Abstract
There are basically two different mechanisms to control collective management organizations (CMOs), namely the general competition-law approach and the sector-specific regulation approach. This chapter explains the features of copyright management (CRM) systems in general and discusses up- and downsides of both approaches. In conclusion it suggests a primary focus on sector-specific regulation. This approach not only takes into account the particularities of two-sided markets in which CMOs act as intermediaries, but also allows the balancing of non-economic values and interests which are among the objectives of CMOs. Sector-specific regulation is further capable of addressing governance issues of CMOs; above all, it promotes transparency for both right holders and users by providing ex ante guidance. General competition law, in contrast, applies ex post and is particularly likely to become a last resort to control CMOs.
Reto M. Hilty is Director of the Max Planck Institute for Innovation and Competition; full Professor ad personam at the University of Zurich; Honorary Professor at the University of Munich.
Tao Li is Junior Research Fellow of the Max Planck Institute for Innovation and Competition.
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Notes
- 1.
- 2.
N. Searle, G. White (2013), 45-56.
- 3.
Recital 8 of Directive 2014/26/EU 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, 84 OJ L72-98.
- 4.
- 5.
- 6.
- 7.
See in particular CJEU, Case 78/70 Deutsche Grammophon v. Metro [1971] ECR 487; Case 127/73 BRT v. SABAM [1974] ECR 313; Cases 55/80 and 57/80 Musikvertrieb Membran GmbH v. GEMA [1981] ECR 147; Case 7/82 GVL v. Commission [1983] ECR 483.
- 8.
In 1941, the United States brought separate antitrust suits against Broadcast Music, Inc. (BMI) and the American Society of Composers, Authors and Publishers (ASCAP). Both suits were settled by Consent Decree. See U.S. v. BMI, 1940-43 Trade Cas. (CCH) paras. 56, 096, 381 (E.D.Wisc.1941); U.S. v. ASCAP, 1940-43 Trade Cas. (CCH) paras. 56,104, 402 (S.D.N.Y.1941). These Consent Decrees have been amended over time. For the latest amended Consent Decrees see U.S. v. BMI, 1996-1 Trade Cas. (CCH) paras. 71, 379 (S.D.N.Y. Nov. 18, 1994); U.S. v. ASCAP, 2001-2 Trade Cas. (CCH) paras. 73, 474 (S.D.N.Y. June 11, 2001).
- 9.
A. Schierholz (2010), 1151-1152.
- 10.
W. Herschel (1967), 26.
- 11.
R.M. Hilty, S. Nérisson (2013), 224-225.
- 12.
- 13.
- 14.
- 15.
- 16.
See U.S. v. ASCAP, 1940-43 Trade Cas. (CCH) paras. 56, 104, 402 (S.D.N.Y.1941) (supra n. 8); R.M. Hilty (2012), 35-37.
- 17.
Recital 3 of Directive 2014/26/EU (supra n. 3); A. Schierholz (2010), 1152-1153.
- 18.
European Affairs (2006), 30.
- 19.
- 20.
A. Katz (2005), 12-18.
- 21.
R. Podszun (2014), 181.
- 22.
G. Hansen, A. Schmidt-Bischoffshausen (2007), 470.
- 23.
J. Drexl (2014), 263-268.
- 24.
R. Podszun (2014), 181.
- 25.
K. Viscusi, E. Joseph, M. John (2005), 401.
- 26.
Examples of agreements between CMOs to limit competition in this field are the Santiago and the Barcelona Agreement; see Commission Recommendation 2005/737/EC of 18 May 2015 on collective cross-border management of copyright and related rights for legitimate online music service, OJ L 276/54; see also Commission Decision of 16 July 2008 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the Agreement on the European Economic Area (Case COMP/C2/38.698—CISAC).
- 27.
SESAC was established by the right holders from Europe whom ASCAP refused to accept as members; BMI was established by the radio broadcasters, for whom ASCAP tried to double its tariffs. See J. Drexl (2013), 217.
- 28.
- 29.
