EC?

2. Do the contested regulations and subsequent implementing measures contravene Article 7 of the ‘Authorisation’ Directive 2002/20/EC and Article 6 of the ‘Framework’ Directive 2002/21/EC, which require the independent national regulatory authority to organise a priori a transparent consultation?

3. Does European Union law – in particular, Article 56 TFEU, Article 9 of the Framework Directive 2002/21/EC, Articles 3, 5 and 7 of the Authorisation Directive 2002/20/EC, and Articles 2 and 4 of the Competition Directive 2002/77/EC; plus the principles of non-discrimination, transparency, freedom of competition, proportionality, effectiveness and a pluralism of information – preclude the annulment of the ‘beauty contest’ procedure which, for the system of allocating digital frequencies for television, had been designed to address the illegitimate exclusion of operators in the market and to allow for access to it by smaller participants – and [preclude] its replacement by another tendering process based on payment, which imposed requirements and obligations on participants that were not imposed on the incumbents who were already in the market, whereby participating in the procurement procedure became expensive and uneconomic;

4. Does European Union law – in particular, Article 56 TFEU, Article 9 of Framework Directive 2002/21/EC, Articles 3, 5 and 7 of the Authorisation Directive 2002/20/EC, Articles 2 and 4 of the Competition Directive 2002/77/EC and Article 258 TFEU plus the principles of non-discrimination, transparency, freedom of competition, proportionality, effectiveness and informational pluralism – preclude the reconfiguration of the Italian Frequency Allocation Plan, which reduced the [number of] national networks from 25 to 22 (and preserved the same number of multiplexers to the incumbents on the market), and reduced the tendering options to three multiplexers, and allocated frequencies in the VHF band-III [despite the] risk of severe interference;

5. Is the cancellation of the beauty contest – with the result that the claimants who were already admitted to procedure access could not be sure of being granted a number of the lots up for tender – compatible with the principle of legitimate expectation, as that protection has been developed by the Court of Justice of the European Union?

6. Are the Union’s regulatory measures governing the allocation of rights to use frequencies (Articles 8 and 9 of the Framework Directive 2002/21/EC, Articles 5 and 7 of the Authorisation Directive 2002/20/EC, and Articles 2 and 4 of the Competition Directive 2002/77/EC) compatible with enacting a provision, such as Article 3(d) of Decree no. 16 of 2012, that infringes upon the particular characteristics of the radio and television broadcasting market?

Comment
The situation for companies attempting to access the Italian market has generated two preliminary references in 2015, and these also touch upon the issues raised in the ‘Europa Way’ reference.

The first reference concerns barriers to entering the Italian market for non-Italian companies. What is at stake is an Italian law that requires all Internet advertising companies to supply ‘economic system information’ to AGCOM. That data must be supplied in accordance with Italy’s accounting standards. This means that Italian companies should therefore be able to comply with the new rules. However, Google, which has a base in Ireland, is querying the compatibility of those Italian ‘technical standard’ rules with EU law; see further, Case C-322/15, Google Ireland and Italy – refusing to let the Italians look at their financial books.

The second reference of 2015 also concerns AGCOM’s independence, more particularly, the ‘independence obligation’ placed upon it by dint of Article 3 of the EU’s ‘communications networks’ Directive 2002/21/EC; see further, Case C-240/15, ISTAT – independence, regulatory capture and economic crisis.

Readers of EU Law Radar who are interested in some of the problems that have afflicted the Italian broadcasting market in recent years are referred to two earlier, and now concluded, preliminary references which related decisions that had also been taken by the Italian regulator, AGCOM.

In 2012, there was a problem about the legality of administrative charges that AGCOM had imposed on companies that were active in the Italian telecoms market, charges which were intended to cover the operating costs of the national regulatory authorities; see further; Case C-231/12, Vodafone Omnitel – does the Authorisation Directive authorise not paying AgCom?.

In 2012, there was also a problem about the legality of advertising time rules introduced by AGCOM which meant that private Pay-TV companies, like Sky, could only show a reduced amount of adverts every hour, in comparison to the amount of time which free-to-air broadcasters could sell to advertisers; see further, Case C-234/12, Sky Italia – demanding the same advertising time as free-to-air commercial broadcasters.

Update – 22 May 2016
The Italian Council of State has added another couple of questions to this broad dispute but the CJEU has given them a completely new docket number; see further, Case C-112/16, Persidera – access to Italian broadcasting frequencies.

 
Update – 8 January 2017
The Fourth Chamber will hear this dispute on 2 February 2017.
 

Update – 26 February 2017
The Opinion of Advocate General Kokott is due on 30 March 2017.