Judgment of the Court of First Instance in Case T-201/04
Competition / October 2007

COMPETITION Technology, software Microsoft Corp. v Commission of the European Communities The Court of First Instance has essentially upheld the European Commission’s decision finding that Microsoft had abused its dominant market position although the Court has annulled certain parts of the decision relating to the proposed appointment of a monitoring trustee holding that this has no basis in community law. On 23 March 2004 the European Commission adopted a decision finding that Microsoft had infringed Article 82 of the EC Treaty by abusing its dominant position by engaging in two separate types of conduct. The Commission also imposed a fine of more than EUR 497 million on Microsoft. The first type of conduct found to constitute an abuse consisted in Microsoft’s refusal to supply its competitors with ‘interoperability information’ and to authorise them to use that information to develop and distribute products competing with its own products on the work group server operating system market, between October 1998 and the date of adoption of the decision. By way of remedy, the Commission required Microsoft to disclose the ‘specifications’ of its client/server and server/server communication protocols to any undertaking wishing to develop and distribute work group server operating systems. The second type of…

RIAA spend $658,000 on lobbying but should Sound Exchange be ‘lobbying’ at all?
Competition / September 2007

COMPETITION All areas The Recording Industry Association of America spent more than $658,000 in the first half of 2007 to lobby the federal government, according to a disclosure form. The trade group lobbied on intellectual property and copyright issues, including more funding for enforcement, according to the form posted online Friday by the Senate’s public records office. Under 1995 federal law, lobbyists are required to disclose activities that could influence members of the executive and legislative branches. But in other news, it appears collection society Sound Exchange who collect for the erformaqnce of recorded music by way of interenet and satellite media has also spent money lobbying and PR as part of its musicFIRST campaign – and US commentators are now claiming that such activities are not permitted under the US Copyright Act. One lawyer added “t he lobbying efforts do exceed the legislative and regulatory authority given to SoundExchange. I also believe that the lobbying activity on a matter outside the scope of SoundExchange’s original charter constitutes a violation of the 501 (c) (6) tax-exemption held by SoundExchange“ saying that Sound Exchange should only be spending money on collecting, administering and distributing royalties from the use of recorded music….

Does China discriminate against foreign copyrights?
Competition , Record Labels / August 2007

COMPETITION Record labels, film & TV The United States is seeking urgent consultations with China over China’s rules on music downloading and cinema rights that The US say discriminate against foreign sound recordings and films. Hollywood studios and U.S. Internet music providers such as Apple Inc.’s iTunes store could be among the groups that suffer from “less favorable distribution opportunities” for imported films and foreign suppliers of music recordings in China, which the U.S. cited in a World Trade Organization request in July. The main issue is that music from foreign sources needs to undergo content review before being distributed in China. Chinese music doesn’t have to face that process and it is suggested that these reviews delay Chinese Internet providers and Chinese consumers from accessing foreign music. The same discrimination exists when Chinese consumers seek to download music onto mobile phones the US allege. The problem for American music providers is compounded by rules that prevent foreign companies from owning or investing in businesses that distribute music over the Internet. We are not quite sure about this one at Music Law Updates – whilst seen in the strict headlights of competition law that screening of foreign music may seem…

European Commission finally reopens Sony BMG review
Competition , Record Labels / July 2007

COMPETITION LAW Record labels The European Commission has reopened its antitrust probe into the merger of Sony’s recorded music division and Bertelsmann’s recorded music divisions which created Sony BMG – the second largest music company in the world. The commission halted its review of the merger in March after both companies failed to produce crucial documentation on their activity in the European market. “The file is finally complete and the probe has been re-launched,” said a Commission spokesman. A new deadline has been set, with a ruling expected by 10th October. The delay has had significant impact on the industry – whilst the music publishing arms of Universal and BMG have been allowed to merge (after a significant shedding of certain catalogues by BMG including Zomba) the delay is not helpful for Warner Music Group which still looks like it would like to buy EMI – and clearly EMI is up for sale and on the verge of signing itself away to private equity firm Terra Firma. The resurfacing of merger issues could hinder any last-minute bids by Warner for the major. www.forbes.com blogs.reuters.com

Universal / BMG Music tie up approved by European Regulators as Warners look at EMI

COMPETITION Music publishing, Record labels Vivendi/Universal and BMG Music Publishing have finally had their merger given the green light by the European Commission. The E1.63B merger was approved on the grounds that Rondor UK, Zomba UK, BBC Music and 19 Music were excluded from the merger. Immediately after the announcement, independent labels association Impala was quick to point out that it reserves the right to seek a reversal of the decision, and said it will follow the merger with great interest – no doubt Warners, who are hovering over EMI, will do the same! The ECsaid in a statement “The proposed merger, as initially notified, raised serious doubts as regards adverse effects on competition in the market for music publishing rights for online applications. However, the Commission’s investigation found that these concerns would be removed by the remedies package proposed by the parties concerning the divestiture of a number of publishing catalogues”. In fact EMI Group has agreed to an offer by private equity firm Terra Firma for £2.4B, subject to approval by the firm’s shareholders. The board of directors at EMI intend to recommend unanimously that EMI shareholders should accept the offer. EMI’s shares jumped 10% on the news – the offer vaues…

EC to investigate Sony-BMG merger
Competition , Record Labels / April 2007

COMPETITION Record labels The European Commission has announced it is launching a new more detailed investigation into the 2004 merger of Sony and BMG’s record label operations which means competition regulators will now not rule on whether the merged enterprise, SonyBMG, can continue to operate in its current form until July 4th 2007 (now extended by two weeks). The EC is also considering the potential tie up of BMG Music and Universal Music. The EC had been forced to reconsider their approval of the SonyBMG merger after the European Courts of Justice annulled the approval last year. The annulment came after a case brought by independent label trade association IMPALA: IMPALA members have asked the EC to look at specific concerns about their reduced market access including the collective dominance of the majors and co-ordination of  competitive behaviour in retail, radio and television, press and other media, as well as in the vital on-line market. The independents also asked  the Commission to address other vital issues such as cultural diversity (which MEPs also recently highlighted as above), the  role of creativity and small business in the Lisbon strategy, vertical integration, links with sister publishing companies, unfair leveraging of repertoire and…

