Mr. Geoffrey Vos QC, Mr. Kenneth Parker QC, Mr. Jon Turner and Mr. Daniel Beard instructed by The Treasury Solicitor, Queen Anne's Chambers, 28 Broadway, London SW1H 9JS appeared on behalf of the Director General of Fair Trading

Mr. Charles Aldous QC, Mr. Richard Fowler QC and Miss Catherine Otton-Goulder instructed by Denton Hall, Five Chancery Lane, Clifford's Inn, London EC4A 1BU appeared on behalf of The Football Association Premier League Limited.

Mr. Jonathan Sumption QC and Mr. Nicholas Green QC instructed by Herbert Smith, Exchange House, Primrose Street, London EC2A 2HS appeared on behalf of British Sky Broadcasting Limited

Mr. Christopher Carr QC and Mr. Rhodri Thompson instructed by Richards Butler, Beaufort House, 15 St. Botolph Street, London EC3A 7EE appeared on behalf of the British Broadcasting Corporation

1. This court has before it an amended notice of reference by which the Director General of Fair Trading ("the Director General") has referred to the court three agreements, numbered respectively S6357 S6180 and S8772, on the register of agreements maintained under Section 1(2) of the Restrictive Trade Practices Act 1976 ("the 1976 Act"). Although the 1976 Act will be repealed by the Competition Act 1998 as from 1st March 2000, it continues to have effect in relation to proceedings, including those now before the court, which subsist before that date.

2. The three agreements which have been referred to the court comprise a large number of documents. Speaking generally, they relate to the establishment and rules of the Football Association Premier League Limited ("the Premier League") and to agreements made by the Premier League with British Sky Broadcasting Limited ("Sky") and the British Broadcasting Corporation ("the BBC") concerning the broadcasting on television of football matches played in the Premier League competition organised by the Premier League. The respondents to the reference are the Premier League, Sky and the BBC. The Premier League is joined as a representative respondent to represent the individual football clubs which are now, or have previously been, members of the Premier League.

3. By an order of this court made on 24th October 1996 it was provided that the proceedings should be limited to a consideration of certain specific provisions of the registered agreements. These provisions, with the restrictions which are said to be accepted by virtue of them, are identified in the Schedule to that order. In simplified form, and thus at the expense of some degree of accuracy, the restrictions may be said to fall into four categories, namely:

(ii) Two similar restrictions as follows:

4. We propose to begin by summarising the material provisions of the 1976 Act and certain other legislation. The case for the Director General is that the restrictions we have mentioned above are all restrictions relating to the supply of services. We are therefore concerned with the statutory provisions which govern the registration and investigation of agreements in respect of services. These are contained partly in the 1976 Act itself and partly in the Restrictive Trade Practices (Services) Order 1976 (SI 1976/98) ("the Services Order"). Their effect can be summarised as follows:

5. There are three main issues in this case. The first is whether all or any of the restrictions said to be accepted under the provisions of the registered agreements with which the court is concerned are relevant restrictions in the sense referred to above. The second, which only arises in respect of any restriction which is found to be a relevant restriction, is whether or not the restriction is contrary to the public interest, having regard to the statutory test already referred to. The third is what action the court should take in respect of any relevant restriction which is held to be contrary to the public interest.

6. If the first issue stood alone it would not be necessary to explore the factual background in any detail. That issue is primarily, if not exclusively, one of law and it would suffice to set out the bare facts and the relevant terms of the agreements. But the second issue, and to some extent the third as well, require a much more extensive account of the underlying facts. Even if we were to find ourselves wholly in favour of the respondents on the first issue we would consider it necessary to state our views on at least the second issue, on which we have heard very full evidence and argument, lest we be held to be wrong in our conclusions on the first issue. We must therefore explore the facts to the extent necessary to enable the second and third issues, as well as the first, to be decided.

7. We therefore divide this judgment into sections in which we shall consider the following main aspects of the case:

8. Everyone knows that football originated in the United Kingdom. Many of the football clubs in this country have a history going back beyond anything which is to be found in other countries and some of the controlling bodies of the sport in the United Kingdom are of similarly ancient origin. But the sport is now played world-wide and organised on a world-wide basis. International governing bodies have been introduced into the hierarchy above the purely national bodies which used to be autonomous. We propose first to describe the organisation of football as it stood at the beginning of 1992, the year in which the Premier League was formed. Save for the introduction of the Premier League into the hierarchy in the manner which we shall narrate, the organisation remains substantially the same today.

9. Football is organised throughout the world by a hierarchy of governing bodies. At the top of the hierarchy is the Federation Internationale de Football Association ("FIFA"), the membership of which consists of national football associations which agree to conform to the statutes, regulations and decisions of FIFA, each of which is recognised by FIFA as governing the sport in its own country. There are currently about 190 such national associations. The national association so far as England is concerned is the Football Association ("FA") which was founded in 1863 as the governing body of football in England. Scotland, Wales and Ireland have their own separate national associations, which are likewise members of FIFA.

