Skip to main content

Advertisement

SpringerLink
Log in

Competition and Intellectual Property Protection in the Market for the Provision of Multi-Territorial Licensing of Online Rights in Musical Works – Lights and Shadows of the New European Directive 2014/26/EU

  • Article
  • Published:
IIC - International Review of Intellectual Property and Competition Law Aims and scope Submit manuscript

Abstract

The Directive of February 2014 regarding the collective management of copyright and the multi-territorial licensing of online rights in musical works is part of a broader framework of initiatives that the European Commission has been promoting in the past years, acting both as competition guarantor and as EU legislator, to facilitate the emergence of a European single market for the exploitation of musical works in digital format. This study will analyze the framework put forward by the new Directive 2014/26/EU with regard to the management of online rights in musical works by collective management organizations (CMOs) to see whether the EU legislators have succeeded in introducing a set of rules capable of fostering the emergence of a competitive EU-wide market for the provision of multi-territorial licences. As will be shown, not only several provisions contained in the new Directive offer reasons for concern as regards the protection of both competition and intellectual property rights in the new market for multi-territorial licences, but also recent judgments by both the General Court and the Court of Justice of the European Union (the CISAC and OSA judgments respectively) seem to go against the spirit of the Directive.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. Directive 2014/26/EU of the European Parliament and of the Council of 26 February 2014 on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market, in OJ EU L-84/72 (20 March 2014), (hereinafter: “Directive 2014/26/EU”).

  2. See Commission Study on a Community Initiative on the Cross-Border Collective Management of Copyright (7 July 2005), available at: http://ec.europa.eu/internal_market/copyright/docs/management/study-collectivemgmt_en.pdf (hereinafter: “Commission Study”); Commission Recommendation 2005/737/EC of 18 May 2005 on collective cross-border management of copyright and related rights for legitimate online music services, OJ EU L-276, p. 54 (21 October 2005), (hereinafter: “Recommendation 2005/737/EC”). On the management of copyright and neighbouring rights in general, see Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee on the Management of copyright and related rights in the internal market, of 16 April 2004, COM(2004) 261.

  3. Note that the new Directive has adopted the new terminology “collective management organisation”, instead of “collective management society”, as suggested by the European Council in its Presidency compromise proposal, with the purpose of better taking into account the variety of legal forms that collective management societies may choose: from companies to foundations. See Council of the European Union, Brussels 5 April 2013, 8013/13, Presidency compromise proposal – Proposal for a Directive of the European Parliament and of the Council on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market, 2012/0180 (COD), recital 7d) and Art. 3, lit. a), (hereinafter: “Compromise Proposal”).

    In this study the terms “collective management society”, “collective management organisation” or, more simply, “collecting society” will be used interchangeably.

  4. For a comprehensive analysis of the Commission’s as well as the Court of Justice of the European Union’s judicature, see Hilty and Nérisson (2013, p. 222).

  5. On the functioning of representation agreements, see Guibault and Van Gompel (2010, p. 143).

  6. In a number of cases, the Commission pronounced against the anti-competitive nature of some clauses which would have led to the fragmentation of the European market into many national markets. Of particular interest are the Santiago and Barcelona agreements, under which the parties committed to grant non-exclusive multi-territorial licences for public performance rights in online musical works and for online mechanical reproduction rights, respectively. Both agreements contained clauses that bound the author to apply to the collective management society located in his country of residency (so-called “economic residency clause”). See Notice published pursuant to Art. 27(4) of Council Regulation (EC) No. 1/2003 in case COMP/C2/39152 – BUMA, and case COMP/C2/39151 – SABAM (Santiago Agreement – COMP/C2/38126), OJ C 200, pp. 11–12 (17 August 2005); Notification of cooperation agreements (case COMP/C-2/38.377 – BIEM Barcelona Agreements), OJ C 132, p. 18 (4 June 2002). Broadly on the subject, see Frabboni (2009, p. 383), Extensively on the Santiago Agreement, see also Woods (2010, p. 115 et seq.).

  7. Of particular interest for the matter under investigation is the so-called CISAC case, regarding reciprocal representation agreements between collective management societies that are members of the network of the CISAC association (International Confederation of Societies of Authors and Composers). See Commission decision of 16 July 2008 relating to a proceeding under Art. 81 of the EC Treaty and Art. 53 of the EEA Agreement, case COMP/C2/38698 - CISAC, available at: http://ec.europa.eu/competition/antitrust/cases/dec_docs/38698/38698_4567_1.pdf. For a comment on the Commission decision, see Yow (2011, p. 292 et seq.). Note that the decision has been partially overruled by the General Court, see judgments of the General Court (Sixth Chamber), International Confederation of Societies of Authors and Composers (CISAC) v. European Commission, 12 April 2013, case T-442/08 et al., OJ C 156, p. 37 (1 June 2013). Both the CISAC decision of the Commission and the judgments of the General Court will be extensively examined infra, at 5.4.

  8. See, in particular, the case IFPI-Simulcasting where the Commission explained that: “The licensing of copyright and related rights in the online environment is significantly different from the traditional offline licensing, in that no physical monitoring of licensed premises is required.… This means that monitoring can take place from a distance. In this context, the traditional economic justification for collecting societies not to compete in cross-border provision of services does not seem to apply” (emphasis added). See Commission decision of 8 October 2002 relating to a proceeding under Art. 81 of the EC Treaty and Art. 53 of EEA Agreement, case COMP/C2/38014 – IFPI “Simulcasting”, OJ EC, L-107, p. 58 et seq., para. 61 (30 April 2003).

  9. On the goals pursued by the European Digital Agenda, see http://ec.europa.eu/digital-agenda/digital-agenda-europe.

  10. The Commission is aware that other factors impede the rise of a digital single market in the EU such as: (i) high technological barriers (for example, the circumstance that in some Member States there is still limited access to ADSL internet connections); (ii) the limited familiarity of some internet users with online payment methods and online transactions in general; and (iii) online piracy. See Commission’s impact assessment accompanying the document “Proposal for a Directive of the European Parliament and of the Council on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market” 23, § 3.2 (11 July 2012), SWD (2012) 204 final (hereinafter: “Impact Assessment”).

