EU Tells Partnership to Halt Digital TV Decoder Box Sales

BRUSSELS — The European Commission told Kirch Gruppe and Bertelsmann to stop selling the set-top decoder box they will use for their digital television venture until the partnership gets regulatory approval.

Bertelsmann’s TV unit said it has no plans to halt sale of the devices, which control access to digital TV programming. “This is like asking a mobile phone company to stop using its network,” said Nikolaus Formanek, a spokesman for CLT-UFA, the broadcaster jointly owned by Bertelsmann and Audiofina’s Compagnie Luxembourgeoise de Telediffusion.

The decision could further delay acceptance of digital TV in Germany, Europe’s largest television market, and set a precedent for development of pay TV in Europe. Digital TV, which allows a greater number of channels as well as interactive services, has gotten off to a slow start in Germany after disputes among Bertelsmann, Kirch and cable TV provider Deutsche Telekom over what decoder technology to use.

“This is truly unimaginable; the EU’s actions are out of control,” said Michael Schatzschneider, an analyst at BHF Bank. “I doubt that this will put an end to Kirch and Bertelsmann’s plans, but it will cause a delay and that will cost both money.”

Formanek said representatives of CLT-UFA and Kirch, which are merging their pay-TV activities, will meet with commission authorities today to argue their position. The company received a letter from the commission outlining its concerns last week.

The commission, the executive agency of the 15-member European Union, said Monday that use and marketing of the technology “is considered a partial execution of the intended merger,” and leads consumers to believe the technology “is already the definite digital standard for the German market.”

Still, the commission said its concerns about the box don’t amount to an outright rejection of the merger, which is currently under review by EU competition authorities.

The commission already warned Kirch, Bertelsmann and Deutsche Telekom--which is providing the network for their pay-TV services--not to go ahead with their alliance before getting approval. Bertelsmann said last week that it and Kirch are following the law with “painful exactness” leading up to the merger.

The commission said in a statement that its threat to fine the companies doesn’t “imply that the commission is in principle opposed to a single digital standard or wants to obstruct the introduction of digital television in Germany.”

CLT-UFA Chief Executive Rolf Schmidt-Holtz said in a statement over the weekend that the commission’s concerns were unwarranted.

BHF’s Schatzschneider said the commission made the decision in order to demonstrate its regulatory power.

“They are playing power games and want to punish them for not following their procedures,” he said.