10. National Associations of countries within a single continent may form confederations which are recognised by FIFA. The confederation of which the national associations of countries in Europe are members is the Union des Associations Europeennes de Football ("UEFA").

11. For the purpose of organising football England is divided into a number of geographical areas, in each of which football is regulated by a county association. Individual clubs which desire to participate in football in England must register with the appropriate county association. There are currently some 43,000 clubs which are represented on the Football Association through their county associations and which thus constitute the membership of the FA.

12. Individual clubs participate in a variety of football competitions, each of which has to be sanctioned by the FA. Competitions exist for clubs at various levels, ranging from a senior level (which includes the Football League, the Football Conference and, since 1992, the Premier League) and extends down through certain "feeder" leagues to lesser leagues, including local "park" leagues. A system of promotion and relegation exists between the Premier League, which is the pre-eminent league, down through the Football League, the Football Conference and the "feeder" leagues. In theory, therefore, a club consisting of amateur players participating in one of the feeder leagues could work its way up through the hierarchy to the Premier League and a prestigious club which has participated in the Premier League could be relegated to a much lower level on the ladder. In practice, of course, movements are usually much less dramatic than this.

13. Of particular importance in this hierarchy, so far as the present case is concerned, is the Football League, which was formed in 1888 to represent the interests of all professional football clubs in England and to organise a league championship competition. Until the formation of the Premier League in 1992 it remained the only English professional league and had a membership of over 90 clubs divided into four divisions. Since the formation of the Premier League its membership has been reduced to 72 clubs organised into three divisions of 24 clubs. The divisions operate in a hierarchy, with a system of promotion and relegation. At the end of each season the three most successful clubs in division one are promoted to the Premier League and the three least successful clubs in the Premier League are relegated to division one. A similar system operates as between divisions one and two and also as between divisions two and three where, however, four clubs are promoted and relegated.

14. In addition to the league competitions already mentioned, both the Football Association and the Football League organise cup competitions on a knock-out basis (i.e. the winner of each match goes forward to the next round, the loser being eliminated from the competition). The Football Association Cup competition is open to any club which is affiliated to the FA. It is so organised that clubs which participate in the Premier League or Football League competitions do not have to play until the later rounds. All clubs in the Premier League and the Football League compete in the Football League Cup, now known as the Worthington Cup, The Football League also organises another cup competition, currently known as the Auto Windscreens Shield, in which clubs in the second and third divisions of the Football League participate.

15. Opinions differ about the quality of English football, by comparison with overseas competition, in the 1980's. England won the World Cup in 1966, which represented a high point in international achievement. Thereafter the national team was less successful and individual clubs sold some of their leading players to foreign clubs. Public support for the game seems to have declined over a longer period. Attendances at Football League matches fell from a peak of 77 million in the 1949/50 season to about 20 million in the late 1980's. Since then there has been a recovery in attendances and, if there was previously a decline in the quality of play, this seems to have been reversed. Some witnesses expressed the view that this reversal only took place after the formation of the Premier League in 1992, the circumstances surrounding which we shall describe later. Others claimed that the corner had been turned, so far as the standard of play was concerned, by about the mid 1980's. This is not a matter on which we find it possible or necessary to express a view of our own.

16. What is clear, however, is that English football suffered a number of disasters during the 1980's. The main causes were crowd behaviour and the problems of ensuring crowd safety in antiquated stadia. Three tragedies stand out. In 1985 serious disorder at a match between Liverpool and Juventus at the Heysel Stadium in Brussels resulted in the deaths of 55 Juventus supporters. This was blamed on Liverpool supporters and as a result English clubs were subjected by UEFA to an indefinite ban on participation in events organised by UEFA. This ban was not lifted until the end of the 1990/1991 season. There was also in 1985 a very serious fire at the stadium of Bradford City, which resulted in a number of deaths among those attending the stadium. This resulted in the setting up of an inquiry under Mr. Justice Popplewell to inquire into safety at football grounds.

17. A third, even more serious, disaster occurred on the 15th April 1989 at the Hillsborough stadium in Sheffield on the occasion of a semi-final match in the Football Association Cup between Liverpool and Nottingham Forest. There was serious overcrowding of the terraces and a failure of crowd control, leading to an excessive number of spectators trying to gain access to a restricted standing area in order to see the match. This resulted in 96 deaths. Lord Justice Taylor was appointed by the government to inquire into the cause of the disaster and to make recommendations about how any repetition of it could be avoided. In his final report he said, in addition to much else:

18. Amongst many other recommendations Lord Justice Taylor proposed that steps should be taken to ensure that spectators were admitted only to stadia having seated accommodation, not the traditional unseated terracing. He proposed that this recommendation should be implemented at certain high risk matches from the start of the 1993/94 season; that it should apply at grounds in the first and second divisions of the Football League (i.e. what became the Premier League and the first division of the Football League) by the start of the 1994/95 season; and that it should be extended to matches at other grounds over a slightly longer period, the change being completed at all relevant grounds by the beginning of the 1999/2000 season. This recommendation was accepted by the government and by the governing bodies of football.