  11. See Commission Study, supra note 2, § 1.1.4, p. 10. See also recital 5 of Directive 2014/26/EU where it is expressly stated that problems with the functioning of CMOs lead to “inefficiencies in the exploitation of copyright and related rights across the internal market, to the detriment of the members of collective management organisations, rightholders and users”. Similarly also recital 38 explains that “the complexity and difficulty associated with the collective management of rights in Europe has … exacerbated the fragmentation of the European digital market for online music service”; a situation which is “in stark contrast to the rapidly growing demand on the part of consumers for access to digital content and associated innovative services, including across national borders”.

  12. On blanket licences and their positive as well as negative impact on competition, see Handke and Towse (2007, p. 942 et seq.).

  13. See Commission Study, supra note 2, § 1.2.2., p. 14.

  14. Scholars have pointed out, however, that the implementation of an analytical computation of the uses of the works, by making possible an extremely precise remuneration of such uses, risks undermining the solidarity and redistributive features that in the past have typically characterized the collective administration of rights by local collective management societies. See Ricolfi (2006, p. 24); Sarti (2001, p. 32 et seq).

  15. See Impact Assessment, supra note 10, § 3.2.3, p. 27.

  16. See Recommendation 2005/737/EC, supra note 2, recital 8. See also Commission Study, supra note 2, §§ 1.1 and 7.1.

  17. According to the Recommendation, online rights in musical works comprehended: (i) the exclusive right of reproduction, covering all reproductions provided for under Directive 2001/29/EC in the form of intangible copies, made in the process of online distribution of musical works; (ii) the right of communication to the public of a musical work, either in the form of a right to authorize or prohibit pursuant to Directive 2001/29/EC or a right to equitable remuneration in accordance with Directive 92/100/EEC, which includes webcasting, internet radio and simulcasting or near-on-demand services received either on a personal computer or on a mobile telephone; (iii) the exclusive right of making available a musical work pursuant to Directive 2001/29/EC, which includes on-demand or other interactive services. See Recommendation 2005/737/EC, supra note 2, recital 5, and § 1, lit. f).

  18. Recommendation 2005/737/EC, supra note 2, recital 9, and §§ 3, 5, lit. c).

  19. See Commission Study, supra note 2, §§ 3.3., 4.6, p. 41.

  20. See recitals 6 and 39 of Directive 2014/26/EU; see Explanatory Memorandum accompanying the Proposal for a Directive of the European Parliament and of the Council on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market, 11 July 2012, COM(2012) 372 final (hereinafter: “Explanatory Memorandum accompanying the Proposal Directive”), 1.3, p. 5, where the Commission declares unsatisfactory the results reached with the adoption of Recommendation 2005/737/EC. The adoption of a non-binding legal instrument such as a recommendation had also been criticized by the European Parliament, fearing a situation of legal uncertainty which would have followed its adoption. See European Parliament resolution of 13 March 2007 on the Commission Recommendation of 18 October 2005 on collective cross-border management of copyright and related rights for legitimate online music services (2005/737/EC), (2006/2008 (INI), OJ C-301E, pp. 64–69 (13 December 2007), recital C, where the Parliament found it “unacceptable that a ‘soft law’ approach was chosen without prior consultation and without the formal involvement of Parliament and the Council, thereby circumventing the democratic process, especially as the initiative taken has already influenced decisions in the market to the potential detriment of competition and cultural diversity”. In a similar sense, see also European Parliament resolution of 25 September 2008 on collective cross-border management of copyright and related rights for legitimate online music services, OJ C-8E, pp. 105–107, § 2 (14 January 2010).

  21. Proposal for a Directive of the European Parliament and of the Council on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market, 11 July 2012, COM(2012) 372 final (hereinafter: “Proposal Directive”).

  22. See Impact Assessment, supra note 10, p. 14. See also Explanatory Memorandum accompanying the Proposal Directive, supra note 20, §§ 1.1. and 3.4.1. The possibility of dividing the two parts of the legislative text into two autonomous proposals had also been supported by J. Lemercier on behalf of the European Economic and Social Committee. See Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market, COM(2012) 372 final – 2012/0180 (COD), 2013/C 44/18, § 3.4. (15 February 2013).

  23. See Art. 2(1) and (3), Directive 2014/26/EU.

  24. See Art. 2(2), Directive 2014/26/EU.

  25. See Recommendation 2005/737/EC, supra note 2, recital 9, §§ 3, 5, lit. c).

  26. See Recommendation 2005/737/EC, supra note 2, § 3.

  27. Article 5 introduces a number of key principles regarding the relationship between CMOs and right-holders such as the latter’s right to appoint just one CMO for the administration of a certain category of rights throughout the whole of Europe. Extensively on the subject, see Guibault (2014, p. 720 et seq.).

  28. It is worth noting that Art. 31 further clarifies that right-holders can withdraw “the online rights in musical works for the purposes of multi-territorial licensing in respect of all territories without having to withdraw the online rights in musical works for the purposes of mono-territorial licensing”.

  29. In this sense, see Quintais (2013, p. 71) who also questions whether the provision actually adds something new to the standard situation where withdrawal and termination are already available to right-holders.

  30. The term “pan-European passport” has been used by the very same Commission. See Impact Assessment, supra note 10, § 6.2 and Explanatory Memorandum accompanying the Proposal Directive, supra note 20, § 2.3.

  31. Pursuant to Art. 24 et seq. of Directive 2014/26/EU, collecting societies aimed at granting multi-territorial licences for online rights in musical works must be capable of processing and managing electronically all that is needed for the management of such licences, from timely and precise invoicing to gathering and distribution of revenues. Art. 24(2), for example, requires that collecting societies be capable of (a) identifying accurately the musical works which the collecting society is authorized to represent; (b) identifying accurately the rights and their corresponding right-holders; (c) making use of unique identifiers in order to properly identify right-holders and musical works; (d) making use of adequate procedure in order to resolve in a timely and effective manner inconsistencies in data held by other collective management societies granting multi-territorial licences.