Para. X. A. of the ASCAP Consent Decree: U.S. v. ASCAP, 2001-2 Trade Cas. (CCH) paras. 73, 474 (S.D.N.Y. June 11, 2001) (supra n. 8).
- 30.
Id., para. VI.
- 31.
Id., para. IV. A.
- 32.
Id., para. IX. D-E.
- 33.
There are only a few countries in the world that follow the US approach, for instance Ireland and Poland; see e.g. Irish Competition Authority, Decision No. 326 of 18 May 1994, Notification No. CA/2/91E—Performing Right Society and individual creators/publishers (Assignment of Copyright), para. 81; Poland: UOKiK, Decision of 16 July 2004, Case RWA‐21/2004, Annual Report 2006, 20.
- 34.
The CRJ were set up under the Copyright Royalty and Distribution Reform Act of 2004. CRJ have to apply § 801(b)(1) of the US Copyright Act according to which “reasonable … rates of royalty payments … shall be calculated to achieve the following objectives:
(A) To maximize the availability of creative works to the public.
(B) To afford the copyright owner a fair return for his or her creative work and the copyright user a fair income under existing economic conditions.
(C) To reflect the relative roles of the copyright owner and the copyright user in the product made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, risk, and contribution to the opening of new markets for creative expression and media for their communication.
(D) To minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices.”
- 35.
- 36.
- 37.
In some jurisdictions, there are no substantive regulations or acts on CRM systems, but copyright act paragraphs concerning CMOs. For example, in Part IV of the British Copyright Act under the title “Performing Right Tribunal”, in Part V of the Irish Copyright Act under the title “Jurisdiction of the Comptroller of Industrial and Commercial Property” and in Part VIII of the Copyright Ordinance of Hong Kong under the title “Copyright Licensing” (Articles 145-168).
- 38.
Although Germany was not the first jurisdiction to undertake such a specific regulatory framework related to CMOs and to provide special procedural rules in order to handle conflicts between the parties involved. As early as 1932, the Netherlands established a specific arrangement by introducing Article 30a and Article 35a to the Copyright Act and by a related regulation. For more details about the history of CMOs in the Netherlands see A. Dietz (1978), 234-237.
- 39.
- 40.
On 9 June 2015 the German Federal Ministry of Justice and Consumer Protection officially published a first draft and explanatory notes to seek public opinion, available at: www.bmjv.de/SharedDocs/Downloads/DE/pdfs/Gesetze/RefE_Richtlinie_Umsetzungsgesetz.pdf?__blob=publicationFile. The consolidated text of the draft has 6 chapters and 139 articles, while the law of 1965 has 4 chapters and 36 articles. This VGG amendment has been completed in May 2016 (BGBl. I S. 1190).
- 41.
- 42.
On the one hand, CMOs are obliged by law to contract with users under certain equal conditions (Section 11 of German Act on the Administration of Copyright and Related Rights); on the other hand, CMOs have the duty to contract with right holders under certain equal conditions (Section 6), and to disclose related information regularly (Section 9).
- 43.
Decision of the Commission: 71/224/EEC of the Commission of 2 June 1971; CJEU, Case IV/26.760—GEMA, [1971] OJ 134/15.
- 44.
D. Gerber (1994), 98.
- 45.
For further details see A. Schierholz (2010), 1164-1166.
- 46.
J. Drexl, S. Nérisson, F. Trumpke, R.M. Hilty (2013), 325-328. Indirectly, however, sector-specific competition law as established through Directive 2014/26/EU to a certain degree may also have harmonizing effects on substantive (national) copyright legislations.
- 47.
For more about the tasks and functions of CMOs in the future, see K.-N. Peifer (2015), 34-35.
- 48.
R.M. Hilty (2010), 148.
- 49.
Supply-side substitutability is only taken into consideration when “its effects are equivalent to those of demand-side substitutability in terms of effectiveness and immediacy”. See J. Drexl (2013), 75; The EU Commission notice on the definition of relevant market for the purposes of Community competition law (1997), OJ No. C 273, 5, para. 20.