19. Lord Justice Taylor was mindful of the very high cost of implementing this recommendation and devoted considerable attention to how it might be met. Amongst other suggestions he said (Taylor Report, para 117):

20. As we have mentioned, until 1992 the Football League consisted of over 90 clubs divided into four divisions. By the end of 1990 some of the more successful clubs in the first of those divisions had become discontented with the way in which the Football League was run, particularly the way in which each of the 90 member clubs had an equal voice in the affairs of the Football League. There was also concern that potential for raising revenue from the broadcasting of football matches on television was not being fully exploited. Five clubs in particular led the way. They were Liverpool, Arsenal, Manchester United, Everton and Tottenham Hotspur, then the leading clubs in the first division of the Football League. With some encouragement from the Football Association they began to explore the possibility of forming a new league, separate from the Football League and consisting of the twenty or so most successful clubs in the Football League. At a meeting on 8th April 1991 the Council of the Football Association accepted in principle a composite proposal under which a new league, to be called the Football Association Premier League, would be established and start its activities by the beginning of the 1992/93 season.

21. Both before and after the Football Association Council meeting of 8th April 1991 less formal preparations were made for the formation of the new Premier League. These preparations involved numerous meetings with interested parties in which the leading part, on behalf of the putative Premier League, was taken by Mr. Rick Parry, who had been engaged as a professional management consultant to explore and pursue all aspects of such formation. In his evidence to us Mr. Parry went into considerable detail concerning these discussions. We have no difficulty in accepting his evidence, which was not challenged in this respect, but we do not find it necessary to summarise it here. It will suffice to say that, apart from structural issues, the prospects for new and lucrative television contracts had a most important part to play in Mr. Parry's negotiations. The prospect of greatly enhanced revenues from television which would be shared between the member clubs on the basis of an agreed formula was a major inducement in persuading those clubs in the old first division of the Football League who were doubtful about the new Premier League to agree to join the original five clubs. The negotiation of the formula involved a good deal of bargaining, but an acceptable formula was arrived at and agreed at a meeting of the division 1 clubs on 13th June 1991. At that meeting the same clubs also agreed in principle that they would give notice of their intention to leave the Football League .

22. On 17th July 1991 the 22 clubs which then made up the first division of the Football League entered into a formal "Founder Members Agreement" in which they recorded in a more formal way the matters agreed upon on 13th June. They stated their belief that a separate Premier League needed to be established. They declared certain basic principles for the establishment of a Premier League which included:

50% would be divided equally amongst the member clubs;

23. Notices of intention to leave the Football League were duly served by the clubs who were parties to the Founder Members' Agreement. Negotiations then took place to enable the Premier League to begin its activities at an earlier time than the expiration of the three seasons during which the notices would run. Agreement was reached and approved by the member clubs of the Football League in September 1991. The substance of the agreement was embodied in heads of agreement between the Football Association, the Football League and the Premier League (then operating as a sub-division of the FA) signed on or about 23rd September 1991. These heads of agreement provided as follows:

24. An expanded version of these heads of agreement was incorporated in a formal tripartite agreement, but this was not executed until a much later date, namely 15th December 1992.

25. It appears to have been envisaged in the earlier stages that the Premier League would operate as an organisation within the Football Association, but by October 1991 the clubs which intended to break away from the Football League decided that they wanted the Premier League to be independent of the Football Association as well. For some months thereafter it operated as an unincorporated association of clubs, with Mr. Parry acting as its chief executive. On the 22nd May 1992 a new company was incorporated with the name "The Football Association Premier League Limited.

26. The objects of the company, as stated in its Memorandum of Association, include the following:

27. It is to be noted that in this quotation references to the Premier League are references to the league which was to be organised and managed by the company rather than to the company itself. Elsewhere in this judgment references to the Premier League are references to the company, unless the contrary is indicated.

28. The Premier League is so constituted that it is governed in accordance with its Articles of Association and Rules and Regulations adopted by it. The following points of a constitutional nature are to be noted:

29. he Rules have been altered and in some cases re-numbered from time to time since the formation of the Premier League, but the provisions which we have noted above have remained unchanged throughout the life of the Premier League.

30. Since it began at the start of the 1992/93 season the Premier League has organised, and its member clubs have participated in, the league competition which the constitution of the Premier League envisaged. The form of the competition is very similar to that of other league competitions, notably that of the Football League. Each member club plays each of the other member clubs twice during each season, once at home and once away. This means that when, as now, the Premier League has 20 member clubs, a total of 380 games are played in the Premier League in each season.

31. The winner of a match receives three points. In the event of a draw each of the sides receives one point. A losing club, naturally enough, receives no points. The position of each club in the league is determined by its total number of points in the season. There are rules for the determination of the order in which clubs having an equal number of points are ranked. These rules are of great importance when the winner of the championship or a club to be relegated has to be identified from two or more clubs having an equal number of points but do not need to be explained here.

32. Except at the end of the 1993/94 season, when four clubs were relegated to the first division of the Football League and only two clubs were promoted from that division, so reducing the membership of the Premier League from 22 clubs to 20, three clubs are relegated and three promoted at the end of each season. A total of 29 different clubs have been members of the Premier League between its inception and the 1998/99 season.