  32. Article 24 of Directive 2014/26/EU.

  33. Article 27 of Directive 2014/26/EU.

  34. Article 28 of Directive 2014/26/EU.

  35. Commission Decision of 8 October 2002 relating to a proceeding under Art. 81 of the EC Treaty and Art. 53 of EEA Agreement, case COMP/C2/38014 – IFPI “Simulcasting”, supra note 8.

  36. The term “tag-on regime” was introduced by the European Commission in the Impact Assessment, supra note 10, §§ 6.2., 24.3.

  37. Article 29 of Directive 2014/26/EU.

  38. Note, indeed, that the Directive does not place a clear-cut obligation upon the pan-European collective management organization to accept the mandate from the colleague. On this point, see infra, at 5.1.

  39. Article 30(1) of Directive 2014/26/EU. This provision must be read together with Art. 5(2), last sentence, introducing a general duty to contract upon CMOs, whereby it establishes that, unless a collective management organization has objectively justified reasons to refuse management, it shall be obliged to manage the mandated rights.

  40. Article 30(3) of Directive 2014/26/EU. In this regard, see also recital 30 of the Directive establishing that: “To protect the rights of the members of the other collective management organisation, a collective management organisation should not distinguish between the rights it manages under representation agreements and those it manages directly for its rightholders. Nor should the collective management organisation be allowed to apply deductions to the rights revenue collected on behalf of another collective management organisation, other than deductions in respect of management fees, without the express consent of the other organisation. It is also appropriate to require collective management organisations to distribute and make payments to other organisations on the basis of such representation agreements no later than when they distribute and make payments to their own members and to non-member rightholders whom they represent. Furthermore, the recipient organisation should in turn be required to distribute the amounts due to the rightholders it represents without delay”.

  41. Article 30(4) of Directive 2014/26/EU.

  42. In this sense, see Quintais (2013, supra note 29, p. 71).

  43. See in this regard recital 3 of Directive 2014/26/EU stressing that CMOs should continue to play “an important role as promoters of the diversity of cultural expression, both by enabling the smallest and less popular repertoires to access the market and by providing social, cultural and educational services for the benefit of their right-holders and the public”. On this point, however, see also infra, at 5.2.

  44. Article 31 of Directive 2014/26/EU holds that “rightholders who have authorised that collective management organisation to represent their online rights in musical works can withdraw from that collective management organisation the online rights in musical works… so as to grant multi-territorial licences for their online rights in musical works themselves or through any other party they authorise or through any collective management organisation complying with the provisions of this Title”.

  45. See Banghalter and Homem Christo v. SACEM, case COMP/C2/37219 (12 August 2002), available at: http://ec.europa.eu/competition/antitrust/cases/dec_docs/37219/37219_11_3.pdf (in French), at pp. 10–12. The Banghalter and Homem Christo v. SACEM case, better known as the Daft Punk decision, concerned SACEM’s refusal to accept mandates from two French singer-songwriters, Banghalter and de Homem Christo (founders of the well-known music duo “Daft Punk”), who only intended to assign to the French collecting society the management of some categories of rights, reserving to themselves the administration of rights concerning the online exploitation of their works. In the course of the complaint, SACEM amended its statute in line with competition principles, to the satisfaction of the European Commission.

  46. See in this regard Hilty and Nérisson (2013, supra note 4, p. 223), emphasizing that the term collective regards the management of rights and refers precisely to the circumstance that the CMO perform representation, defence and enforcement of (copy)rights jointly.

  47. Article 5(6) of Directive 2014/26/EU.

  48. In this sense, see Impact Assessment, supra note 10, at 9, and in particular footnote 29, where the Commission explains that even if right-holders in theory may freely choose between collective and individual management of their rights, such choice highly depends on the different category of right-holder and on the kind of use of the right. In the case of musical works, authors have typically preferred to choose a collective administration of rights. In a similar sense, see also Explanatory Memorandum accompanying the Proposal Directive, supra note 20, § 1.1.

  49. See Hilty and Nérisson (2013, supra note 4, p. 223).

  50. For the distinction between primary and secondary markets of copyrighted works, see Ricolfi (2007, p. 285).

  51. See in this regard Hilty and Nérisson (2013, supra note 4, p. 223).

  52. See Decision of the European Commission of 12 August 2002, Banghalter and Homem Christo v. SACEM, case COMP/C2/37219, supra note 45. A similar situation occurred in the case GEMA, where the Commission held abusive the obligation imposed by the German collective management society upon its members to exclusively mandate the administration of all rights, including those pertaining to future works. See Decision of the European Commission of 2 June 1971, case IV/26270 – GEMA (71/224/CEE), in OJ L-134, pp. 15 et seq. (20 June 1971), and in particular pp. 22–24.

  53. See Kretschmer (2002, p. 130), arguing that the diffusion of new digital rights management systems would allow right-holders to directly disseminate and control their works online.

  54. See Ricolfi (2007, supra note 50, pp. 292–293), explaining that the digitization of works, blurring the distinction between the original work and its copies, which can be made at no cost, has shortened the distance between authors and their public.

  55. The problematic issue of so-called “copyright fragmentation” is discussed at length by Gervais (2010, p. 3 et seq.).

  56. In this regard, it is worth pointing out that Art. 3(c) of the Directive has introduced a very broad notion of right-holders which even embraces legal entities holding copyrights or related rights by virtue of an agreement for the exploitation of such rights: a definition which surely encompasses big publishing groups. On this subject, see Guibault (2014, supra note 27, p. 712).

  57. Drexl (2007a, p. 276), noting that big publishing companies will be the only entities capable of assembling significant repertoires of works, comparable in size to those managed by CMOs.

  58. Broadly on the subject, see Hellenic Foundation for European and foreign policy, “Collecting societies and cultural diversity in the music sector” 31 et seq. (ELIAMEP Study, 2009), available at: http://www.europarl.europa.eu/committees/en/studiesdownload.html?languageDocument=EN&file=28328.

  59. See Hilty and Nérisson (2013, supra note 4, p. 227 et seq.).

  60. In this regard it is worth recalling that some authors, criticizing the broad notion of right-holder contained in the 2005 Recommendation (where right-holders were generically defined as “any natural or legal person that holds online rights”: see Recommendation 2005/737/EC, supra note 2, § 1(g)), warned that such an extensive definition would blur the distinction among right-holders, music publishers and CMOs and, much in the same way, the difference between individual and collective management, to the detriment of authors and performing artists. See Drexl (2007a, supra note 57, p. 277).

