ARCHIVED - Broadcasting Decision CRTC 2002-254

Broadcasting Decision CRTC 2002-254

Ottawa, 29 August 2002

Quebecor Media Inc., on behalf of Vidéotron ltée

Bell Globemedia Inc., on behalf of Le Réseau des sports (RDS) inc.

Complaint by Vidéotron ltée alleging that Le Réseau des sports (RDS) inc. contravened section 10.1 of the 1990 Specialty Services Regulations

The Commission dismisses the complaint by Vidéotron ltée. The Commission is unable to conclude that RDS gave a preference to itself and/or subjected Vidéotron to a disadvantage. Given this finding, there is no reason to proceed to the second stage of the analysis for the purpose of determining whether the preference and/or disadvantage is undue.

The parties

1.

Vidéotron ltée (Vidéotron) is a wholly owned subsidiary of Le Groupe Vidéotron ltée, a corporation all of whose shares are held and controlled by Quebecor Media inc. (Quebecor Media).

2.

Le Réseau des sports (RDS) inc. (RDS) is a wholly owned subsidiary of Netstar Communications Inc. (Netstar)¹. Netstar is a corporation in which Bell Globemedia Inc. (Bell Globemedia), through subsidiaries, holds 80% of the voting shares. ESPN holds the other 20%.

3.

Bell Globemedia is controlled by BCE Inc. (BCE), which holds 70.1% of the voting shares. The Thomson family holds the other 29.9%.

4.

Bell ExpressVu Inc. (ExpressVu), whose practice concerning multiple terminals Vidéotron criticizes in its complaint, is a wholly owned and controlled subsidiary of BCE.

5.

RDS is the licensee of a programming service of the same name that is distributed by, among others, the competing distribution systems of Vidéotron and ExpressVu.

6.

Vidéotron and Netstar/RDS are bound by an affiliation agreement which will remain in effect until December 2002, and which includes a "most favoured nation" clause.

The complaint

7.

Vidéotron alleges that RDS contravened section 10.1 of the Specialty Services Regulations, 1990 (the Regulations) by tolerating ExpressVu's practice of offering multiple terminals for a single subscription. According to Vidéotron, the effect of this practice reduces ExpressVu's pass-through charges to RDS significantly. Vidéotron claims that such a per-unit reduction has not been granted to Vidéotron and its subsidiaries. Vidéotron therefore claims that RDS gave an undue preference to ExpressVu, and via a corporate link, to itself, and thus subjected Vidéotron to an undue competitive disadvantage.

8.

Vidéotron is asking the Commission to rule that the above situation constitutes an undue preference, and to order RDS to comply immediately with section 10.1 of the Regulations.

RDS's position

9.

RDS maintains that at no time has it tolerated ExpressVu's multiple terminal practice as alleged by Vidéotron. On the contrary, RDS states that it has acted responsibly and diligently by immediately initiating contact with ExpressVu after being notified by Vidéotron of the possibility of such a practice.

10.

Netstar, the parent company of RDS, specifically asked ExpressVu in May 2002 about the method used to determine the total number of RDS subscribers in order to ensure that Netstar/RDS received all the revenue to which RDS was entitled under the affiliation contract. Netstar/RDS submitted to the Commission a copy of all correspondance exchanged with Vidéotron prior to the complaint. Netstar/RDS also submitted on 20 December 2001, at Vidéotron's request, a certificate signed by Rick Brace stating that Netstar did not have an affiliation agreement with a third party more favourable than its agreement with Vidéotron. In the opinion of Netstar/RDS, these measures clearly show that Vidéotron's allegation of conspiracy between RDS and ExpressVu is unfounded.

11.

Netstar/RDS also maintains that it was in their interest, particularly because of their corporate structure, to enforce the RDS affiliation agreement with ExpressVu and to receive all the pass-through charges payable for each ExpressVu subscriber who receives the RDS programming service. According to Netstar and RDS, the complainant did not provide any evidence in support of its complaint.

12.