33. There are, of course, many other football competitions. Some of them have already been mentioned, including the Football League championship, the Football Association Cup and the Football League Cup. Premier League clubs participate in the two Cup championships, the winner of each Cup usually being a Premier League club. There is also an expanding range of attractive European and World competitions and the fortunes of Premier League clubs are increasingly tied up with these. Other competitions which are of relevance to these proceedings include:

The World Cup: FIFA organises the World Cup, in which national teams participate, which is competed for every four years, with qualifying matches taking place during the two years preceding each World Cup final. The initial stages are played on a league basis, the later ones on a knock-out basis. England always participates in the World Cup, although its team does not always reach the final stages. The English team is likely to consist mainly, if not wholly, of players who normally play for a Premier League club.

UEFA Champions League: The European Champions League, formerly known as the European Cup, is organised by UEFA for the leading clubs in the national leagues of countries affiliated to UEFA. A total of 56 clubs took part in the 1998/99 season, the number of clubs from each country being dependent on UEFA's ranking of that country. In 1998/99 two clubs from England took part, these being the winner and the runner-up in the Premier League championship for the preceding season. The early stages of the competition, after two qualifying rounds, are conducted on a league basis, the later stages on a knock-out basis. For the 1999/2000 season there will, in the early stages, be four leagues, each of six clubs. The two most successful clubs in each league will go forward to the knock-out stage, where they will be joined by the winners of the Champions League in the preceding year and one club from each of the seven highest standing nations affiliated to UEFA (currently England, Italy, France, Spain, Germany, Portugal, Holland and Greece). There will then be quarter-finals, a semi-final and a final to select the winner out of the sixteen clubs participating in the knock-out stage. The league stages of the Champions League are played early in the season; the knock-out stages are played in the latter part. There is thus a gap, of the order of three to four months in duration, in Champions League activity in the middle of winter.

The European Cup Winners Cup: This competition (which, we were told, was discontinued at the end of the 1998/99 season) was formerly open to the winners of the cup competition of the national association in each UEFA country which had a sufficiently high ranking. In England this was the winner of the Football Association Cup in the preceding season or, where the winner of the Football Association Cup was also the winner of the Premier League championship, the losing finalist in the Football Association Cup. The previous year's winner of the Cup Winners Cup was also entitled to participate. The main competition was limited to 32 clubs, but a qualifying stage was introduced for countries whose UEFA ranking was too low to entitle them to an automatic place. The competition was played on a knock-out basis. In each round the clubs drawn against each other played two matches, one at home and one away. The result was decided on the basis of the aggregate of the goals scored in the two matches, equality being resolved by the weighting of away goals.

The UEFA Cup: This is a knock-out competition organised by UEFA and played on a home and away basis similar to that adopted for the Cup Winners Cup. Generally the clubs entitled to participate are the winners of domestic competitions which do not carry with them a place in the Champions League or the Cup Winners Cup (e.g. in England the Football League or the Football League Cup) and clubs from countries whose UEFA ranking does not give them a place in the Champions League or Cup Winners Cup. After the discontinuance of the Cup Winners Cup some clubs which would formerly have been eligible for that competition will be eligible to play in the UEFA Cup.

The UEFA Intertoto Cup: This competition is little known in England, partly because it is of recent origin, having been first staged in 1995, and partly because its object is to provide matches in the period between mid-June and the end of August when English clubs are reluctant to play more football. No Premier League clubs participated in 1995, the first year of this competition. In 1996 three Premier League clubs entered but they were subsequently penalised for failing to field their strongest teams. In 1998 only one Premier League club entered, namely Crystal Palace. It was suggested to us that the competition may become more popular as the result of an arrangement under which the three clubs doing best in the Intertoto Cup will qualify for the UEFA Cup.

34. The traditional time for professional football matches to take place in England is Saturday afternoon, with a kick-off time of 3pm. The commencement and ending of the football season are fixed by the Council of the FA. The tendency has been for the season to be fixed so that it lasts longer and longer. In recent years it has begun on or about the 10th August and ended on about 28th May in the following year. There are thus some 40-43 Saturdays in each season but for one reason or another not all of these may be available for the playing of Premier League matches. Each Premier League club will play 38 Premier League matches in the season, but all of them will also play a number of other matches. Each Premier League club will, for example, enter the Football Association Cup and the Football League Cup in each of which a successful club will play a significant number of matches over and above its Premier League commitment. In addition the most successful clubs may be involved in one or more of the UEFA competitions. Mr. Foster, who is the company secretary of the Premier League and whose responsibilities include the scheduling of football matches for the Premier League, said that Premier League clubs which are successful in European and domestic competition could potentially play up to 70 matches over the playing season, with international players within these clubs playing a further 6 or so games.