  61. On the criticalities related to the definition of a collecting society contained in the (Proposal) Directive, see Sarti (2013a, p. 13 et seq.). According to the author, the feature that would distinguish a collecting society from other subjects that equally aggregate and manage the rights of many authors (such as, for example, music publishers or phonogram producers) is represented by the “associative” function to safeguard an interest of the category; a function that is typical only in collective management forms of rights.

  62. In this regard, it is worth noting that Art. 3, lit. c), defines a right-holder as “any person or entity, other than a collective management organisation, that holds a copyright or a related right or, under an agreement for the exploitation of rights or by law, is entitled to a share of the rights revenue” (italics added). Therefore, the requirement that an IME ought not to be owned or controlled by a right-holder is perfectly compatible with it being controlled by a CMO.

  63. See Gyertyanfy (2010, p. 79), arguing (with regard to the provisions set forth in Recommendation 2005/737) that the Commission’s hidden goal was precisely to benefit major publishing companies.

  64. For example, some national collecting societies (such as the Italian SIAE, the French SACEM and the Spanish SGAE) have created a licensing hub called ARMONIA for the purpose of granting pan-European licences for online rights covering the repertoires of the three collecting societies (the repertoires are formally distinct, but aggregated in practice). Moreover, ARMONIA through SACEM and SGAE also manages the Anglo-American Universal Music Publishing repertoire and the Latin-American Sony/ATV repertoire. It is not clear whether such a “common desk” for multi-territorial licensing can be treated like an IME. By the same token, it will be even more challenging to understand if and how the Directive’s provisions will have an impact on other licensing initiatives that have taken place in Europe, such as mandating the management of pan-European licences for online rights directly to one or more existing collecting societies. We refer, for example, to the projects called PEL and PEDL. The first one (Pan-European Licensing Initiative of Latin-American Repertoire) stems from an agreement signed by SGAE, Sony/ATV and Peer Music, and some Latin-American collecting societies, for the management within the EU territory of pan-European licences for online rights for the repertoires they represent. The second one (Pan-European Digital Licensing) refers to a project whereby Warner Chappell conferred the mandate to negotiate multi-territorial licences to five national collecting societies, namely: PRS for Music – UK; SACEM – France; SGAE – Spain; STIM – Sweden; and BUMA-STEMRA – The Netherlands).

  65. In this sense, see GESAC’s Main Comments on the Proposal for a Directive on Collective Management (“Draft Directive”) 3, 8 (Brussels, 30 October 2012), available at: http://www.authorsocieties.eu/uploads/documents/GESAC_Position_paper_30_Oct_2012_121VD12_final.pdf. GESAC is the European Grouping of Societies of Authors and Composers.

  66. These fears were shared by the European Parliament during the legislative process leading to the adoption of the Directive. See Draft report, Marielle Gallo (Rapporteur), Committee on Legal Affairs, European Parliament, Amendments 123–331 (PE510.562v01-00), Collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market Proposal for a directive (COM(2012)0372 – C7-0183/2012 – 2012/0180(COD)), pp. 73–75 (6 June 2013), available at: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-%2f%2fEP%2f%2fNONSGML%2bCOMPARL%2bPE-513.141%2b01%2bDOC%2bPDF%2bV0%2f%2fEN, where the Rapporteur underlined the risk that the proposal, as initially depicted by the Commission, could lead “to an intentional circumvention of the societies’ obligations … by entities such as CELAS, PAECOL or PEDL”, and she further added that: “Ensuring that subsidiaries of collective management organizations or other entities managing authors’ and related rights are submitted to the same governance and transparency requirements as collective management organizations themselves is a basic minimum to ensure a level playing field.” (Italics added.) And that “there must not be a distortion of competition benefiting economic operators engaged in the same activities as collecting societies”.

  67. A “two-sided” market is generally intended as a scenario where companies are active in the provisions of goods or services to two distinct groups of customers/consumers. The goal of the firm active in a two-sided market will be that of facilitating commercial interactions between the two categories of customers, minimizing transaction costs. Among the most important economic literature studies, see Evans (2003, p. 325); and Rochet and Tirole (2003, p. 990).

  68. See Evans and Schmalensee (2007, p. 152).

  69. Evans (2012). Ebay, for example, performs all three functions as it makes it easier for people – looking for a particular item and wanting to sell a particular item – to find each other. It has created a common platform for matchmaking which reduces the exchange costs for all participants and it does that by attracting a large number of both sellers and buyers to its platform.

  70. See Drexl (2007b). The author underlines how, on the one hand, the appeal of the product that the collecting society offers on the licensing market is strictly linked to the number and kind of works it manages. On the other hand, a collective management society capable of aggregating all the most appealing works a service provider might wish to have to launch a new service will hold a position almost of monopoly on the market: a scenario which might also benefit right-holders. Think, for example, of the case where the monopolist fixes super-competitive prices and then also distributes part of its income to right-holders.

  71. Evans (2012, supra note 69, p. 9), noting that the analysis of either side of the platform in isolation will yield a distorted picture of the business.

  72. On the effects stemming from the disappearance of blanket licences, see also infra, at 5.2.

  73. Right-holders’ faculty to withdraw the mandate even with regard to “category of rights” has been strongly criticized by GESAC. The entity has pointed out that the division of rights into specific categories is a duty pertaining to the Board of a collective management society and if each author might have the power to redefine such category and create new ones, this would lead to a further fragmentation of rights. See GESAC’s Main Comments on the Proposal for a Directive on Collective Management (“Draft Directive”), p. 4 (Brussels, 30 October 2012), available at: http://www.gesac.org/eng/homepage_en/download/gesac-position-paper-30-oct-2012-121vd12-final.pdf.

  74. See Hilty and Nérisson (2013, supra note 4, p. 229), highlighting the negative consequences flowing from the repertoire fragmentation that began right after the adoption of the 2005 Commission’s Recommendation.