US radio stations settle with FCC in payola scandal
Competition , Record Labels / April 2007

COMPETITION LAW Record labels Following from New York Attorney General Eliot Spitzer’s successful pursuit of the for major record labels in the US on payola charges, four major US broadcasters (Entercom, Clear Channel, CBS and Citadel) have been fined $12.5M by the Federal Communications Commission, bringing to an end the most recent probe into payola in the US media. The stations have also agreed to up their airplay commitment (of around 4,000 hours) to local and independent acts. While the broadcasters have admitted no wrongdoing, the deal is still subject to final FCC approval. A new set of regulations will also be put in place that will mean closer scrutiny of broadcasters’ dealing with record labels, a limit – as well as greater transparency – on the ‘gifts’ they can receive from labels, as well as the introduction of a “payola hotline” for radio employees to report abuses of the system (Five Eight magazine). The deal appears to close an embarrassing chapter for the music and radio industries. Mr. Spitzer’s inquiry disclosed how payloa payments had become widespread as label executives pressed to obtain exposure for stars. In some cases, label executives offered payoffs directly; in others, they hired middlemen…

Apple fails to have US anti-trust suit dismissed and Sony lose interoperability case in France
Competition / February 2007

COMPETITION Technology A US court has denied moves by Apple to dismiss a lawsuit that is being pursued against the computer company alleging that their much reported restrictive business model is anti-competitive. The federal lawsuit, launched last July by a consumer, Melanie Tucker, claims that Apple created an “illegal monopoly” by refusing to make their digital music player or codec interoperable with those of their competitors, so that the only source of DRM music for an iPod is iTunes, and the only portable players that play music bought from iTunes is the iPod. The computer giant had hoped to get the lawsuit dismissed without its digital music business strategy being analysed in court, but judges say the case against Apple deserves proper consideration and so the litigation will now get a full hearing, out of court settlement pending. Given the wider and growing concerns of Apple’s restrictive approach which have already caused the company problems in France and various Scandanavian countries, case should prove interesting. At the same time a French court has ruled that Sony is misleading buyers of its music downloads and digital music players, a reflection of growing discontent among consumers – the case was brought by…

Norway rules that Apple DRM is illegal
Competition , Record Labels / February 2007

COMPETITION Labels, technology As France, Germany and Finland join the growing list of countries looking at iTune’s DRM and lack inter-operability which include Sweden and Denmark, the Norwegian Ombudsman rules the software illegal and the Dutch Consumer Protection Agency joins the protest against Apple in the Netherlands.   http://www.theregister.co.uk/2007/01/24/apple_drm_illegal_in_norway/ http://www.canada.com/topics/technology/news/gizmos/story.html?id=bdd7e7d2-1639-46a5-bb71-f9830c61b608&k=878

The Competition Commission’s final report into the London venue market is published
Competition , Live Events / February 2007

COMPETITION Live event industry The UK Competition Commission’s report into the proposed Hamsard 2786 Ltd / Academy Music Holdings Ltd deal has now been published. The Competition Commission has formally decided that the proposed acquisition of a controlling interest in Academy Music Holdings Limited (Academy) by Hamsard 2786 Limited (Hamsard) would lead to a substantial lessening of competition in relation to certain live music venues in London, resulting, in particular, in rentals at the venues concerned being higher than would otherwise be the case. If the acquisition of the controlling interest is to proceed, the merging companies will first be required to sell one of either the Brixton Academy or the Hammersmith Apollo and one of either the Shepherd’s Bush Empire or the Forum. These venues represent the closest alternatives to each other in London for artists, agents and promoters of popular live music events and would come under common ownership following the acquisition. Hamsard will not be permitted to acquire a controlling interest in Academy until there is a binding sale/purchase commitment for the venues in question. The sale will need to be approved by the Commission so that it is made to a suitable purchaser(s) and is likely to include venue management and booking teams, contracts with…

Entercom settles with Spitzer
Competition , Record Labels / February 2007

COMPETITION Broadcasting, record labels Radio broadcast group Entercom has reached a settlement with the New York Attorney General. Eliot Spitzer over payola charges. Spitzer targeted the US media conglomerate after reaching a settlement with all four major record companies for. Entercom had denied any wrong doing, claiming their business relationships with music companies were within US broadcasting regulations. The Company says that it only settled to avoid fighting a lengthy and costly lawsuit. In a statement the company said: “In the interests of the company, our employees and our shareholders, we have chosen to resolve this matter immediately and without extensive and costly litigation. The court did not find any liability, nor are we admitting liability with this settlement. Rather, we are taking the opportunity to put the investigation behind us and move forward.” As part of the deal the radio firm will pay a $4.25 million fine, of which $3.5 million will go to music education programmes. Entercom also pledged to introduce internal measures to ensure any practices considered as payola by the New York Attorney General’s office could no longer take place. Entercom is the second radio firm to settle with Spitzer over the issue of payola after…

Hamsard 2786 Ltd / Academy Music Holdings Ltd
Competition , Live Events / January 2007