35. Quite clearly it would be impossible to arrange for this number of matches to be played only on Saturday afternoons during the season. Many of them have to be arranged at other times. Mr. Foster gave a detailed account of the difficulties involved in arranging the fixture list. Leaving aside the requirements of television companies and restrictions on the broadcasting of football on television arising from Article 14/44 of UEFA's statutes (both of which we shall discuss later) the conflicting requirements which have to be accommodated by Mr. Foster and his colleagues in preparing the fixture schedule include:

Mr. Foster mentioned a number of other requirements which have to be met. We accept that this is the case but we do not set them out as it appears to us that they are of lesser importance than those we have set out.

36. The general picture which was painted by Mr. Foster, which we accept as being correct, is of an overcrowded fixture schedule which leaves little or no room for manoeuvre, particularly towards the end of the season when such factors as the success of a particular club in one of the Cup competitions or in a European competition have to be taken into account. We think that some of the possibilities canvassed by Mr. Parker in his cross-examination of Mr. Foster did not so much offer a solution to the difficulties involved in lifting the pressure on the existing fixture list as it emphasised those difficulties. These included such measures as the reduction of the number of clubs in the Premier League and changing the rules of the Cup competitions so as to eliminate the need for matches still drawn after extra time to be replayed (Transcript, Day 16, page 157 et seq).

37. We turn now from the organisation of football to the evolution of the television industry in the United Kingdom.

38. Television was invented in the 1930's, but there were very few broadcasts on television until after the 1939-45 war. For a time after the war the BBC was the only organisation which was permitted to broadcast in the United Kingdom, whether in sound only or by means of television. The technical means whereby programmes were broadcast was the transmission of a radio signal from a broadcasting station to a reception point consisting of an aerial attached to the radio or television set of the person desiring to receive the broadcast. This method of broadcasting is now known as "analogue terrestrial", meaning that the signal consists of radio waves of an analogue nature and that the signal travels direct from a transmitter on the earth's surface to a receiving point on the earth's surface, with the consequence that it can only be received by listeners or viewers living within the limited range of a transmitting station. As no other method of broadcasting was in use when television began the expression "analogue terrestrial" was not then used. It is used now mainly for the purpose of distinguishing this method of broadcasting from others which are now available.

39. The BBC is established by royal charter, the charter being revised from time to time. It is financed by the government by means of a subvention equal to the amount received by the government in respect of television licences, which must be held by every person desiring to receive television broadcasts in the United Kingdom, whether or not that person intends to receive BBC programmes.

40. In 1954, or soon afterwards, "commercial" television began, as the result of the passing of the Television Act 1954. It has been referred to ever since as Independent Television or "ITV". It is not provided by a single broadcaster. Instead the country is divided into a number of regions, the franchise for commercial television broadcasting in each region being awarded for a specific period to a broadcaster chosen by means of a competitive bidding process. The franchisees for each region make some of their own programmes, but most are purchased or made on a central basis. In the case of sports programmes the franchisees have established a separate company to acquire the necessary television rights and to make the programmes. This separate company is referred to as "ITV Sport" or, in this judgment, as we are concerned only with sport, simply as "ITV".

41. Like the BBC, the ITV franchisees broadcast by means of analogue terrestrial signal. Unlike the BBC they receive no money from the government. They are financed by means of the advertising revenue which they obtain for advertising which is transmitted at intervals in their programmes.

42. Originally the BBC had only one "channel", by which is meant a broadcasting system through which a sequence of individual programmes is transmitted. In 1964 it opened a second channel, broadcasting a different series of programmes. The two channels, which continued to be broadcast in analogue terrestrial form, became known as BBC1 and BBC2 respectively.

43. In 1987 a second commercial channel was also opened. This has become known as Channel 4. It operates under the terms of a licence granted by the Independent Television Commission ("ITC") which requires it to provide alternative programming, including programme content targeted to cater for minority interests. A third commercial channel, known as Channel 5, began operations in 1996 or 1997. As with the three earlier channels these newer channels broadcast by means of an analogue terrestrial signal. Like the ITV franchisees they receive no public money and are financed by advertising revenue.

44. The five channels so far mentioned make no charge direct to their viewers. The television licence fee, which every television owner must pay, goes to the exchequer, not direct to the BBC. They are referred to collectively as "free to air" broadcasters,

45. During the 1980's a new form of broadcasting became feasible. This involves the transmission of a signal to a satellite which is in orbit above the earth, from which the signal is re-transmitted by means of a device called a "transponder" to a specific area of the earth's surface. There it can be received by means of a dish-shaped aerial and translated into a television picture, with sound accompaniment, by means of a set-top box. By means of the use of a coded signal the broadcaster can ensure that the service is only available to subscribers who have paid for it and that certain channels, referred to as "premium channels", are available only to those viewers who have paid an enhanced subscription. This form of broadcasting is, for obvious reasons, referred to as "satellite" broadcasting. It was used to some extent from the early 1980's but, for technical reasons connected with the power of the available satellites, it was only in the later years of that decade that broadcasting by this means direct to the viewer's home became feasible.

