Antitrust Alert: EU General Court Reverses European Commission in CISAC Music Rights Case
The EU General Court has overturned part of the European Commission's ("Commission") infringement decision against 24 European copyright collecting societies, in the so-called CISAC case. The Court's judgment comes as a victory for the collecting societies and serves as a reminder of the difficulty for EU competition authorities and courts to establish "concerted practices." It also removes the stigma on the collecting societies that they had acted together against the interests of authors and rights users. But coming 13 years after the lodging of the initial complaint to the Commission that led to the infringement decision, after the collecting societies have made other changes, these judgments may have little effect.
CISAC and collecting societies
The collecting societies in this case manage copyright – in particular performance rights – on behalf of composers and lyricists of musical works, ensuring that they receive the remuneration due for exploitation of their work. Many EU countries have just one national collecting society. All the collecting societies operate under the umbrella of CISAC, the International Confederation of Societies of Authors and Composers.
CISAC developed a non-binding model contract ("Model Contract"), which the collecting societies used as the basis for reciprocal representation agreements ("RRAs"), giving each other the right to grant licenses for their authors' works in their respective territories.
Background - Commission's decision
Broadcasters RTL, in 2000, and Music Choice, in 2003, complained to the Commission that they were unable to obtain EU-wide licenses from CISAC collecting societies for public performance rights, but instead had to negotiate multiple licenses to provide their services. The Commission's investigation focused on the Model Contract and the RRAs and whether the collecting societies had infringed Article 101 of the Treaty on the Functioning of the European Union (TFEU), which prohibits agreements between undertakings, concerted practices, and decisions of undertakings whose object or effect is to restrict competition within the EU.
The Commission identified two anticompetitive agreements arising from Model Contract clauses. The "membership clause," which prevented authors from switching to another collecting society; and the "exclusivity clause," under which collecting societies refrained from offering licenses to commercial users outside their domestic territory by granting other collecting societies in those territories exclusivity to license those rights. The exclusivity clause had been removed from the Model Contract in 1996, and the membership clause in 2004, but for the most part had been retained in the RRAs.
The Commission also identified the existence of a concerted practice among the collecting societies, according to which each collecting society restricted the scope of the license granted to other societies to the national territory of each licensee society. The Commission found that this restriction, together with the membership restriction, prevented any society from awarding a multi-territorial, multi-repertoire license. The Commission conceded that the national territorial limitations themselves could be justified by the wish to ensure that collecting society licensees had the ability to monitor unauthorized exploitation of the rights they license. However, the Commission concluded that the presence of national territorial limitations in all the RRAs could only be explained by a concerted practice between the societies.
Although CISAC and the collecting societies proposed commitments addressing the clauses and offering to create a multi-territorial, multi-repertoire license for internet, satellite transmission, and cable transmission, the Commission nevertheless decided to issue an infringement decision. The Commission did not impose fines but required that the collecting societies remove the clauses in question from the RRAs and bring to an end the concerted practice.
Most of the collecting societies and CISAC brought an action before the General Court against the Commission's decision, but many of the applicants chose to challenge only the allegation of a concerted practice.
The General Court's Judgment
The Court agreed with the Commission's analysis in respect of the membership and exclusivity clauses. However, it overturned the Commission's finding of a concerted practice, for lack of sufficient evidence. The Court noted that, to presume the existence of an anticompetitive concerted practice, the Commission must show precise and consistent evidence that parallel behavior does not correspond to normal conditions of competition. In this case, the Commission:
- a) had no documentary evidence to prove the existence of the concerted action; and
- b) had not rendered implausible the applicants' explanation that the parallel conduct of the collecting societies in imposing territorial restrictions was not the result of concertation, but rather of the need to fight effectively against unauthorized use of musical works, by requiring a local presence from the licensee society.
The applicants argued that the existence of national territorial limitations resulted from individual, rational decisions taken for practical and economic reasons. For its part, the Commission failed to explain how certain monitoring activities would take place if collecting societies were competing to grant licenses in respect of overlapping repertoires overlapping or covering same territories.
Implications of the decision
It is possible that the Commission will appeal this decision to the Court of Justice, if only to obtain further clarity on the law surrounding how to establish the existence of an anticompetitive concerted practice.
Nevertheless, the ruling is unlikely to have much impact on the system for music rights management in Europe. First, the exclusivity and membership clauses were removed from the model contract many years ago, before the Commission published its decision in July 2008.
Second, should the Commission's decision have been upheld, collecting societies would have had to revisit the territorial limitations in their respective licensing agreements, which could have resulted in more multi-territorial agreements. However, since 2006, several music publishers have withdrawn their mechanical rights for online Anglo-American music from national collecting societies and license them directly, together with applicable performance rights, via new organizations set up by collecting societies to act in the publisher's interests. For example, CELAS, a joint venture between the UK's PRS for Music and Germany's GEMA, offers EU-wide licenses for EMI's online Anglo-American repertoire. This development has had a far greater impact on rights management than did the CISAC case and provided impetus for improved efficiencies by competition between national collecting societies.
Perhaps the most important development on the horizon will be the entering into force of a new collective rights management directive, currently being amended by the European Parliament. Two key aims of this new legislation are to foster the emergence of one stop shop licenses (multi territory, multi repertoire) in the EU and to encourage greater administrative efficiency among collecting societies by imposing transparency obligations.
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