COMPETITION Live event industry The Competition Commission (CC) has provisionally decided that the proposed acquisition of a controlling interest in Academy Music Holdings Limited (Academy) by Hamsard 2786 Limited (Hamsard) would lead to a loss of competition in relation to certain live music venues in London. Hamsard is jointly controlled by Live Nation (Music) UK Ltd (Live Nation) and Gaiety Investments Ltd. Through its ownership of Mean Fiddler Music Group Ltd, Hamsard operates live music venues in London, including the Astoriaand the Forum. It also has a management contract for the Wembley Arena. Academy owns the Shepherd’s Bush Empire (SBE), and the Brixton Academy as well as a number of other venues in London and elsewhere. Live Nation owns the Hammersmith Apollo, and a number of theatres in London. It also owns venues (mostly theatres) in 20 other cities in the UK. The Competition Commission Inquiry Group has concluded that the acquisition is expected to result in a substantial lessening of competition. Inquiry Group Chairman, Diana Guy , said: The extent to which different live music venues provide alternatives for artists, agents and promoters depends on a number of factors, including capacity, ambience and the type of events generally held…

EC to investigate Universal – BMG music publishing tie up
Competition , Record Labels / January 2007

COMPETITION Record labels Perhaps unsurprisingly in light of the comments by the European Court of Justice when they annulled the European Commission’s approval of the Sony-BMG record label merger, the European Commission has extended its investigation into Universal’s $2.2bn (£1.12bn) acquisition of BMG’s music publishing business by up to 90 working days (to April 27th 2007). The combined Universal Music / BMG Music would have an appoximate 22% of the music publishing market. Both BMG and Universal Music currently have 11% market shares, behind EMI Music’s 20% share and Warner’s 15% share but ahread of and Sony Music (7%). The regulator wants more time to consider whether the deal will undermine competition. The inquiry could last up to five months. In a statement Universal said that “although we understand why, in the current environment, the European Commission has sought more time for its review, we believe, as we have always done, that the merger will be approved” adding that Universal were looking “forward to working with the Commission over the next few months to complete the process.  The original Sony-BMG ECJ review was due to a law suit from the European trade association IMPALA which represents independent labels and IMPALA has promised to battle the Universal…

EMI and UMG settle on Napster
Competition , Internet , Record Labels / January 2007

COMPETITION Record labels, internet EMI Music and the Universal Music Group announced yesterday that they have reached a conditional settlement with investment firm Hummer Winblad over its $13 million investment in the late nineties in the original Napster. The settlement is conditional on trial Judge Marilyn Patel revoking her order against the record labels to produce certain documents which Humer Winblad had originally said would show that the label’s original moves to develop their own download websites were anti-competitive. Hummer Winblad had always defended to label’s claim saying that their funding was to develop a new legitimate Napster but clearly the Supreme Court judgment in MGM v Grokster would have been worrying the investment firm. Less obvious is why the labels wanted to settle unless the documents ordered to be produced by Judge Patel (using criminal law exceptions to privilege) really are that damning. There have long been suggestions that the record label’s Musicnet and PressPlay opetrations were set up to prevent the development of a competitive digital market (although with iTune’s dominance this clearly failed): Limewire recently used the allegation as a defence to actions by the RIAA. MGM v Grokster see Law Updates August 2006 04-480 27th June 2005 Limewire see…

Vivendi’s purchase of BMG Music clears first regulatory hurdle
Competition , Music Publishing / December 2006

COMPETITION Music publishing The Federal Trade Commission and the US Justice Department have both given the green light for Vivendi Universal to acquire BMG Music Publishing FiveEight magazine reported. The acquisition now needs the approval of the European Union’s regulators who are due to make their decision by the 8th December. Independent label trade association IMPALA is rounding up its independent label members to oppose the tie up. With the Sony BMG merger under scrutiny following the European Court Of First Instance’s ruling on the flaws in the EC’s approval of that merger, IMPALA clearly believes there is a strong chance that the EC may block the Vivendi/BMG Music Publishing marriage. The E1.6B deal would create the single biggest publishing entity in the world. Based on 2005 figures, a combined BMG Music Publishing and Universal Music Publishing would control 25.7% of the market, far ahead of EMI Music Publishing’s 16.7% and Warner/Chappell’s 15.1%. http://www.billboard.biz/bb/biz/newsroom/legal_management/article_display.jsp?vnu_content_id=1003382106 

Limewire files countersuit against major labels alleging anti-trust violations

COPYRIGHT / COMPETITION Record labels, internet Peer-2-peer software developer LimeWire has filed a counterclaim to the action brought by Warner Bros. Records, Virgin Records America, Sony BMG Music Entertainment and other music labels. The counterclaim filed in U.S. District Court in New York alleges that the record companies have engaged in unfair business practices to scare away its users. The record companies allege that Limewire’s technology provides a means for copyright infringement by illegal peer-2-peer fileswapping and downloading. In its countersuit Lime Wire alleges that the major record labels launched their own digital-distribution to “destroy any online music distribution service they did not own or control, or force such services to do business with them on exclusive and/or other anticompetitive terms”. This is not the first time this allegation has been made and the major labels are facing a class action in the USA alleging that the labels first forays into digital retailing were nothing more than blocking devices to shut other companies out of the digital market. Lime Wire’s suit also argues that the record companies combined and conspired to restrain trading in the market for online distribution of recorded music and, as a result, violated sections of the…

United States v Google? As it buys YouTube, does Google now have market dominance?
Competition , Internet / November 2006

COMPETITION Internet ARTICLE LINK  An interesting blog by David Berlind looking at anti-trust issues in the US and pointing out that the question of Google’s ‘market dominance’ is by no means as simple as it might look – and challenges the idea of a ‘Googleopoly’ whilst making some challenging comments on Apple’s iTunes business model. http://blogs.zdnet.com/BTL/?p=3771

Sony and BMG to appeal the annulment of their merger by the European Court
Competition , Record Labels / November 2006

