EU Legal Attack on ‘Geoblocking’ Could Undermine Consumer Benefits

WASHINGTON—ITIF Senior Fellow Joe Kennedy issued the following statement Thursday after the European Union filed antitrust claims against a British broadcaster and six U.S. film studios for limiting pan-European access to certain programming on pay-TV services, a practice known as “geoblocking.”

“As the world economy becomes more integrated, it is increasingly common for the same product to be offered on different terms in different national markets—and it can be for very good reasons,” said Kennedy, who authored a 2014 ITIF report titled, ‘Why Geoblocking Can Increase Consumer Welfare and Improve Income Equality.’ “Some people may envy the deal they see other customers getting, but the fact is geoblocking can benefit consumers by increasing total supply, lowering the prices offered to at least some customers, and encouraging a competitive market with a diverse supply of products and services. It would be a mistake for policymakers to restrict such pricing practices.”

“Companies in competitive markets have an interest in selling as much of a product as possible, and customers almost always have the option of saying no if they believe the price is too high,” Kennedy said. “In this case, consumers are unlikely to be harmed because film companies compete heavily and have a strong incentive to maximize profits. Studios have to manage a variety of distribution channels including movie houses, cable, satellite, and DVDs. They also face different costs and distribution rules in each country. Government should reduce its interference with these markets, not increase it.”

“It is important to note that film companies have high fixed costs and face a constant threat of illegal copying. This adds to their incentive to maximize legal viewership. Prices cannot exceed the value that consumers attach to watching programs, otherwise they will not pay for them. Competition policy traditionally focuses on removing barriers that prevent suppliers of a product, in this case the film companies, from entering into markets. It seldom attempts to force those companies to sell to new customers. The Commission may think that it is helping consumers by breaking down the barriers between national broadcasters, but there is no evidence that this is true. Government-regulated markets are seldom more efficient than private ones.”