46. Originally two companies offered satellite broadcasting services to domestic consumers. The first, Sky Television plc ("Sky TV") launched its service early in 1989. The second, British Satellite Broadcasting Ltd. ("BSB") launched in 1990. Both used an analogue signal, although each used a different satellite and a different type of television system. They also distributed their channels via cable networks. They each faced the problem that their initial audiences were small, even though both of them initially offered their channels, other than a movie channel, on a free to air basis. This produced the result that both subscription income and advertising income were low. As a result neither broadcaster prospered and by the latter part of 1990 both were in a parlous state financially. The businesses of the two of them merged on 3rd November 1990, the main operating company being named British Sky Broadcasting Limited. It is this company which is a respondent to these proceedings and which we refer to as Sky. The merger resulted in a consolidation of channels (one of which, eventually known as Sky Sports, was a dedicated sports channel) and the use of one satellite only. Nevertheless the new company was burdened by debt arising from past losses and it continued to suffer further substantial losses. We were told that during the 37 week period from 13th October 1990 to 30th June 1991 these amounted to more than £750 million before tax. Break even point, so far as operational income and expenditure (ignoring interest payments) was concerned, was not reached until March 1992.

47. Two other forms of broadcasting call for mention, namely cable and digital. The possibility of distributing television by means of cable has been appreciated for some time. But the initial costs of establishing a cable network are high, involving as they do a good deal of street excavation to enable the cables to be laid. For this reason cable has become available only in the more highly populated areas. A further problem is that cable networks have been established on a piecemeal basis in a multitude of different ownerships. It is only in recent years that, as the result of amalgamations and take-overs of cable companies, three main networks have emerged. These are Cable & Wireless, Telewest and NTL.

48. The nature of cable is that it is available for the transmission of telephone services as well as television. Cable operators have tended to concentrate more on offering a telephone service as competitors of British Telecommunications than on offering television. Nevertheless they have begun to provide television to an increasing extent in recent years. Cable broadcasters usually buy in their television channels from outside sources. In particular they offer Sky's own channels, Sky having given an undertaking to make its channels available to other broadcasters on payment of charges calculated in accordance with a rate card approved by the Office of Fair Trading.

49. As to digital broadcasting, a digital signal is an alternative to an analogue signal. The technical differences between the two signals do not matter for present purposes. It will suffice to say that digital has a number of advantages over analogue, notably higher quality of reception and the ability to compress the signal. The latter characteristic means that it is now possible to deliver a greater number of digital channels by any given delivery medium, whether terrestrial, satellite or cable. A disadvantage of digital is that the viewer must either buy a new television set or install a set-top box to handle the signal. If the viewer wishes to receive programmes broadcast by more than one broadcaster he may need to install more than one set-top box.

50. A digital signal can be used in all types of broadcasting. It was first used by Sky for its channels in October 1998. We were told that Sky plans that its digital satellite service will eventually include 200 channels. Digital has not yet been used for cable broadcasting, but is expected to be launched at an early date. So far as terrestrial broadcasting is concerned, the fact that so many more channels can be used has alleviated the shortage of available frequencies which had previously held up expansion. In 1997 the government made available 6 groups of digital channels, known as multiplexes, for digital terrestrial transmission (i.e transmission by means of a signal which passes direct from a transmitter on the earth's surface to the viewer's home, as in the case of the original analogue signal). Three of these were opened to bidding by commercial broadcasters and a company named British Digital Broadcasting Plc was given a licence for all three multiplexes. That company adopted the trading name "ONdigital" at the end of July 1998 and we shall refer to it by that name.

51. ONdigital is a joint venture between Carlton Communications Plc and Granada Group plc, which are two of the main ITV franchisees. Originally Sky was also a member of the joint venture, but when the applications for allocation of the multiplex licences were being considered the ITC, which was responsible for granting the licences, indicated that on competition grounds it would not be willing to grant licences to a consortium of which Sky was a member. The other two participants in the joint venture therefore bought Sky's interest. The application for a licence had, however, been put forward on the basis that Sky channels would feature largely in the programme output of the new broadcaster. The ITC was not willing to allow the licence application to be altered. Accordingly arrangements were made for Sky to supply its channels to ONdigital.

52. The final form of broadcasting which we must mention is "pay per view" ("PPV"). The essence of this form of broadcasting is that the viewer pays a price for each programme watched. This payment is often, but not always, additional to a periodical subscription. Pay per view can be delivered to the viewer by satellite, cable, or digital or analogue terrestrial signal. A requirement is that the viewer must be able to communicate with the broadcaster in order to be able to order the broadcast he wants to see. In the present state of the relevant technology cable appears to have an advantage over the other platforms so far as pay per view is concerned, because the viewer can communicate with the broadcaster via the television controls and the cable which delivers the signal. For the other platforms communication by ordinary telephone is necessary. In the United Kingdom PPV is so far largely untried in the field of televised sport, although it is fairly well established for the broadcast of movies. It presents many kinds of problem for the broadcaster. In particular the broadcaster has to devote considerable resources to publicising what is available and establishing the necessary organisation for communication with the viewer and operating the necessary customer accounts. The viewer also needs to accustom himself to the practice of ordering up the television broadcasts which he wishes to see and has to put in place a mechanism for payment of the broadcaster's charges, usually in the form of a direct debit mandate.