COMPETITION Record labels Sony and Bertelsmann have appealed against an annulment of their joint venture that created the world’s number two music company. In July, the Court of First Instance annulled the European Commission’s decision to approve the venture (see our August Music Law Updates. German media group Bertelsmann said in a statement it and Sony had filed the appeal because “the EU Commission’s 2004 decision to clear the Sony BMG recorded music joint venture was correctly decided on both the law and the facts”. The appeal process is likely to take about a year. Meanwhile the European Commission will concurrently undertake a renewed review of Sony and Bertelsmann’s original merger proposals (annulment issued by the Court Of First Instance simply overturned the original approval on procedural grounds, it did not actually state whether the merger itself was, in fact, anti-competitive – that is for the Commission to decide anew). Bertelsmann said “parties will be providing current market data and other information requested by the Commission in the next few weeks”. As European officials closely monitor the music industry, it appears that Vivendi is going to restructure the way it buys BMG Music Publishing from Bertlesmann after EC officials expressed…

CBS makes peace with Spitzer
Competition / November 2006

COMPETITION Broadcasting US radio major CBS has become the first broadcasting corporation to settle with New York Attorney General Eliot Spitzer in his long running payola investigations where record labels have paid to have their records played on the radio – ‘pay for play’. All f the majors have agreed to pay fines and revamp internal rules as a result of their own settlements with Spitzer has since turned his attention to the radio groups.CBS have pledged to introduce more stringent rules regarding the relationships their station managers have with record labels and their promoters, as well as paying $2 million in fines. CBS runs approximately 180 radio stations across the US

US Copyright Office agitates publishers over statutory licences for ringtones

COPYRIGHT / COMPETITION Record labels, music publishers The US Copyright Office has ruled that ringtones qualify as digital phonorecord deliveries and as a result they fall under compulsory license provisions. Under section 115 of the USCopyright Act, the Copyright Royalty Board can now determine royalty rates for these tones. This means that labels can offer ringtone operators the mater rights and the publishing rights as a single package and labels will be able to avoid lengthy licensing negotiations with publishers. Whilst the Recording Industry Association of America welcomed the news, the National Music Publishers’ Association was quick to attack the Copyright Office’s decision. It argues that this “represents an unprecedented broadening of the compulsory licence for musical works” and could damage songwriters and copyright owners who were previously able to negotiate licences in the free market but are now subject to government regulation. http://www.billboard.biz/bb/biz/newsroom/legal_management/article_display.jsp?vnu_content_id=1003255346

US Anti-trust chief takes hands off approach to Apple
Competition , Internet , Record Labels / October 2006

COMPETITION Record labels, internet ARTICLE LINK:  As competition and consumer regulators in some European countries prepare to take action against Apple and its DRM software, the US competition chief has a different view. http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=google&guid=%7B3845BAAA-EA87-45E3-BA14-7756F8619D75%7D&keyword=

The European Court annuls the European Commission’s approval of the Sony BMG merger

COMPETION Record labels, music publishers ARTICLE The European Court annuls the European Commission’s approval of the Sony BMG merger Case T464/04 Independent Music Publishers and Labels Association v Commission of the European Community By Ben Challis Barrister The European Court of First Instance has annulled the European Commission’s approval of the 2004 merger between Sony Music and BMG, which allowed the music industry to shrink from five major companies to four. The case, brought to court by IMPALAon behalf of European independent record labels, has been closely watched by Warner Music and EMI who must now wait and see how Europe’s top antitrust authority will react to the court’s decision. The court considered two pleas brought by IMPALA: The first plea was in regard to the strengthening of a pre-existing collective dominant position in the market for recorded music and the second plea: creation of a collective dominant position on the markets for recorded music. The Court noted the case-law of the Court of Justice regarding an alleged collective dominant position which has held that the Commission must assess, using a prospective analysis of the reference market, whether the concentration which has been referred to it leads to a situation in which effective competition…

Live music and internet downloads face anti-trust scrutiny in the USA

COMPETITION / COPYRIGHT Live Event Industry, record labels Clear Channel (Live Nation) has been accused of violating anti-trust laws by impinging on concert competition and pushing up ticket prices in the USA. The class action in Denver comes three months after the US Justice Department probe into similar accusations saw no action being taken against Clear Channel. In a separate action the major labels are being sued by a group of consumers in the US for allegedly fixing the price of digital downloads. According to the suit, the major labels, having failed to delay the online market with their own (failed) joint ventures, are now conspiring to keep the wholesale price of individual tracks at $0.70. It is also claimed that, as a result of this activity, the digital music retailers have squeezed the wholesale price offered to independent labels. The labels are alleged to have inserted anti-competitive clauses into their contracts with online music providers, forcing the providers to pay all the labels the same amount for their songs. http://business.timesonline.co.uk/article/0,,9071-2211881,00.html

APIG announces findings of its public inquiry into Digital Rights Management

COMPETITION / COPYRIGHT Record labels, film & television, technology The United Kingdom’s All Party Parliamentary Internet Group (APIG) has released its report into Digital Rights Management (DRM). The Inquiry received over 90 written submissions from consumers, think-tanks, libraries, print media publishers, the film and music industries and lawyers. An oral evidence session was organised at the House of Commons in February when a cross selection of the respondents were invited to give evidence to APIG officers. Key points of the report were: A recommendation   that   the   Office   of   Fair   Trading   (OFT)   bring   forward appropriate   labelling   regulations   so   that   it   will   become   crystal   clear   to consumers what they will and will not be able to do with digital content that they purchase. A recommendation that OFCOM publish guidance to make it clear that companies distributing Technical Protection Measures systems in the UK would, if they have features such as those in Sony-BMG’s  MediaMax  and  XCP  systems,  run  a  significant  risk  of  being prosecuted for criminal actions. A recommendation that the Department of Trade and Industry investigate the single-market issues that were raised during the Inquiry, with a view to addressing the issue at the European level. A recommendation  that  the  government …

