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Competition and trade law: EU preliminary ruling against Hollywood film studios

United Kingdom
16/03/1998
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A preliminary ruling by the European Commission suggests that Hollywood film studios Paramount, MGM and Universal may be forced to dismantle United International Pictures (UIP) their joint distribution organisation in Europe.

The European Commission has sent a formal statement of objections to UIP, concerning its joint sales activities. The Commission has warned UIP that it might not renew the company's exemption from EU rules on restrictive business practices under Article 85 of the EU Treaty. The UIP has benefited from an exemption from EU laws which prohibit restrictive or exclusive agreements since 1989. The Commission is now arguing that the UIP distribution system no longer fulfils the original criteria which justified the exemption. In particular, other US film-makers have apparently established autonomous distribution entities, suggesting that joint distribution is no longer necessary for effective marketing in the sector, which was the original premise of the exemption. Abolition of UIP may also remove an obstacle to the growing European film producers.

It is believed that the Commission has also received informal complaints about UIP relating to a suspicion that it operates a block booking system which forces cinemas to buy packages which include a minimum number of weak titles to screen blockbusters.

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