53. In the 1960's and 1970's the BBC and ITV negotiated jointly with the Football League for the television rights in football matches played as part of the Football League competition. The BBC was particularly interested in broadcasting recorded highlights. It obtained the right to broadcast 45 minutes of highlights of two league games a week. From 1964 these highlights were broadcast on a Saturday evening in a programme called Match of the Day. The agreement between the Football League and the BBC ensured that all the first division clubs were visited at least once a season, but none more than three times. There were also arrangements to ensure a certain degree of exposure for clubs in the lower divisions. In 1968 London Weekend Television ("LWT"), one of the ITV franchisees, began to broadcast a programme called "The Big Match" at 2.30 on Sunday afternoon and other ITV franchisees broadcast similar programmes. In general, however, coverage was very limited.

54. In 1979 Mr. Michael Grade, then Director of Programmes for LWT, in which capacity he had a measure of responsibility for the whole of ITV's sports coverage, negotiated a deal with the Football League under which LWT obtained exclusive rights to broadcast, each Saturday evening during the season, recorded highlights of all the Football League matches played on that Saturday. This deal provoked strong objection from the BBC and a degree of intervention from the Office of Fair Trading on competition policy grounds. The result was a compromise under which ITV and the BBC entered into a joint contract with the Football League whereby the television rights (mainly if not wholly in respect of recorded highlights) were shared between them during a four year period, lasting until 1983. The Football League was paid a total of £9.2 million over the four year period for these rights. In 1983 another joint contract was made for a period of two years (until the end of the 1984/85 season). The BBC was given the right to broadcast five matches during each season live on Friday evenings, ITV having the right to another five matches live during the season on Sunday afternoon. For this two year contract the Football League received £5.2 million.

55. When the second of these joint contracts came to an end at the close of the 1984/85 season, the BBC and ITV were able to obtain for the next season only an allocation of three live matches each during a six month contract. In 1986 they entered into a contract for two seasons (1985/86 and 1986/87) under which they each had the right to broadcast seven live league or league cup matches.

56. In 1988 ITV acted unilaterally and secured for itself a four year deal (to the end of the 1991/92 season) under which it obtained exclusive rights to show on television both a specified number of live matches, which were played on Sunday afternoons, and highlights of these and other league matches. ITV paid a total of £55 million for this coverage over the four seasons.

57. During the periods which we have mentioned the television rights to other football competitions, notably the Football Association Cup, were sold to other broadcasters. We do not propose to go into detail about these arrangements except to say that, in 1988, the BBC and BSB (as it then was) jointly bid for the television rights to matches played in the Football Association Cup and England's home internationals, offering £6 million per year. This bid was successful. BSB took the rights to broadcast matches live and the BBC took the highlights rights. At about the same time Sky TV obtained the television rights for matches played in two competitions for third and fourth division clubs.

58. English football clubs, and probably also football clubs elsewhere in the world, have a somewhat ambivalent attitude to football on television. On the one hand there is a strong and almost universal belief that if a football match is shown live on television this will have an adverse effect not only on the attendance at that match but also on the attendance at some other matches played at the same time ("the spill-over effect"). We shall say more later on about the basis for and the validity of this belief. On the other hand football clubs appreciate the publicity which is obtained by appearances on television and the opportunities thereby provided to raise income by means of sponsorship and advertising at the ground. (Sponsors need exposure on television and advertisers will pay more for advertisements at football grounds if these appear on television). During the four seasons between 1988/98 and 1991/92, when ITV had exclusive television rights in Football League matches, resentment built up at the very limited television exposure received by some clubs, some of which did not appear at all on television during some seasons, by comparison with other clubs, whose matches were shown several times each season.

59. In view of the first of these concerns UEFA's Statutes have made provision to regulate the showing of football matches on television in countries affiliated to UEFA. In 1993 UEFA adopted as Article 14 of its Statutes an Article which provides:

60. On 5 December 1997, UEFA revised its Statutes and Article 14 was renumbered Article 44. Although the wording and numbering of the article have changed, the changes do not appear to have altered the general effect of the Article, to which we will refer henceforth as "Article 14/44".

61. In August 1993, the UEFA Executive Committee approved a detailed set of regulations governing the broadcasting of football ("the Regulations"). Broadly, the Regulations established a series of time "windows" during which matches:

62. The most important provision of the Regulations for present purposes is Article 8(1) which, when adopted in 1993, provided as follows:

With effect from 28th March 1996 UEFA amended this regulation so that it now reads:

63. The regulation therefore does not now purport to restrict the showing of football on television within the territory of a national football association. But, except when it is delivered by cable, a television signal is no respecter of national boundaries. There is accordingly a substantial risk that a television broadcast intended primarily for reception within the territory of the national football association where the match is played will be regarded by UEFA as being transmitted into the territory of another member association if it can be received there. The problem is particularly acute in the United Kingdom, where Scotland, Wales and Ireland each qualify as the territory of a separate national football association. Instances were cited to us where national associations (in England the FA) have incurred substantial fines for breach of the regulation. In other instances payments have been made by one national football association to another to avoid the recipient of the payment making a complaint to UEFA which may result in the imposition of a fine.