Norway takes a bite out of Apple

COPYRIGHT / COMPETITION Internet, record labels Norwegian consumers were already up in arms about iTunes’ digital rights management (DRM) system and the lack of interoperability between Apple and other platforms. But then some brave Norwegian souls read the iTune’s end user licence agreement (EULA). The Norwegian Consumer Council called the EULA “grossly unreasonable” pointing out that (amongst other complaints) it required Norwegian consumers to consent to English law while the music store reserves the ability to change the rights to the downloaded music even while disclaiming all liability for possible damage their software may cause. The Norwegian Consumer Ombudsman ruled that certain of Apple’s terms were illegal under Norwegian law and the Company has been given to June 21 st to amend its rules. Consumer Agency officials in Denmark and in Sweden have taken the same line. Apple has also been told in Norway that it must defend its DRM system, Fairplay, which restricts downloaded songs to being played on the consumer’s iPod. To be fair, its not just Apple – most EULA’s are wholly unreasonable and most online users ‘click to consent’ without ever reading the draconian terms they are agreeing to. But Norway has strong consumer protection rules…

French legislators to compromise on iTunes

COPYRIGHT / COMPETITION Record labels, internet The French National Assembly’s draft copyright bill which included the demand that companies such as iTunes and Napster share their copy-protection technology has been watered down. Currently tunes purchased at Apple’s iTunes Music Store won’t play on music players sold by Apple rivals. Likewise, an Apple iPod can’t play songs bought on Napster Inc. or other rival music stores. French consumer groups have called the restrictions anti-competitive and anti-consumer. But the compromise, approved by a committee of legislators from both houses, maintains a Senate loophole that could allow Apple and others to sidestep that requirement by striking new deals with record labels and artists. A new regulatory authority will be given the power to resolve disputes by ordering companies to license their exclusive file formats to rivals – but only if the restrictions they impose are “additional to, or independent of, those explicitly decided by the copyright holders.” This means that Apple, Napster and Sony could avoid having to share their protection formats such as FairPlay and ATRAC3 if they obtained permission from the artists whose music they sell. Apple had earlier indicated that it would close its French iTunes store rather than comply…

Is the EMI/Universal ‘Napster’ litigation about to backfire on the majors?

COMPETITION / COPYRIGHT Record labels US district judge Marilyn Hall Patel has ordered Universal and EMI to hand over privileged documents relating to a federal government antitrust probe into the major record labels failed online services Pressplay and MusicNet. That investigation started in 2001 and was abandoned in 2003. At the heart of this demand for new documents is the question of whether or not EMI and Universal colluded on Pressplay and MusicNet in such as a way as to ‘discourage digital downloading’ – thereby protecting their CD business. The original claim in this case stems from the ongoing 2003 proceedings resulting from Bertelsmann’s investment in the original ‘illegal’ Napster. EMI and Universal took legal action against the Bertelsmann investment, arguing that the investment kept the original Napster running for longer than it could have done on its own thereby exacerbating online copyright infringements. However the requirement by Judge Patel is rather interesting – looking beyond the core issue in the case (the illegality of Napster’s services) and rather looking at the legality of the plaintiff’s business activities in as much as they are relevant to the case. It is not the first time the idea that the majors actively…

The ‘unintended consequences’ of the DCMA

COMPETITION/COPYRIGHT Internet, record labels, film, television ARTICLE LINK: By Timothy B Lee Pointing out that the modern PC industry wouldn’t exist without ‘reverse engineering’ and multi platform compatibility (Microsoft’s dominance accepted!) this article explores the unintended consequences of the US’s Digital Millennium Copyright Act. Congress passed the Digital Millennium Copyright Act (DMCA) which includes a clause prohibiting the “circumvention” of digital rights management schemes. It is a federal crime to transfer a protected DVD to your iPod for example. Congress hoped to deter piracy. But the practical effect has been rather different. The DMCA gives incumbents a powerful weapon against competitors seeking to build products that are compatible with their own. If they refuse to license their copy protection schemes to competitors, any compatible device a competitor might build is likely to be ruled a “circumvention device” under the DMCA, even if it’s never used for piracy. That allows the platform creator to effectively control who may create devices for that platform. http://www.heartland.org/Article.cfm?artId=18902

Spitzer targets radio stations
Competition , Record Labels / March 2006

COMPETITION Record labels New York Attorney General Eliot Spitzer has subpoenaed some of the USA’s largest radio conglomerates in his “payola” investigation of major artists and songs that he claims got air time because of payoffs by recording companies. Payola, or ‘pay for play’ breaches a 1960 federal law prohibiting record companies paying ton get airtime for records on the radio. “A lot of the major songs have been implicated in this and it showed how pervasive the payola infrastructure had become,” Spitzer told Associated Press. “Probably many of the songs that were beneficiaries of the payola scheme would have succeeded without it, but certainly payola became part of the promotional structure and was integral to the game to get songs to the top. Major artists, major songs were sent up the charts through improper payments to buy spins on the air that translated into sales.” Warner Music Group Corp. agreed last year to pay $5 million to settle its part of the investigation, and Sony BMG Music Entertainment agreed to pay $10 million .http://abcnews.go.com/Business/wireStory?id=1594741

European competition regulators to look at music collection societies again
Competition , Internet / March 2006

COMPETITION Internet In October 2005 The European Commission adopted a recommendation on the management of online rights in musical works. The recommendation puts forward measures for improving the EU-wide licensing of copyright for online services. Improvements were deemed necessary because new Internet-based services such as webcasting or on on-demand music downloads needed a license that covers their activities throughout the EU. The absence of EU wide copyright licenses were held to have been one factor that has made it difficult for new Internet-based music services to develop their full potential. Internal Market and Services Commissioner Charlie McCreevy said at the time : “Today we have made workable proposals on how licensing of musical work for the Internet can be improved. I want to foster a climate where EU-wide licenses are more readily available for legitimate online music service providers. These licenses will make it easier for new European-based online services to take off. I believe that this recommendation strikes the right balance between ease of licensing and maintaining the value of copyright protected works so that content is not available on the cheap. In the interests of better regulation, for the time being and as a first step, I am…

UK Secretary of State opposes plan for EU internet regulation
Competition , Internet / February 2006

COMPETITION Internet Tessa Jowell, the UK’s Culture Secretary, has said that European Union plans to regulate the internet would be unwelcome, arguing that the new media were best left to regulate themselves and that ordinary criminal laws were sufficient to regulate the internet. The EU insists that its new plans would be ‘light touch’. The EU is trying to overhaul its1989 ‘Television Without Frontiers’ Directive in particular to introduce new rules on the protection of children and the incitement of hatred. The remarks were made at the Oxford Media Convention. See the Times, 20th January 2006.

