On September 21, 2021, the Milan Court of Appeal dismissed an appeal filed by Digital World Television (“DWT” or “Appellant”),[1] a company active in the distribution of audiovisual programs for adults, against the judgment delivered in 2019 by the lower court, which had also dismissed DWT’s claims for damages against Sky Italia (“Sky” or the “Defendant”) for an alleged abuse of dominant position and/or abuse of economic dependence.[2]
Background
Between 2006 and 2011, DWT and Sky entered into four contracts regarding the supply by the latter of technical pay-perview services, in exchange for the payment by DWT of a monthly fee of € 10,000. The fourth contract, which was entered into on December 22, 2011, had a duration of three years and, differently from the first three, did not provide for a tacit renewal clause. It expired on December 31, 2014.
DWT later brought interim proceedings against Sky, alleging breach of contract, bad faith in negotiating the contract and an abuse of dominant position deriving from Sky’s interruption of the provision of technical services after the expiry of the contract. On March 3, 2015, the Court of Milan rejected DWT’s application for lack of connection between the requested interim measures and the plaintiff’s claim for damages. The Court further highlighted DWT’s failure to prove the alleged breach of the principle of good faith.[3]
DWT challenged the Order. The Court dismissed DWT’s challenge on the basis, inter alia, of the absence of a prima facie case regarding the alleged abuse of dominant position.[4]
The judgment of the Court of Milan
Following the interim proceedings, DWT filed a lawsuit against Sky before the Court of Milan alleging wrongful conduct by Sky and requesting to be granted access to Sky’s satellite broadcasting platform, to be returned the entry fee paid to Sky and to be awarded damages. In particular, DWT claimed that Sky had abused its dominant position on the relevant markets, which in its view were the (upstream) market for the satellite broadcasting of adult contents and the (downstream) market for pay-TV broadcasts via satellite platforms in the entire Italian territory.
DWT further claimed that Sky had breached Article 102 TFEU: first, by arbitrarily refusing to renew the fourth contract, consequently preventing DWT from having access to the only satellite platform existing in Italy; secondly, by imposing on DWT a disproportionate entry fee, compared to the value of the technical services offered by Sky. DTW also claimed that Sky’s conduct amounted to an abuse of economic dependence.
Sky requested that the Court of Milan dismiss DWT’s claim on the ground that: (i) the restitution of the entry fee was time-barred, and, in any event, DTW had amortized the expenses during the duration of the contracts. Moreover, the cost of the entry fee was very low compared to the fee required for digital terrestrial services; (ii) Sky was not in a dominant position, since the relevant geographic market was not limited to a national dimension, and adult content could be transmitted not only on a satellite platform, but also through other means, such as digital terrestrial services and the Internet. Sky also highlighted that DWT had continued operating on the same satellite platform through a dedicated decoder.
On September 17, 2019, the Court of Milan dismissed DWT’s claims. It held that DWT had not provided sufficient evidence in support of its definition of the relevant market, and that, even taking into consideration the relevant market indicated by DWT, there would have been no abuse of dominant position because, among others: (a) the 2011 contract did not provide for any automatic renewal clause and (ii) DWT’s passive behavior had been coherent with the natural expiration of the contract. Moreover, the Court of Milan deemed that the abuse of economic dependence claim was groundless, since Sky’s contractual behavior was in line with the principle of good faith.
Appeal proceedings
DWT appealed to the Milan Court of Appeal against the lower court’s ruling, claiming that the Court of Milan had: (i) wrongly excluded that Sky had an obligation to negotiate; (ii) erroneously assumed that DWT had access to a satellite platform; (iii) failed to take into consideration the Italian Competition Authority (“ICA”)’s decision-making practice when defining the downstream market; and (iv) erroneously held that “the parties simply had a fixed-term contractual relationship, which naturally expired”. On the contrary, according to DTW, the parties’ long-term business relationship had been regulated by fixed-term contracts by Sky’s unilateral decision. DWT also challenged the amount of the costs awarded by the Court of Milan to the defendant.
The Milan Court of Appeal deemed that the Appeal was inadmissible because of its absolute vagueness. Despite this, the Court went on to analyze the merits of DWT’s case.
The Court concurred with the Court of Milan and affirmed that, in light of the evolution of the market, Sky was under no obligation to contract with DWT. It held that DWT’s access to a satellite platform was confirmed by the available evidence and, in any case, had never been previously disputed. The Court also ruled that, according to ICA’s precedents, the retail market for pay-TV services was one and the same for all distribution platforms. It upheld the judgment under appeal also with regard to the lack of evidence of an abusive conduct or contractual bad faith by Sky. Moreover, the analysis of DWT’s several claims for damages was precluded by: (i) the groundlessness of the appellant’s allegations with regard to damages; and (ii) the general lack of evidence supporting DWT’s claims.
Having dismissed DWT’s ground of appeal concerning the amount of costs awarded to Sky, the Milan Court of Appeal rejected DWT’s appeal in full.
[1] Milan Court of Appeal, Judgment of September 21, 2021, No. 2701.
[2] Court of Milan, Judgment of September 17, 2019, No. 8276.
[3] Court of Milan, Order of March 3, 2015.
[4] Court of Milan, Order of May 7, 2015.