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EU CRIES FOUL ON COST OF HOLLYWOOD FILMS

BRUSSELS, Belgium - European Union regulators are close to filing charges against Hollywood studios over a contract clause with pay-television companies that allegedly keeps the price of films high in Europe, reports the Agence France Press.

An official statement of objections is expected as early as this month, the sources told The Associated Press on condition of anonymity. While not going so far as to accuse the studios of forming an illegal cartel, the European Commission's investigation turned up similar language setting minimum prices in pay-TV contracts across Europe.

Investigators believe the "cumulative effect" of the clauses keeps the price of Hollywood films high, resulting in higher pay-TV subscription fees for customers in the European Union.

The charges could further strain trans-Atlantic ties just as the long- running EU investigation into alleged antitrust abuses by Microsoft Corp. nears a decision.

Commission spokeswoman Amelia Torres declined to comment on the status of the investigation, which began more than a year ago, other to say the commission's concerns were known and that no conclusions have been made.

The commission contacted Hollywood studios and carried out inspections at the offices of pay-TV companies in Europe in late 2002. While it has declined to identify any of the companies involved, British Sky Broadcasting Group PLC and California-based Walt Disney Television have confirmed they were among those contacted.

BSkyB spokesman Robert Fraser declined to comment; a Disney spokesman could not be immediately reached for comment.

BSkyB has deals with all the main Hollywood studios and shows some 2,000 movie titles a year on its pay-TV channels.

The clause in question requires a pay-TV company to extend the best price and terms for a set number of films for one Hollywood studio to all studios it has contracts with. It's known as a "most-favored nation" clause after the status granted by Washington to trading partners.

Hollywood studios argue that such clauses are not illegal and can work both ways - preventing studios from reselling a package of films for a lower price to another platform, for example.

"The truth is in a particularly competitive business supplying to an increasingly monopolized distribution sector, you use every trick you can, as long as it's legal," said David Halbert, president of Walt Disney International Television, in an interview last summer.

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