  75. This point will be further discussed infra, at 4.2.

  76. As we will see, the new framework affords right-holders the possibility of choosing to leave the administration of online rights to the local CMO and to simultaneously assign them to a pan-European society, but the overall picture seems quite contradictory. See infra, at 5.1.

  77. According to Max Planck scholars, the Proposal Directive was only aimed at increasing competition in the market related to services provided to right-holders, but failed to take into account the impact its measures would exert on the connected market of licences to providers of online services. See Drexl et al. (2013, p. 322 at § 9). Hereinafter J. Drexl et al., “Comments of the Max Planck Institute”.

  78. Such fears were expressed with regard to the consequences stemming from the adoption of the 2005 Recommendation by Drexl (2007a, supra note 56, p. 272).

  79. Drexl et al. (2013, supra note 77, § 9).

  80. Think, for example, of a website providing online music for English-speaking consumers and one providing the same service for Greek consumers. While the first provider will probably be capable of successfully launching its service even providing only an Anglo-American repertoire and will not feel the urge to buy the Greek one, the second provider will surely acquire the national repertoire, but it will not be possible for him to abstain from also getting licences for certain foreign repertoires whose songs are extremely widespread among the Greek public.

  81. Drexl et al. (2013, supra note 77, § 65).

  82. The existence of indirect network effects is a typical feature of two-sided markets. In this sense, see Evans (2012, supra note 69, p. 5).

  83. On network externalities, see the seminal contribution by Katz and Shapiro (1985, p. 424).

  84. See Lüder (2007–2008, p. 53). Guibault and Van Gompel (2010, supra note 5, p. 150).

  85. Note that the issue of repertoire fragmentation arose during the consultations preceding the adoption of the Proposal Directive as one of the main obstacles to the launch of new online services. See Impact Assessment, supra note 10, at 27.

  86. This finds confirmation in the North-American experience relating to collecting societies administering public performance rights. In this case, the collecting societies ASCAP, BMI and SESAC compete on the market for the provision of services to authors, but they offer products that are not substitutes on the licensing market, so that service providers must obtain licences from the three of them. In this sense, see Riis (2001, p. 486). Drexl (2007a, supra note 57, p. 268).

  87. Some authors have pointed out that a form of competition between repertoires is possible in the abstract, although it would obviously benefit those entities capable of better internalizing the costs related to the analytical computation of the number of uses of the works. See Sarti (2013b), (on file with the author).

  88. See Guibault and Van Gompel (2010, supra note 5, p. 145), already noting a tendency towards a concentration of the market and the emergence of these new players as a consequence of the 2005 Recommendation. In a similar sense, Ricolfi (2007, supra note 50, p. 297).

  89. Such a hypothesis is not so remote if one thinks that, already in 1941, North-American federal judges asked for and obtained the insertion of similar clauses in the consent decree settling the case United States v. ASCAP, 1940–43 Trade Cases 56104 (SDNY 1941). The consent decree, first amended in 1950 and then again in 1966, has been substituted today for the Second Amended Final Judgment of 2001. Nonetheless, despite the changes made over the years, the clauses preventing ASCAP from exclusively managing the rights of its affiliates has not been abolished. More broadly on the subject, see Goldstein (2005, 263 et seq.).

  90. Pursuant to the theory of contestable markets, even a market with a highly concentrated structure would not raise competitive concerns if it were possible for newcomers’ to enter it and be capable of actually competing with the incumbents (hence, of contending the market). The theory of contestable markets has been elaborated by Demsetz (1968, pp. 61–65), and has found complete theorization in Baumol et al. (1982).

  91. By the term “sunk costs”, economic literature means the investments that are generally difficult to recoup. See Pindyck and Rubinfeld (2001, 205 et seq.).

  92. It is worth noting, in this regard, that the only Directive provision requiring the non-exclusive nature of the mandates is Art. 29, which only concerns representation agreements signed between CMOs. The provision, however, does not extend to all the other cases where right-holders (re-)assign their rights to a CMO or to third intermediaries, not to mention the case where they choose to individually administer them.

  93. On the basics of game theory, see Church and Ware (2000, 201 et seq.).

  94. In this sense, see Lüder (2007, supra note 84, pp. 52–53). In a similar sense, Sarti (2013b, supra note 87, p. 7), arguing that competition on repertoires would bring a form of competition to the market.

  95. See recital 19, stating that collective management of copyright and related rights should entail that a right-holder is able to freely choose a collective management organization for the management of his rights, provided that the collective management organization the right-holder wishes to choose already manages such rights or categories of rights.

  96. In this regard, it would be advisable to distinguish among different groups of right-holders. While individual authors probably might be interested in mandating the administration of their works to several collective management societies, editors and major entities will prefer to grant the mandate only to one society, trying to negotiate the best conditions for the service.

  97. See Riis (2001, supra note 86, p. 487).

  98. The term “creative competition” is used as a synonym for “dynamic competition” which is generally related to competition through innovation by the introduction of better products, and it generally refers to patents. By contrast, “creative” competition would imply the same concept but where competition is based on creativity, as happens in the copyright industries. See Drexl (2007a, supra note 57, p. 273 et seq.).

  99. Think, for example, of the transmission of musical works via a radio station and via streaming. A good enforcement system in one of the two markets might influence the decision of a content provider to ask for licences in the other connected market. In this sense, see Sarti (2013b, supra note 87, p. 8).

  100. In this sense, see Drexl (2007a, supra note 57, p. 258), arguing that since collecting societies increasingly depend on income from the online market, their likely exclusion from it will even have a negative impact on the administration of the off-line rights in their territories.

  101. See Art. 31, Directive 2014/26/EU. The previous version of the Directive contemplated a similar provision where it established that a collecting society that did not grant (or offer to grant) multi-territorial licences could continue to grant “licences for the online rights in musical works of such right-holders for their use in the territory of the Member State where the collecting society is established, unless the right-holders terminate their authorisation to manage them” (italics added). See Art. 30, last sentence, Proposal Directive, supra note 21.