Monstermob’s mobile services prompt fresh complaints
Competition , Internet / December 2005

COMPETITION Telecomms, technology, internet Mobile giant monstermob is facing a fresh investigation from UK from telephone watchdog Icstis over claims that the company has sent out unsolicited ‘reverse bill chargeable texts’ to users. In effect the user pays for the text at premium rate even if they haven’t asked for the text. Here entrants to a ‘free’ competition are said to have received texts which they had to pay for. Ictis can impose fines on service operators or bar services from operating. Monstermob had previously been investigated by Icstis for a subscription text service which provided ineffective ‘stop codes’. Monstermob were warned but no other action was taken. The Advertising Standards Authority had prevously upheld a number of complaints against ringtone provider Jamster, the firm behind the ‘Crazy Frog’, ‘Sweetie the Chick’ and ‘Nessie The Dragon’ downloads. The ASA noted that Jamster’s style of advertising particularly appealed to children and young people and the adverts for these Jamster downloads did not make it clear that the service was a subscription service. Many young people who complained (often after parents had to foot large bills) thought that the purchase of a single download was a ‘one off’ transaction. Jamster failed in…

US Senator introduces bill against US ‘payola’ as Warners settle with Spitzer
Competition , Record Labels / December 2005

COMPETITION Radio, record labels Senator Russ Fiengold (Democrat, Wisconsin) has introduced legislation that seeks to close the loopholes on payola-like practices and stop alleged “muscling” practices by broadcast-venue owner companies from forcing performers to play for reduced fees or for free. Senator Feingold has crafted his Radio and Concert Disclosure and Competition Act of 2005 after studying the New York Attorney General Eliot Spitzer’s $10 million settlement in July with Sony BMG Music Entertainment, and realizing there is a need to help artists and also regulate such practices on the radio side to prevent abuse of a dominant position by large conglomerates who control venues as well as radio stations and other media. In The US, Warner Music Group has become the second major label company to settle with New York attorney general Eliot Spitzer’s office in its ongoing payola investigation. WMG is paying out $5 million – which will be donated to nonprofit organisations – and a further $50,000 to cover the cost of the enquiry. Spitzer accused the label of dishing out iPods, $800 gift cards and cash bribes of up to $20,000 to DJs and radio stations. In July, Sony BMG was the first record company to reach settlement,…

US payola scandal rumbles on
Competition , Record Labels / November 2005

COMPETITION Radio, Record Labels TSR Records has filed a lawsuit in Los Angeles against Sony BMG, accusing the company of bribing radio programmers in order to unfairly dominate radio playlists. This new case comes just three months after Sony BMG agreed to pay $10M in settlement after the Eliot Spitzer-led investigation into payola in the US radio sector. TSR alleges it was “systematically excluded” from a number of playlists and this affected its business prospects. Sony disciplined a number of executives and Clear Channel sacked two programming executives and disciplined a number of others following internal payola investigations. See: http://www.nytimes.com/2005/10/19/business/media/19payola.html andhttp://www.latimes.com/business/la-fi-payplay19oct19,1,7448152.story?coll=la-headlines-business And see Law Updates September 2005 SONY BMG settle payola claim

SONY BMG settle payola claim
Competition , Record Labels / September 2005

COMPETITION Record Labels Sony BMG is paying $10M as a settlement following Attorney General Eliot Spitzer’s payola investigations in the US. The money will be paid to non-profit organisations that promote music education. The investigation illustrated that to get Franz Ferdinand played on radio station WKSE, the label paid $4,000 which was used to send radio executives to Miami. It is also said to have disguised ‘payoffs’ such as flat-screen TVs by referring to them as “contest giveaways”. It is expected similar settlements with the other majors will be arrived at soon. Sony BMG responded by firing its promotion executive at Epic and disciplining four other executives at Sony Urban and Epic. Spitzer is now thought to be investigating radio stations in the United States on the similar matters. See: http://www.guardian.co.uk/business/story/0,,1535935,00.html

EU to investigate download pricing in Europe

COMPETITION Record Labels, Internet The European commission is to begin an investigation into the pricing of Apple Computer’s digital music service after consumers complained that downloading tracks was more expensive in the UK than other parts of Europe. Officials are investigating whether price differentials on iTunes between the UK and other countries such as France and Germany of up to 20% amount to a breach of EU pricing regulations. The inquiry comes after Which? (formerly the Consumers’ Association) wrote to the Office of Fair Trading last September, asking it to look into iTunes’ pricing across Europe. In the UK, iTunes charges users around 1.20 (83p) a track against 99 cents in France and Germany. The OFT later referred the case to the commission, which yesterday said it would begin an investigation. Source: http://www.guardian.co.uk/uk_news/story/0,,1424769,00.html

