The European Union Upgrades Its Audiovisual Regulatory Framework

by K&L Gates LLP
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On 6 November 2018, the Council of the European Union (“Council”) formally adopted the revised Audiovisual Media Services Directive (“revised AVMSD” or “Directive”). This closes a long, and at some moments, tense and conflictual process started in May 2016, with the presentation of the original proposal by the European Commission. While both the European Parliament (“Parliament”) and the Council (the EU co-legislators) agreed in the need to modernize the legal framework for audiovisual services and adapt it to the online environment, the discussion in some matters created important tensions between them and with relevant stakeholders all along the process.

Finally, after a year of dialogue and a lot of redrafting to clarify the text to restrict, as much as possible, any alternative interpretation to its most sensitive issues, negotiators from both institutions finally reached a political agreement on the revised rules which was confirmed by the Parliament in October and by the Council in early November.

The declared goal of the Directive is to update the AVMSD currently in force (“2010 AVMSD”), in order to reflect the evolution of the market and to cover new types of content and players after the game-changing advent of the audiovisual sector on the Internet. The repeated “mantra” in 2010 was the need to guarantee a “level playing field” among market players. In 2018, that goal clearly required updating some of the rules.

What is new in the EU Audiovisual framework?
1. Geographical scope

The 2010 AVMSD applied to audiovisual service providers falling under the jurisdiction of a member state (defined by the country of establishment, with some exceptions and clarifications to define this) and linked that with the fundamental country of origin principle, according to which an audiovisual media service provider operating in the EU needs to comply only with the rules of one country, that is, the one under which jurisdiction it falls.

The revised text preserves the principle and the essence of the criteria to decide which country is the country of establishment. Therefore, the geographical scope of the rules remains broadly unchanged. However, the revised Directive aims at improving the principle by:

  1. Requiring Member States to establish an up-to-date list of the media services providers subject to their jurisdiction and make such list available in an EU-wide database accessible by national regulatory authorities.
  2. Establishing more and clearer grounds for derogations to the country of origin principle, including an urgency procedure, where Member States are authorized to restrict retransmissions on their territory of services established in other Member States in case of public health reasons, incitement to violence and provocation to commit terrorist offences.

2. Material scope
The 2010 AVMSD introduced an initial distinction (with regulatory consequences) between TV broadcasting and on-demand audiovisual services. It was understood then that other providers of audiovisual content had no editorial responsibility and should therefore not be covered by any of these rules. This has been radically changed in the revised AVMSD because the material scope has been extended to include video-sharing platforms, as it is assumed they compete with other audiovisual media services as means to share information and entertain, and they are not just neutral hosts of content provided by others.

Video-sharing platforms are now defined as providers of electronic communication services to the general public where:

  1. The principal purpose of such service is providing programs and/or user-generated videos for which the platform does not have editorial responsibility; and
  2. The content is organized by the platform provider itself.

As a consequence, not only video sharing websites but also social media services allowing users to share audiovisual content are covered by the new rules.

3. Media ownership transparency
There is political agreement in Europe on the point that transparency of media ownership is directly linked to freedom of expression. The Directive thus aims at ensuring that customers have easy access to information regarding the ownership structure of media service providers.

This has now been reinforced: media service providers are requested to make accessible — in addition to their name, address, contact details and Member State having jurisdiction over them — relevant information concerning their ownership structure, including their beneficial owners.

4. Rules against hate speech and public provocation
There are new rules taking into account the new means of spreading illegal content and forbidding all audiovisual media service providers to transmit contents that incite violence and hatred or encourage committing terrorist offences.

5. Protection of minors from harmful content
In the 2010 AVMSD the rules on protection on minors were restricted exclusively to TV broadcasting services. They did not apply to on-demand services, and even less to video-sharing platforms. To correct what was generally understood as an inconsistency, the revised AVMSD requires all audiovisual media service providers, including video-sharing platforms, to provide information to viewers about content that may impair minors’ physical, mental or moral development.

The most harmful content (e.g. gratuitous violence and pornography) will be subject to the strictest measures such as encryption and effective parental controls. Moreover, a new provision prohibits the processing of minors’ personal data for commercial purposes.

As it can be easily understood, the means of enforcement of these new restrictions to the free and unrestrained distribution of online content have been at the base of some of the strongest arguments around this new regulatory text.

6. Commercial communication
The Directive maintains the existing prohibition on tobacco advertising but has included electronic cigarettes in the ban. Moreover, the revised AVMSD encourages the use of self-regulation at the EU level to protect children from inappropriate advertising of foods and beverages high in fat, salt or sugars, which are not recommended in children’s diets.

In 2010, a large majority called for the strong restriction of product placement in broadcasting. The reality of its importance in audiovisual financing, as well as its general presence movies and on-demand TV shows, has pushed for a complete change in this matter: product placement will be allowed in all audiovisual media services and video-sharing platforms, with the exception of news and current affairs programmes, consumer affairs programmes, as well as religious and children’s programmes. Member States will also have the option to prohibit the sponsorship of children’s programmes.

In one of the most important discussions, due to its serious economic impact, the revised AVMSD has also changed the maximum authorized proportion of advertising spots and teleshopping from broadcasters, as well as the way it is to be calculated.

7. Promotion of European works
Obligations regarding the promotion of European works have been the most controversial point of the revised AVMSD. The 2010 AVMSD already allowed Member States to require media services to promote the production of European works and to impose financial or investment obligations in support of European audiovisual production. But to this day, the large on-demand content distributors (most of them non-European, but with a very important presence in Europe) had been exempted from these obligations. The new text requires Member States to ensure that on demand service providers secure at least a 30% share of European works in their catalogues and ensure the prominence of those works.

Besides that, those Member States who impose financial obligations to media service providers established on their territory (in the form of direct investment in content or as contributions to a national fund) are allowed to extend the same obligations to any media service providers targeting audiences in their territories, but established in another member state.

On-demand audiovisual media services with no significant presence on the market (companies with low turnover or low audience).

Next Steps
The revised AVMSD will enter into force on the 20th day after its publication in the EU Official Journal. As it is a Directive, it is not directly applicable: it requires Member States to transpose the new rules into domestic legislation within a fixed and mandatory time limit of 20 months. During this national legislative process, since the Directive is a minimum harmonization instrument, Member States will be able to adopt stricter rules for audiovisual media service providers and video-sharing platforms that fall under their jurisdiction.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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