Finally, RDS maintains that Vidéotron should have resolved this dispute directly with ExpressVu rather than penalize RDS by unilaterally reducing the pass-through charges under the affiliation agreement. RDS has no control over the business practices of ExpressVu and, for that reason, RDS is of the view that Vidéotron's real purpose is to reduce its costs arbitrarily, to the detriment of the programming undertakings with whom it does business, in order to thwart competition.

The Commission's analysis

13.

The public file includes all documentation and schedules submitted by the parties and pertaining to the dispute: the complaint by Vidéotron dated 28 May 2002, the response from Bell Globemedia Inc. dated 7 June 2002, and the reply from Vidéotron dated 21 June 2002.

14.

Section 10.1 of the Regulations states that:

No licensee shall give an undue preference to any person, including itself, or subject any person to an undue disadvantage.

15.

The Commission notes that, with respect to undue preference, the complainant must provide enough evidence to prove, first, that there is a preference and/or a disadvantage, and second, that such a preference and/or disadvantage is undue.

16.

In order for the Commission to conclude that RDS gave an undue preference to ExpressVu and to itself, Vidéotron must demonstrate that the actions of RDS constituted a preference and/or disadvantage. In order to do so, Vidéotron must prove that there was a significant reduction in RDS's revenues to the benefit of ExpressVu, and that RDS's actions involved express or implicit acceptance of the reduction. Finally, in order for a preference and/or disadvantage to be found to be undue, Vidéotron must demonstrate serious and material consequences for Vidéotron and/or the Canadian broadcasting system that are contrary to the public interest.

Preference and/or disadvantage

Claims of a reduction in RDS revenues

17.

Since Vidéotron did not place on the public file conclusive proof in support of the allegation pertaining to the significant reduction in RDS revenues to the benefit of ExpressVu, the Commission finds that this component of Vidéotron's argument has not been proven.

Actions by RDS

18.

At the request of Vidéotron, Netstar's president provided Vidéotron on 20 December 2001 with an officer's certificate stating that Netstar (on behalf of RDS, Discovery Channel and The Sports Network) had not entered into an affililation agreement with a third party that was more advantageous to the third party than its affiliation agreement with Vidéotron was to Vidéotron.

19.

Furthermore, RDS denies tolerating ExpressVue's practice concerning multiple terminals and claims that, beginning 5 March 2002, Netstar, its parent company, took steps to clarify the situation with ExpressVu. The Commission is thus of the view that RDS has acted in good faith under the circumstances. As a result, the Commission is unable to conclude that RDS expressly agreed to reduce its own revenues to the benefit of ExpressVu.

20.

The affiliation agreement between RDS and ExpressVu was signed in September 1997, before RDS and ExpressVu became related companies. Furthermore, although Netstar is an affiliate of ExpressVu, it has an independent Board of Directors and a distinct ownership structure. ESPN, a shareholder with no voting rights in BCE or its subsidiaries, holds 20% of the voting shares in Netstar, while ExpressVu is wholly owned by BCE.

21.

Vidéotron had to show that the corporate link and/or business relationship between the parties was such that RDS was in a position to influence or control ExpressVu's marketing practices, but Vidéotron failed to do so. As a result, the Commission is unable to find that RDS implicitly agreed to reduce its own revenues to the benefit of ExpressVu.

Undue preference and/or disadvantage

22.

Because the Commission finds that Vidéotron failed to demonstrate that RDS gave a preference to ExpressVu or to itself or that Vidéotron was subjected to a disadvantage, it is therefore unnecessary for the Commission to reach any determination regarding whether the preference and/or the disadvantage is undue.

Conclusion

23.

For all the reasons given above, the Commission finds that the allegation of undue preference against RDS and the claim of undue disadvantage with respect to Vidéotron have not been proven. Accordingly, the Commission dismisses the complaint.

24.

Consistent with the Commission's policy, all correspondence relating to this complaint will be placed on the public file.

Secretary General

This decision is available in alternative format upon request, and may also be examined at the following Internet site: www.crtc.gc.ca