  102. See supra, at 2.3.

  103. See Art. 30 of Directive 2014/26/EU.

  104. Such a reading finds confirmation in recital 46 of Directive 2014/26/EU where the EU legislators explain that “to ensure that … [it] is not disproportionate and does not go beyond what is necessary … this requirement [i.e. the obligation to accept the mandate from another collecting society that does not comply with the requirements of the passport] should only apply to collective management organisations which aggregate repertoire and should not extend to collective management organisations which provide multi-territorial licences for their own repertoire only” (italics added).

  105. See supra, at 3.1.

  106. This result had been foreseen by the European Commission. See Commission Study, supra note 2, § 3.3, p. 36.

  107. CMOs excluded from multi-territorial licences risk losing large portions of revenue because they will no longer enjoy the opportunity to manage those uses of works which, in perspective, will be more profitable. In this sense, see Mazziotti (2010–2011, pp. 792–793). Similarly, see Drexl et al. (2013, supra note 77, § 37). According to the Max Planck Institute’s scholars, the impact on collecting societies that would be left to administer only those rights related to analogue uses of the musical works would be destabilizing.

  108. See Guibault and Van Gompel (2010, supra note 5, p. 141), arguing that the extent to which cultural diversity will be harmed depends on the level of repertoire fragmentation. The more repertoires are fragmented, the higher the risk that niche repertoires will be under-used.

  109. The protection and fostering of cultural diversity within the Union was a goal particularly nurtured by the European Parliament and is now reflected in recital 3 of the Directive which recalls Art. 167 of the TFEU requiring EU Member States to take cultural diversity into account and expressly acknowledges CMOs’ role in the promotion of the diversity of cultural expression by enabling the smallest and less popular repertories to access the market.

  110. In this sense, Riis (2001, supra note 86, p. 489). Drexl (2007b, supra note 70, p. 11), arguing that niche music may face obstacles in finding a CMO interested in the management of such a repertoire.

  111. Moreover, it should be added that the Directive’s provisions do not contain an obligation to accept a mandate from individual right-holders similar to the one enshrined in Art. 30 for the purpose of representing another collective management organization for multi-territorial licensing.

  112. See Ricolfi (2006, supra note 14, p. 21).

  113. In this sense, Falce (2014, p. 121, 122, 124).

  114. See Gervais (2010, supra note 55, p. 16), pointing out that the music industry has still not found a way to limit illegal file-sharing of music files on the internet.

  115. See Hilty and Nérisson (2013, supra note 4, p. 230), explaining that computers do not have the capabilities inter alia to monitor use and enforce rights in cases of infringement, and that to consider that digitization and the internet could replace the skills and functions performed by CMOs would be naive.

  116. See Libertini (2014, p. 120).

  117. Although probably an obstacle to the free movement of goods and services within the internal market, some authors point out that the existence of national copyrights and related rights bears some positive features in terms of cultural development and the preservation of cultural diversity. See Hugenholtz et al. (2006, pp. 21–23).

  118. See Drexl (2007a, supra note 57, p. 279 et seq.), noting (with regard to the 2005 Recommendation) that the Commission did not give any consideration to the difficulties of a duty to enforce online rights in any country other than the one where the collecting society is based.

  119. Katz (2005, p. 556 et seq.), Sarti (2013b, supra note 87, p. 6).

  120. See Ricolfi (2007, supra note 50, p. 283, 296 et seq.). The author commented on the likely consequences that the adoption of the 2005 Recommendation would have on infringement, arguing that a system – like the one today promoted by the 2014 Directive – based on mono-repertory multi-territory licences would have significant repercussions on infringements, causing an escalation of enforcement costs.

  121. See Commission decision of 16 July 2008 relating to a proceeding under Art. 81 of the EC Treaty and Art. 53 of the EEA Agreement, case COMP/C2/38698 – CISAC (hereinafter: “CISAC decision”), supra note 7.

  122. The contract model designed by CISAC was not mandatory in nature and was applicable to all categories of exploitation of musical works requiring a public performance licence. See CISAC decision, supra note 7, § 13.

  123. The first clause the Commission deemed anticompetitive regarded the affiliation of CMOs’ members (so-called “membership clause”) and envisaged that each CMO could not, without the consent of another CMO, affiliate right-holders who were members of another CMO or natural persons, firms or companies having the nationality of one of the countries in which the other CMO operated (the clause was contained in Art. 11(2) of the model contract and was in force until 3 June 2004. See CISAC decision, supra note 7, §§ 18–21, 27). The second clause concerned the mandate of exclusive rights, on a reciprocal basis, to grant the necessary authorizations for whatsoever kind of public performance (so-called “exclusivity or territorial clause”): the model contract, indeed, initially established that mandates were granted exclusively and on a reciprocal basis with regard to the territory chosen by each CMO (see Art. 1(1) and (2) of the model contract). The third clause (so-called “non-interference clause”) was aimed at limiting any interference by a CMO against another collecting society in the execution of its mandate (Art. 6 of the model contract. CISAC decision, supra note 7, § 25).

  124. See CISAC decision, supra note 7, §§ 38, 74, 154, 155.

  125. The General Court held that the Commission had based its decision on indicia that were not sufficient to prove the existence of coordination, nor had it adequately taken into account the justification put forward by the CMOs to explain the partitioning of the market into several national ones. See judgment of the General Court, CISAC v. European Commission, 12 April 2013, case T-442/08, supra note 7, § 98 (hereinafter “CISAC v. European Commission”). For an in-depth analysis of the judgment, see Arezzo (2014).

  126. In this regard, CMOs underlined that “it was in the interest of their members, and therefore rational, to provide for territorial limitations in their RRAs, since those limitations were a means of ensuring the effectiveness of the fight against the unauthorised use of musical works”. See CISAC v. European Commission, supra note 7, § 140.

  127. See CISAC v. European Commission, supra note 7, § 132 et seq.

  128. The Court explained that “each musical work has an electronic identity and each personal computer has an internet protocol address. On the basis of that information, the collecting society can ensure, when it delivers the licence, that the user is in a position to know precisely which musical work is used, by which computer, and for which kind of use. The user which has received the licence can then send that data to collecting societies which will use it to accurately distribute royalties between the right-holders. However, that explanation is limited to the monitoring of licences, and does not resolve the issue of how, and by whom, unauthorised uses are to be detected and prosecuted.” See CISAC v. European Commission, supra note 7, §§ 158–159.