64. Article 14/44 and the Regulations have been notified to the Office of Fair Trading, but they have not been referred to this court and their validity is wholly outside these proceedings. They have also been notified to the European Commission under what was formerly Article 85 of the EC Treaty (it is now Article 81) and an exemption has been sought under Article 85(3). The court was informed that the Commission has, comparatively recently, served a Statement of Objections, which is the first step in what may become a challenge to the validity of Article 14/44 and the Regulations. For the time being, however, they continue to be enforced by UEFA against the national football associations which are its members.

65. The Premier League supports both the validity of Article 14/44 and the Regulations and the philosophy which underlies them. It was said that one of the effects of Rule D.7.3 of the Premier League Rules is that it enables the Premier League to ensure that the requirements of the Article and the Regulations are complied with. Certainly the existence of the Article and the Regulations has been a factor which has been taken into account by the Premier League in deciding how it will sell the television rights to Premier League matches pursuant to Rule D.7.1. It is not, however, clear to us that the Premier League always adheres to the letter of Article 14/44. The broadcasting of a Sunday afternoon Premier League match by Sky seems on the face of it to be a contravention of Article 14/44. It was not explained to us on what basis this has been allowed or tolerated.

66. As we have already noticed, the exploitation of the television rights in the matches played by its member clubs was an important factor, perhaps the most important factor of all, which led to the decision to set up the Premier League. Even before the Premier League had been established Mr. Parry, who was to be its first chief executive, began negotiations with television companies. In his evidence he gave a detailed account of these negotiations, the accuracy of which was not challenged. For our purposes, however, a brief account of what happened will suffice.

67. Mr. Parry had detailed discussions with a number of broadcasters and with certain other organisations, including Swiss Bank Corporation ("SBC"). SBC made a proposal for a dedicated football channel to be shown on Pay-TV and to be run as a joint venture between SBC and the Premier League, which was to receive a minimum guaranteed payment and a share of profits. Mr. Parry said that he regarded such a venture as interesting but something for which the Premier League was not yet ready. Attention was therefore concentrated on the BBC, ITV and Sky, each of which showed interest. These were, in substance, all the broadcasters who were active in 1992. The cable companies had not then entered the television market to any significant extent and digital terrestrial television lay some years in the future.

68. In the negotiations the attitude of ITV, at least as it was perceived by Mr. Parry, was that it wanted exclusive rights to Premier League matches. It wanted to show 30 live matches each season, effectively one a week. It did not want to commit itself to showing all the Premier League clubs. It wanted to concentrate on the most successful clubs because their matches would be the most attractive to advertisers.

69. The BBC was not really in the bidding for the television rights in live matches. Its main interest was to gain the right to show highlights, which would enable it to bring back the programme Match of the Day, which had been limited to certain broadcasts of FA Cup matches and to highlights of England home internationals during the period that ITV had exclusive rights.

70. This left Sky as the main rival to ITV. Mr. Parry said that he was initially unconvinced by the idea of selling television rights in the new league for distribution by a Pay-TV satellite broadcaster, whose business was in its infancy. He was, however, impressed by presentations made by Sky to demonstrate its technical capabilities and its business case. An additional factor was that Sky indicated that it would be willing for the BBC to have the highlights rights, which would alleviate concern about giving exclusive rights to a Pay-TV broadcaster with a limited subscriber base.

71. Mr. Parry described the outcome of these negotiations as follows (Witness statement para 128):

72. This summary omits to record, although the Premier League clubs were, of course, made well aware of it, that the 60 live matches included in the Sky bid were to be played on 30 weekends during the season, one match being played on a Sunday and the other on a Monday in each weekend. This was proposed partly because it fitted in with Sky's programming and partly because it met the requirements of the UEFA Article 14/44 (subject to the actual timing of the Sunday match) and the desire of the clubs that live matches shown on television should not conflict with matches not shown live on television.

73. The offers and Mr. Parry's recommendation were considered at a meeting of the Premier League held on the 18th May 1992 .There was considerable discussion. Some clubs were concerned that 60 live matches per season on television would be too many. Others preferred the ITV bid to the Sky bid on the ground that it would be better to have fewer matches on free to air television. Others thought that it was undesirable for Premier League matches to have to be played on a Monday. Eventually the clubs voted by 14 to 6 to accept the Sky and BBC offers. Following on this decision formal contracts between the Premier League and Sky and the BBC respectively were prepared.

74. On 13th August 1992 the Premier League and Sky entered into a formal written agreement. So far as they are relevant to these proceedings its terms can be summarised as follows:

75. We emphasise that this summary does not cover all the terms of the Agreement. We have confined it to those terms which are relevant to these proceedings. The terms which are particularly relevant are those which we have set out verbatim.

76. The BBC Agreement is dated 14th September 1992, a month after the 1992 Sky Agreement. It was made between the Premier League and the BBC and its provisions so far as material to this case may be summarised as follows: