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Racecourse price agreements did not break competition law, says Court of Appeal

Out-Law News | 30 Jul 2009 | 9:20 am | 3 min. read

Racecourses did not break competition laws when they decided to sell their television rights only to a company that they owned. A rival company owned by betting shops has lost its case at the Court of Appeal.

Live footage of horse races was banned in betting shops until 1986. When it was legalised a company was set up by the major betting chains to provide footage of races to shops. Called Satellite Information Services (SIS), it had the market to itself for 20 years.

In 2007 a number of racecourses decided to set up their own company which would compete with SIS. Amalgamated Racing (AMRAC) was formed by 19 companies which own 31 of the UK's 59 racecourses.

The service AMRAC produced, TurfTV, sought to sign up racecourses to provide it with exclusive rights to film races, which it would then sell to betting shops. It won agreement from the 18 owners of 30 racecourses for their exclusive media rights. These were known as the Racing UK (RUK) courses.

SIS sued the racecourses and AMRAC, claiming that they had broken competition law by blocking it from negotiating over the rights and fixing the prices of the media rights.

"[The bookmakers and SIS] do not allege that the joint venture by itself was objectionable," said Lord Justice Lloyd's judgement on the case. "They argue that what put it in breach of competition law was the fact that the RUK courses together undertook closed and collective negotiation with the joint venture, which involved price-fixing."

The licensing agreement said that all the racecourses would be paid the same fee for races, dependent on how many horses were running. A minimum price for races was fixed, which the bookmakers said was unfair and was designed to profit the racecourses.

They argued that the deal was not just one between each racecourse and the broadcasting joint venture, but between all the racecourses themselves, and that it was therefore an anti-competitive arrangement between companies that should have been in competition.

Lord Justice Lloyd disagreed, and said that a crucial point in the case was whether or not the courses were in fact in competition with each other at all. He conceded that they did compete for jockeys, horses, sponsors and spectators, but said that they did not compete when it came to media rights.

"Races held at British racecourses are deliberately scheduled by the British Horseracing Authority so as to take place at different times and not to coincide," he said. "LBOs [betting shops] have an incentive to show live coverage of as many British races as possible and to screen a succession of races throughout the day in order to maximise their betting turnover."

"I would hold that … the racecourses do not compete with each other as regards the sale of LBO media rights," he said.

The Court found that the particular situation in which the racecourses found themselves meant that some collective action was understandable.

"[To set itself up], the broadcaster would have to acquire LBO media rights for a minimum number of racecourses on an exclusive basis," said the ruling. "It is not something that any racecourse could have achieved by itself. Given that the incumbent operator was dominated by the interests of the purchasers in the downstream [betting shop] market, given the high cost of entry, and given the very long period in which no other operator had shown any interest in entry to these markets, it seems to me that it was obviously necessary that the new entrant would have to be promoted by or in association with a number of racecourses, and that it would need to be protected, at the stage of its establishment, from competition from the incumbent, since otherwise it would never get off the ground."

"The proposition that the arrangements were designed to improve the profitability of the racecourses is correct, but I cannot agree with the submission that this was to be done by restricting competition," it said. "On the contrary, it was to be done by introducing competition into the previously monopsonistic upstream market. Nor is increasing profitability objectionable in itself. It is, after all, the motive of most commercial activity."

The racecourses argued that "there cannot be an agreement whose object (or for that matter whose effect) is to restrict competition if at the relevant time there is no competition to be restricted". They said that while only one broadcaster existed, there could be no competition between them for the sale of their media rights.

"Since there was only the one buyer, there was no competition to be restricted [they argued]. That seems to me to be correct in principle, and correctly applied to the facts of this case," said Lord Justice Lloyd. "Arrangements whose object was to enable such an undertaking to enter the market could not therefore be restrictive of competition that did not and could not exist at the time."

The Court said that the racecourses' actions were not anti-competitive, but that they might be in the future if the same behaviour is repeated.

"The position may well be different on the expiry of the current licences," it said. "At that stage, AMRAC will be present in the upstream [rights acquisition] as well as the downstream [betting shop broadcasting] market as a viable undertaking, and will not need the sort of protection which was necessary to secure its entry into the market at the outset."