Microsoft faces the wrath of the European Commission
Competition / April 2005

COMPETITION Computer Software The European Commission is threatening to fine Microsoft 5% of its global revenue for failing to comply with sanctions imposed last year. Microsoft was fined E497 million ( million) and was ordered to implement EU remedies forthwith – these included allowing competitors access to software protocols so they could compete in the provision of interoperable servers and providing Windows software without the obligation of taking Microsofts MediaPlayer software. Microsoft has already posted details of secret protocols to enable other software manufacturers to produce servers compatible with Microsoft’s Windows operating system but is now disputing the royalty (or licence) fees competitors should pay. The software giant also has chosen the name ‘Windows Reduced Media Edition’ for the new version of soft ”unbundled’ from Microsoft’s MediaPlayer software. This and other names (for what Microsoft call their ‘degraded’ software) have bee rejected by the EU as a serious deterrent to consumers. Microsoft’s total revenues in 2004 were approximately $40 billion. Source: The Guardian 26/02/05 Also see: Microsoft Ordered to Open Up Windows – Law Updates March 2005

European Commission seeks to restrict public services broadcasters’ online and digital services
Competition , Internet / April 2005

COMPETITION Television, Internet, Radio The European Commission is to look at the role played by public service broadcasters in the provision of digital and online services. In particular the EC Competition Directorate, headed by Commissioner Neelie Kroes, will look at whether state funding of online and digital services is unlawful state aid. The commercial sector has complained that the online services provided by German public service broadcasters ARD and ZDF and by the BBC in the United Kingdom results in unfair competition to the commercial sector as it is funded by public money or governments. In an effort to head of confrontation ARD and ZDF are to limit their online services to programme related services. The licence fee funded BBC provide its 24 hour news channel News 24 (against commercial providers such as CNN and Sky) childrens’ channels CBBC and CBeeebies (against commercial providers such as Nickleodeon) and a wide range of highly successful web pages at http://www.bbc.co.uk. The BBC also provides a free to air ‘youth’ and comedy channel, BBC3, and the arts and culture channel BBC4. Whilst the principle of licence fee funded broadcasting is not under threat, recent state funding of web and digital services could be. Action…

Music composers complain to OFT
Competition / April 2005

COMPETITION Songwriters The British Society of Composers and Songwriters (BACS) has made a formal complaint to the Office of Fair Trading (OFT) about the assignment of music publishing rights in music for films and television programmes. BACS are concerned about the practice of some film and TV companies of demanding an assignment of publishing rights as part of a composer’s engagement to write music for a film or television programme. BACS point out that in some circumstances the commissioning company may take rights but not exploit these, exclude mechanical royalties from any deal and sometimes offer less favourable publishing deals to composers that those they could find with third parties, depriving composers of revenues. BACS has also raised wider competition concerns in that many publishers are excuded from the film and television production market because they have no relationship with film and television companies. The OFT will investigate breaches of the Competition Act 1998, Article 81 of the EC Treaty and whether the case merits reference under the Enterprise Act 2002. Source: PACT Magazine March 2005 UK Government consults on moral rights for performers

Office of Fair Trading reviews ticket pricing
Competition , Live Events / March 2005

COMPETITION Live Event Industry A shake-up in the way concert and theatre tickets are sold was announced yesterday after The Office of Fair Trading said the public are not getting clear information on prices. Even legitimate agents are sometimes charging as much as two-thirds on top of the face value of a ticket according to the OFT research. In future it would like advertisements for events to show the face value of tickets. The OFT uncovered evidence of some ticket sellers breaking the law and employing “potentially unfair” terms and conditions, and mark-ups as high as 600% on some tickets sold over the internet. The watchdog also revealed just how much fees can add to the price of a concert or West End show ticket. A comprehensive mystery shopping exercise, looking at the cost of tickets for everything from West End hit Chicago to a gig by up-and-coming rock band Hope of the States, found that some people using well-known agencies were being asked to pay up to 67% extra to cover booking fees. Among the OFT findings were that some ticket agents were relying on “potentially unfair” terms and conditions buried in the small print, designed to allow them…

Microsoft ordered to open up windows
Competition / February 2005

COMPETITION Technology Computer giant Microsoft has been ordered to pay a million fine (497 million euros) to the European Commission for anti-competitive activities and abuse of market dominance. This is the biggest fine ever in Europe for a competition case. The company had appealed to the European Court of First Instance in Brussels but the ECJ upheld the European Commission’s ruling in March 2004 that the firm had abused a virtual monopoly. In addition, Microsoft must now make Windows available to consumers without its Media Player software bundled in as part of the package. The European Commission’s aim is to give Media Player’s competitors such as Apple’s Quicktime and RealNetwork a level playing field. The company must also hand over confidential coding information from the Window’s operating system to rivals. Microsoft may still appeal to the full European Court of Justice. The Court of First Instance rejected a suspension of payment of the fine until such appeal. See: www.eubusiness.com/afp/041222193914.qgqu0dis

Indies challenge SONY-BMG Merger
Competition , Record Labels / January 2005

COMPETITION Record Labels IMPALA, which represents Europe’s independent labels, has mounted a legal challenge to the BMG-Sony merger by launching a claim in the European Court of Justice (court of First Instance) in Luxembourg saying that the merger could have legal, cultural and political and economic implications and that the European Commission, which passed the merger, made mistakes when considering the merger and the implications it will have on the market in sound recordings.

