The European Commission (EC) has called on NBC Universal andParamount Pictures to drop what it regards as unfair conditions in their outputdeals with European broadcasters.

The EC's departing Competition Commissioner Mario Monti saidyesterday that his organisation had dropped its investigation into thepractices of the other six "major Studios", Buena Vista International Inc.(subsidiary of The Walt Disney Company), Warner Bros Entertainment Inc, 20thCentury Fox Film Corp., Sony Pictures Entertainment Inc., MGM Studios Inc., andDreamworks LLC.

The Commission began its investigation in 2002 into the"most favoured nation" (MFN) clauses that all the studios employed in theirlong term deals with TV companies. But during the course of the investigationsix of the studios dropped the condition from their contracts.

Although none of the studios admitted any kind of guilt,they may have been swayed by a preliminary judgement by Monti's department. Itruled: "the cumulative effect of the clauses is an alignment of the prices paidto the Majors. This is particularly because any increase agreed with a Majortriggers a right to parallel increases in the prices of the other studios. TheCommission considers that under these circumstances of cumulative effect such anomalousway of setting prices is at odds with the basic principle of pricecompetition."

As NBC Universal and Paramount did not follow suit they willcontinue to be investigated. In a statement this week Monti said: "I welcomethe constructive approach taken by six Hollywood Major Studios concerning MFNclauses. I also invite Universal and Paramount to follow this reasonable pathas soon as possible, so as to avoid adverse effect on competition".

If they are eventually found to be in breach of Europe's anti-monopolylaws the companies could face fines of up to 10% of their annual turnover.