- 50.
- 51.
J. Drexl (2013), 73, 75.
- 52.
D. Evans (2003), 325-354.
- 53.
In the US, although there are three CMOs which grant licenses for the public performance right for the musical works, each of them manages a special repertoire.
- 54.
- 55.
- 56.
D. Evans (2009), 355.
- 57.
Regulation 316/214 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements, OJ L93/17.
- 58.
Antitrust Guidelines for the Licensing of Intellectual Property, issued by the U.S. DOJ and the Federal Trade Commission, 6 April 1995.
- 59.
See CJEU, Case C-52/07 Kanal 5 and TV 4 v. STIM [2008] ECR I-9275, para. 40: “However, it is conceivable that, in certain circumstances, the application of such a remuneration model may amount to an abuse, in particular when another method exists which enables the use of those works and the audience to be identified and quantified more precisely and that method is capable of achieving the same legitimate aim, which is the protection of the interests of composers and music editors, without however leading to a disproportionate increase in the costs incurred for the management of the contracts and the supervision of the use of musical works protected by copyright.” See J. Schovsbo (2012), 185-187.
- 60.
In the US, after the case CBS v. ASCAP, 620 F.2d 930, 934 (2d Cir. 1980), some scholars have noted the relationship between technical development and management conditions and believe that “blanket licensing is maintained for only so long as is necessary for the minimization of transaction costs”; see NN (1978), Note CBS v. ASCAP, 802.
- 61.
N. Dunne (2015), 43-44.
- 62.
Recital 49 of Directive 2014/26/EU (supra n. 3).
- 63.
Article 3 of Directive 2014/26/EU (supra n. 3).
- 64.
A. Schierholz (2010), 1154-1155.
- 65.
Recital 23-24 of Directive 2014/26/EU (supra n. 3).
- 66.
W. Nordemann (1992), 584-589.
- 67.
J. Fujitani (1984), 135.
- 68.
Recital 49 of Directive 2014/26/EU (supra n. 3).
- 69.
- 70.
- 71.
- 72.
- 73.
See—regarding disputes between right holders and CMOs—e.g. CJEU, Case 127/73 BRT v. SABAM [1974] ECR 313; Case IV/29.971—GEMA-Satzung [1981] 82/204/EWG; M. Lichtenegger (2014), 104; regarding disputes between users and CMOs, CJEU, Case C-52/07 Kanal 5 and TV 4 [2008] ECR I-9275 (supra n. 59); Case C-395/87 Ministère public v. Jean-Louis Tournier [1989] ECR I-2521; see also M. Lichtenegger (2014), 109-110.
- 74.
CJEU, Case 78/70 Deutsche Grammophon v. Metro [1971] ECR 487; Case 127/73 BRT v. SABAM [1974] ECR 313; Cases 55/80 and 57/80 Musikvertrieb Membran GmbH v. GEMA [1981] ECR 147; Case 7/82 GVL v. Commission [1983] ECR 483 (supra n. 7). As to U.S. cases see U.S. v. BMI, 1940-43 Trade Cas. (CCH) paras. 56, 096, 381 (E.D.Wisc.1941); U.S. v. ASCAP, 1940-43 Trade Cas. (CCH) paras. 56,104, 402 (S.D.N.Y.1941); for their latest amended Consent Decrees see U.S. v. BMI, 1996-1 Trade Cas. (CCH) paras. 71, 379 (S.D.N.Y. Nov. 18, 1994); U.S. v. ASCAP, 2001-2 Trade Cas. (CCH) paras. 73, 474 (S.D.N.Y. June 11, 2001) (supra n. 8).
- 75.
- 76.
N. Dunne (2015), 46.
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Hilty, R.M., Li, T. (2017). Control Mechanisms for CRM Systems and Competition Law. In: Liu, KC., Hilty, R. (eds) Remuneration of Copyright Owners. MPI Studies on Intellectual Property and Competition Law, vol 27. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-53809-8_9
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