  129. See CISAC v. European Commission, supra note 7, § 140 et seq.

  130. See CISAC v. European Commission, supra note 7, § 150.

  131. Some users would perhaps rather choose not to ask for a licence if they were sure of escaping an infringement action by a CMO monitoring the unauthorized uses of the works belonging to its repertoire. These issues have been more broadly examined in the text of the parallel judgment Società italiana degli autori ed editori (Siae) v. European Commission, case T-433/08, 12 April 2013, unreported, para. 122.

  132. See CISAC Decision, supra note 7, § 177 et seq.; CISAC v. European Commission, supra note 7, § 151.

  133. See CISAC v. European Commission, supra note 7, § 152.

  134. See CISAC v. European Commission, supra note 7, §§ 149–151.

  135. See CISAC v. European Commission, supra note 7, § 152.

  136. See judgment of the Court (Fourth Chamber) of 27 February 2014, OSA – Ochranný svaz autorský pro práva k dílům hudebním o.s. v Léčebné lázně Mariánské Lázně a.s., case C-351/12, OJ C 112, p. 5–6, paras. 14(3), 54–56 (14 April 2014). The case concerned a CMO dealing with copyrights in musical works (Ochranný svaz autorský pro práva k dílům hudebním o.s., “OSA”) claiming damages in the amount 546,995 Czech crowns by a company, Léčebné lázně, for the unauthorized instalment of radio and television sets in the bedrooms of its spa establishments, through which it made works managed by OSA available to its patients. The company claimed that its conduct was protected by the exception contained in Art. 23 of the Czech Copyright Law, exempting health-care establishments from payment of copyright fees when providing health-care services. OSA claimed that such a provision was contrary to Directive 2001/29, while Léčebné lázně further argued that OSA was abusing its monopoly position in the market by setting fees disproportionately high in comparison to those demanded by CMOs located in neighbouring countries for the same kind of use of copyright-protected works.

  137. Judgment of the Court of 27 February 2014, OSA, supra note 136, paras. 82–83.

  138. Judgment of the Court of 27 February 2014, OSA, supra note 136, para. 83.

  139. Judgment of the Court of 27 February 2014, OSA, supra note 136, paras. 87–88, 92.

  140. Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, OJ L 376, pp. 36–68 (27 December 2006).

  141. Judgment of the Court of 27 February 2014, OSA, supra note 136, paras. 59, 63.

  142. Article 16 of the Services Directive introduces some significant principles to safeguard and ensure freedom to provide services in a territory different from the one where the service provider is located. In this regard, the provision introduces an obligation upon Member States where the service is provided to ensure free access and free exercise of service activities, in particular by not making them subject to compliance with requirements which do not respect, among others, the principles of non-discrimination and proportionality (Art. 16(2)(a) and (c)). However, “under Article 17(11) of [the Services] directive, Article 16 does not apply to copyright and to neighbouring rights”, see para. 63 of the judgment. More broadly on this issue and on the relationship between the Services Directive and the provision of collective management services, see Drexl (2014, p. 459).

  143. Judgment of the Court of 27 February 2014, OSA, supra note 136, paras. 64–66. The Court of Justice endorsed the Advocate General’s opinion holding that Art. 17 of the Directive – exempting copyright and neighbouring rights from the scope of application of Art. 16 – should be interpreted in the sense of also excluding services related to copyrights, such as collective management services.

  144. See recital 3 of the Proposal Directive, supra note 21; recitals 3 and 8 of the Compromise Proposal, supra note 3, but see especially the Impact Assessment, supra note 10, § 1.4., where the Commission expressly stated that the Proposal Directive on collective management “complements Directive 2006/123/EC of December 2006 on services in the internal market which aims to create a legal framework to ensure the freedom of establishment and the free movement of services between the Member States” and further concluded that: “Collecting societies are subject to Directive 2006/123/EC as providers of collective management services”.

  145. The final text of Directive 2014/26/EU only contains a general reference to the “freedoms provided by the Treaties” which all CMOs should enjoy. See recital 4 of Directive 2014/26/EU, and recital 18 establishing that when providing management services CMOs should not discriminate between right-holders on the basis of nationality, place of residence or place of establishment. It seems therefore that EU legislators eventually listened to the criticisms outlined by several scholars suggesting, in light of the territorial nature of copyrights as intellectual property rights, that CMOs be considered exempt from the application of Art. 16 of the Services Directive. See Drexl et al. (2013, supra note 77, §§ 20 and 22).

  146. Judgment of the Court of 27 February 2014, OSA, supra note 136, paras. 70, 78–79.

  147. Judgment of the Court of 27 February 2014, OSA, supra note 136, para. 72.

  148. Judgment of the Court of 27 February 2014, OSA, supra note 136, paras. 73, 76.

References

  • Arezzo E (2014) Società di gestione collettiva dei diritti fra tutela della proprietà intellettuale e diritto della concorrenza: brevi note a margine della pronunzia. International confederation of societies of authors and composers (Cisac) v. Commissione europea. In: Concorrenza e Mercato 673

  • Baumol WJ, Panzar JC, Willig RD (1982) Contestable markets and the theory of industry structure. Harcourt, New York

  • Church J, Ware R (2000) Industrial organization: a strategic approach. McGraw Hill, Boston

    Google Scholar 

  • Demsetz H (1968) Why regulate utilities? J Law Econ 55:61–65

  • Drexl J (2007a) Competition in the field of collective management: preferring ‘creative competition’ to allocative efficiency in European copyright law. In: Torremans P (ed) Copyright law: a handbook of contemporary research. Edward Elgar Publishing, Cheltenham, p 255

  • Drexl J (2007b) Collecting societies and competition law. http://www.ip.mpg.de/shared/data/pdf/drexl_-_crmos_and_competition.pdf

  • Drexl J (2014) Collective management of copyrights and the EU principle of free movement of services after the OSA judgment—in favour of a more balanced approach. In: Purnhagen K, Rott P (eds) Varieties of European economic law and regulation: Liber Amicorum for Hans Micklitz. Springer, New York, p 459

