COMPETITION/COPYRIGHT
Record Labels, Music Publishers

The European Commission has announced that it has warned 16 EU collection societies that an agreement between them to create a “one-stop shop” music licence may be in breach of EU competition rules. The agreement, known as the Santiago Agreement, was signed in October 2000 by five organisations – including the UK’s Performing Right Society (PRS) and Broadcast Music Inc (BMI) from the US. The Santiago Agreement is designed to tackle the problems that traditional copyright licensing schemes have faced in light of the growth of new technologies and Internet use, in particular the impossibility of limiting digital services by the notion of territoriality; once uploaded to the Internet, copyrighted music is accessible from almost anywhere in the world so the concept of ‘German’ or ‘British’ rights is inapplicable. The traditional licensing framework requires a commercial user wishing to offer such music to obtain a copyright license from every single relevant national society. The Santiago Agreement sought to adapt the traditional framework to the online world by allowing each of the participating societies to grant “one-stop shop” copyright licences which included the music repertoires of all member societies and which were valid in all their territories. The Agreement was notified to the Commission in April 2001 by the collecting societies of the UK, France (SACEM), Germany (GEMA) and the Netherlands (BUMA). These were subsequently joined by all societies in the European Economic Area (except for the Portuguese society (SPA) and the Swiss society (SUISA)). Yesterday the Commission announced that, while it strongly supports the “one-stop shop” principle for online licensing, it also considers that such crucial developments in online-related activities must be accompanied by an increasing freedom of choice for EU consumers and commercial users as regards their service providers. According to the Commission, the structure put in place by the parties to the Santiago Agreement results in commercial users being able to apply for the licence from only the collecting society established in their own Member State. This, says the Commission, could be in breach of competition rules. They should be able to apply in ANY member state for a Europe-wide licence. The Commission have in the past (2002) exempted a similar type of agreement – a simulcasting agreement that established pan-European licensing of musical repetoire for television use without imposing territorial exclusivity. Under this agreement, TV and radio broadcasters can obtain a licence from any of the collecting societies located in the EEA in order to simultaneously transmit their music broadcasts via the Internet. This freedom of choice means that broadcasters can choose the most efficient society in Europe for the delivery of the licence. In addition, the record producers’ collecting societies announced in 2003 that they had concluded a standard agreement for the purposes of Webcasting licensing, under which commercial users enjoy a similar freedom of choice as regards the licensor society in Europe. The Commission concern is that the territorial exclusivity afforded by the Santiago Agreement is not justified by technical reasons. The Commission is further concerned that the lack of competition between national collecting societies in Europe hampers the achievement of a genuine single market in the field of copyright management services and may result in unjustified inefficiencies as regards the offer of online music services, to the ultimate detriment of consumers and in breach of EU competition law. The Commission has therefore sent a “Statement of Objections” to each of the EU collecting societies party to the Santiago Agreement although this does not prejudge the final outcome of the investigation. The collecting societies have two-and-a-half months to reply to the Commission’s objections. They can also request a hearing at which they would be able to submit their arguments directly to the representatives of the national competition authority.

See: http://www.out-law.com/php/page.php?page_id=musicroyaltiesdeal1083668790&area=news