BSkyB faces legal challenge to football rights bid

The European Commission is investigating whether it can declare the £1bn Premiership football rights deal illegal on the basis that BSkyB paid too muchfor the contract.

Brussels is understood to be examining whether it can accuse the satellite television broadcaster of making a "pre-emptive purchase", by paying well over the market rate for the exclusive right to screen live games - thus shutting out rival bids. In doing so, BSkyB would be accused of creating a monopoly by paying an inflated price for all the supply, then recouping its money through charges to subscribers.

Brussels is expected to issue a "statement of objections" in the next few weeks to the three-year deal Sky signed with the league in August.

It has been unclear in what sense the Commission could declare the contract anti-competitive, given that Sky bid in an open auction and won because it offered the most. If Brussels can show the price paid was not a market rate, it could mount a case. The difficulty will be in determining a market rate.

Matthew Levitt, a Brussels-based competition lawyer at Lovells, said: "If BSkyB can be shown to have paid a premium for all of the Premiership broadcasting rights on offer, this could be an abuse if the purpose or effect was to exclude other, smaller broadcasters from competing effectively for any part of the tender. Paying over the odds would maximise its chances that no one else would get a look-in."

In an attempt to address the Commission's concerns, the Premier League split its rights into four packages, to give broadcasters that could not afford all the rights the chance to buy some of the games.

Sky bid for these packages separately and was awarded each parcel of games individually. Altogether it paid £1.024bn. Although bidders did not know what others were offering, television operators know roughly how much rivals can afford.

It is thought there were rival bids for only one of the packages, from ITV and Telewest, which were easily beaten. Sky bid well above the likely bid of any other broadcaster, according to rights experts. One analyst said: "Why did Sky pay £1bn, when it could have easily got these rights by offering half that sum?"

The Commission could mount a simpler case against the right of football clubs to act collectively to sell their matches through the Premier League. However, lawyers say such a case would not necessarily invalidate the Sky deal. Brussels could combine the two lines of legal attack - the collective selling and the pre-emptive purchase.

The Premier League has said it structured the sale in a way that met the Commission's concerns. It believes the process was pro-competitive and that the Commission has no right to dictate the outcome.

Football officials are likely to argue that Sky paid a price that reflected the level of investment needed in the product it was purchasing - the salaries of top players, who draw the viewers.

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