  • Drexl J, Nérisson S, Trumpke F, Hilty RM (2013) Comments of the Max Planck Institute for Intellectual Property and Competition Law on the Proposal for a Directive of the European Parliament and of the Council on Collective Management of Copyright and Related Rights and Multi-Territorial Licensing of Rights in Musical Works for Online Uses in the Internal Market. COM, p 372 In: Max Planck Institute for Intellectual Property and Competition Law Research Paper No. 13-04, IIC, vol 44, p 322

  • Evans DS (2003) The antitrust economics of multi-sided platform markets. Yale J Regul 20:325

  • Evans D (2012) Two-sided markets. In: American Bar Association, Market definition in antitrust: theory and case studies, vol 5 (ABA, 2012). http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1396751

  • Evans DS, Schmalensee R (2007) Industrial organization of markets with two-sided platforms. Compet Policy Int 3:150

  • Falce V (2014) Copyright societies under scrutiny: from the EU approach to the Italian solution. World Compet 37:1

  • Frabboni MM (2009) Collective management of copyright and related rights: achievements and problems of institutional efforts towards harmonization. In: Derclaye E (ed) Research handbook on the future of EU copyright. Edward Elgar Publishing, Cheltenham, p 373

  • Gervais D (2010) Collective management of copyright: theory and practice in the digital age. In: Gervais D (ed) Collective management of copyright and related rights, 2nd edn. Kluwer Law International, Alphen aan den Rijn, p 1

  • Goldstein P (2005) Goldstein on copyright, 3rd edn. Kluwer Law International, New York (suppl. 2013)

  • Guibault L (2014) Collective right management directive. In: Torremans P, Stamatoudi I (eds) EU copyright law, a commentary. Edward Elgar Publishing, Cheltenham, p 696

  • Guibault L, Van Gompel S (2010) Collective management in the European Union. In: Gervais D (ed) Collective management of copyright and related rights, 2nd edn. Kluwer Law International, Alphen aan den Rijn, p 135

  • Gyertyanfy P (2010) Collective management of music rights in Europe after the CISAC decision. IIC 41:59

  • Handke C, Towse R (2007) Economics of copyright collecting societies. IIC 38:937

  • Hilty RM, Nérisson S (2013) Collective copyright management. In: Towse R, Handke C (eds) Handbook on the digital creative economy. Edward Elgar Publishing, Cheltenham, p 222

  • Hugenholtz B et al (2006) The recasting of copyright and related rights for the knowledge economy, pp 21–23. In: Institute for Information Law Research paper no. 2012-38. http://ssrn.com/abstract=2018238

  • Katz A (2005) The potential demise of another natural monopoly: new technologies and the administration of performing rights. J Compet Law Econ 1(3):541

  • Katz ML, Shapiro C (1985) Network externalities, competition and compatibility. Am Econ Rev 3:424

    Google Scholar 

  • Kretschmer M (2002) The failure of property rules in collective administration: rethinking copyright societies as regulatory instruments. EIPR 24:126

  • Libertini M (2014) Gestione collettiva dei diritti di proprietà intellettuale e concorrenza. In: Spada P (ed) Gestione collettiva dell’offerta e della domanda di prodotti culturali. Quaderni di AIDA no. 16, Giuffrè, Milan, p 103

  • Lüder T (2007–2008) The next ten years in EU copyright: making markets work. Fordham Intell Prop Media Entertain Law J 18:1

  • Mazziotti G (2010–2011) New licensing models for online music services in the European Union: from collective to customized management. Columbia J Law Arts 34:757

  • Pindyck RS, Rubinfeld DL (2001) Microeconomics, 5th edn. Prentice Hall, New York

    Google Scholar 

  • Quintais JP (2013) Proposal for a directive on collective rights management and (some) multi-territorial licences. EIPR 2:65

  • Ricolfi M (2006) Figure e tecniche di gestione collettiva del diritto d’autore e dei diritti connessi, In: Spada P (ed) Gestione collettiva dell’offerta e della domanda di prodotti culturali, vol 6. Quaderni di AIDA no. 16, Giuffrè, Milan

  • Ricolfi M (2007) Individual and collective management of copyright in a digital environment. In: Torremans P (ed) Copyright law: a handbook of contemporary research. Edward Elgar Publishing, Cheltenham, p 283

  • Riis T (2001) Collecting societies, competition, and the services directive. J Intell Prop Law Pract 6:482

  • Rochet J-C, Tirole J (2003) Platform competition in two-sided markets. Eur Econ Assoc 1:990

  • Sarti D (2001) Collecting societies e mutualità. AIDA, p 14

  • Sarti D (2013a) La categoria delle collecting societies soggette alla Direttiva. AIDA, p 3

  • Sarti D (2013b) Liberalizzazioni e gestione collettiva dei diritti di proprietà intellettuale. In: Atti del Convegno, Impresa e mercato fra liberalizzazioni e regole 7 (IV Convegno Annuale dell’Associazione Italiana dei Professori Universitari di Diritto Commerciale Orizzonti del Diritto Commerciale), Rome, 22–23 February 2013

  • Woods T (2010) Multi-territorial licensing and the evolving role of collective management organizations. In: Gervais D (ed) Collective management of copyright and related rights, 2nd edn. Kluwer Law International, Alphen aan den Rijn, p 105

  • Yow JWL (2011) Creative competition with a Pan-European licence body: reconsidering the European Commission’s approach to collecting societies. World Compet 34(2):287

Download references

Author information

Authors and Affiliations

  1. Faculty of Law, University of Teramo, Teramo, Italy

    Emanuela Arezzo (Assistant Professor of Law, Qualified as Associate Professor)

Authors
  1. Emanuela Arezzo
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Emanuela Arezzo.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Arezzo, E. Competition and Intellectual Property Protection in the Market for the Provision of Multi-Territorial Licensing of Online Rights in Musical Works – Lights and Shadows of the New European Directive 2014/26/EU. IIC 46, 534–564 (2015). https://doi.org/10.1007/s40319-015-0354-8

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s40319-015-0354-8

Keywords

Search

Navigation