EC communication on state aid and public service broadcasting: will the BBC lose its self-regulatory role?

Ever since the founders of the Common Market agreed to treat the public and private sectors in a broadly similar way under the competition rules, George Orwell’s observation in Animal Farm that some animals are more equal than others has seemed pretty much in point. However, in its Communication this week on state aid and public service broadcasting, the EC finally appears to be recognising that private sector broadcasters cannot compete adequately with public service broadcasters and that something must be done to bring about genuine equality.

As far as defining the scope of the public service remit is concerned, the Commission’s attitude is “hands off”. However, when it comes to supervision of the public service broadcaster’s compliance with its obligations, the Commission believes that supervision only “seems effective if the authority is independent.” In the absence of such independent supervision (and authorisation), the Commission will not give the public service broadcaster exemption from the competition rules. Thus, unless the BBC submits itself to OFCOM regulation, it looks as if it will be subject to the full panoply of competition powers exercisable by the Commission.

This is a very powerful stick to wave. Once the self-regulating public service broadcaster is within the EC’s competition jurisdiction, it is treated just like any other private sector concern. It does not get the benefit of any of the limited competition law tolerance that is available to companies entrusted with the operation of services of a general economic interest.

But even if the BBC submits itself to OFCOM, the Commission’s attitude to it will become more critical. According to the Communication, the Commission is likely to penalise cross-subsidy of non-public service activities which has the effect of reducing the revenue of competitors. This is something that private sector broadcasters have always complained about.

Generally, the Commission will listen to arguments that state aid helps achieve competitive balance and prevents markets from becoming dominated by pay TV operators. However, this goal will not be allowed to excuse anti-competitive behaviour.

The Communication should be welcomed by private sector broadcasters: it could actually mark the beginning of genuine equality in Animal Farm.

Bulletins are for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Please note that past bulletins included in the Archive have not been updated by any subsequent changes in statute or case law.