New York Attorney General Investigates ‘Payola’ Charges Against Majors
Competition , Record Labels / December 2004

COMPETITION LAW Record Labels The New York Attorney General, Eliot Spitzer, has targeted the major labels in the US (Warners, Universal, EMI, BMG-Sony) in an anti corruption investigation into payola – securing radio airplay for acts. Mr Spitzer has issued subpoenas to EMI and the other majors to seek details of any links between record companies and independent pluggers who are used to promote artistes to radio stations. Mr Spizer is investigating whether the use of ‘go-betweens’ violates anti-payola laws in the US – enforced by the Federal Communications Commission which prevent labels buying airtime. In 2002 the RIAA called on the US Government to bolster the laws and investigate questionable practices in the radio industry. Source: The Times 23 October 2004 and see : http://www.guardian.co.uk/business/story/0,3604,1334252,00.html

US Antitrust Settlement ‘Censored’ By State Lawyers
Artists , Censorship , Competition , Record Labels / September 2004

COMPETITION LAW/CENSORSHIP Record Labels, Artists In 2002 US District Judge D Brock Hornby sitting in the federal court approved the settlement of a lawsuit filed on behalf of millions of record club members who alleged they had been overcharged in a price-fixing conspiracy. The sum of US $143 million was agreed by the five major record companies (Sony, BMG, EMI, Universal and Warners) and three large music retailers in settlement of the anti-trust claims – the claims were that they had been conspiring to set minimum prices for music CDs in the United States. Under that settlement, 3.5 million people received cheques for $12.60 and libraries and schools across the country will due to get $75.7 million worth of music CDs. The lawsuit was signed by the attorney generals of 43 states and territories. However, all is not well with the settlement. In Kansas City, Missouri the Attorney General Phil Kline has withheld 1,600 of the state’s allotted 51,000 discs, because they are contrary to his “concept of decency”. He will not allow any albums that “promote violence or illegal activity” to go into public libraries or schools. The 25 offending artists include Outkast, Notorious B.I.G., Rage Against The Machine,…

EU Commission to Investigate ‘One Stop’ Licensing Schemes in Europe

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…

European Commission Seeks to Regulate Collection Societies

COMPETITION/COPYRIGHT Record Labels, Music Publishers The European Commission has launched consultations with a view to regulate collection societies which manage the marketing of copyrighted products such as CDs and DVDs. Collection societies act as trustees for rights holders, but the way they function may vary considerably within the EU and is an obstacle for businesses, the Commission said. This view is supported by the European ICT industry association (EICTA) which says many collection societies are actually slowing down businesses that distribute content online because they have to negotiate with one or more collecting societies in each country to obtain the rights to use content in that territory. EICTA is advocating official recognition and large-scale adoption of Digital Rights Management (DRM) systems. DRMs are used to protect and secure payments of online material such as music. They are based on direct licensing agreements which means that collecting houses could end up being bypassed because the products’ copyright would be managed directly by software. But the Commission paper says that those technologies have not yet been developed to a satisfactory level. It states that “a necessary pre-condition for their development is their interoperability and acceptance by all stakeholders, including consumers”. The EICTA…

Microsoft To Settle Class Actions, Record Labels Face Scrutiny
Competition , Record Labels / December 2003

COMPETITION Computer Software, Telecommunications, Record Labels Microsoft has agreed to settle class action lawsuits from a number of US states which alleged that the software giant abused its dominant market position. Microsoft are handing out discounts worth approximately USD $200 million to consumers and schools in several US states including Kansas, North Dakota, South Dakota and Tennessee. The Times(29/10/03) estimate that Microsoft has paid out more than $1.5 billion over the last ten years in anti-trust and competition payments. Microsoft is now facing further actions from the US Government and state justice departments who have raised concerns the world’s largest software maker is trying to use its dominant Windows operating system to influence where customers buy their music online. If action is brought, it will be the first test of Microsoft’s unique and federal Court approved anti-trust settlement. The Justice Department and 19 state attorneys general have formally complained to a federal judge about a design feature of Windows that compels consumers who buy music online to use only Microsoft’s Internet Explorer browser and steers them to a web site operated by the company. Microsoft is also now facing competition investigations from the European Commission. In another anti-trust action, the five…

Granada and Carlton Free to merge
Competition / November 2003

COMPETITION LAW Television In a move which surprised many industry commentators, ITV giants Granada and Carlton are to merge to form a single ITV in England and Wales. The companies were given outline permission by the Trade and Industry Secretary, Patricia Hewitt, with only limited restrictions. The Competition Commission had advised the minister that the merger would not breach competition laws provided there are conditions attached to the way advertising is sold. At one point it seemed likely that the merged group would not be able to sell its own advertising as the new entity would control 52% of all UK television advertising as the new entity would control 52% of all UK television advertising (worth more than £3 billion). The Competition Commission have recommended a series of rules to prevent market abuse. As well as restrictions on advertising sales, the merged ITV group must agree to a package of safeguards to protect the protect the remaining three independent channel 3 broadcasters – The Scottish Media Group (Scotland), Ulster (Northern Ireland) and Channel TV (Channel Islands). In response ITV’s main commercial rivals in the UK (Channel 4, Five, BSkyB and Flextech’s ‘UK’ channels) are considering a joint advertising sales house….

US SENATOR REINTRODUCES BILL ON COMPETITION IN RADIO
Competition , Live Events / February 2003

COMPETITION Radio, Live Concert Industry Democrat Senator Russ Feingold has reintroduced his Competition in Radio and Concert Industries Act on January 28th 2003 which he says will help consumers, small and independent radio station owners, and independent concert promoters by prohibiting anti-competitive practices in the radio and concert industries. The Bill’s introduction comes as the Senate Commerce Committee holds a hearing on the problems of radio consolidation. Insiders say committee chairman, Republican Senator John McCain, is expected to sign on as a co-sponsor of the bill soon. The Committee expects to hear from representatives of leading radio station owner and concert promoter Clear Channel Communications, the National Association of Broadcasters, the Recording Artists Coalition and the Future of Music Coalition. Says Feingold: “Since originally introducing this legislation in June 2002, I have seen a groundswell of interest both in Congress and among artists, consumers, independent radio stations, and local promoters in restoring fairness to radio. My legislation will reduce concentration and crack down on anti-competitive practices, such as the new ‘pay to play’ system.” Feingold says the latter practice allows radio giants to “shake down the music industry.” See www.recordingartistscoalition.com See www.billboard.com