Tag Archives: Licensing

Derechos de autor de la foto: D. López Rus

CNMC penalizes SGAE with a fine of 3.1 million euros for abusive fees on concerts

Spain’s National Markets and Competition Commission (Comisión Nacional de Mercados y la Competencia) has imposed on SGAE (Spanish Society of Authors, Composers and Publishers) a penalty of 3.1 million euros for subjecting promoters to abusive conditions. The Commission considered that SGAE carried out anticompetitive practices by imposing abusive conditions on license agreements concerning copyright over songs performed in concerts. These practices constitute an infringement of article 2 of the Spanish Law on Defense of Competition and of article 102 of the Treaty on the Functioning of the European Union. The decision was taken the 6th November 2014 and SGAE has had a period of two months since its notification to appeal the decision before the National High Court (Audiencia Nacional).

Specifically, the Commission considered that the amount of the fee, which is 10% of total box office sales – 9% for concerts in venues with seating capacity for less than one thousand persons-, implies an abuse of a dominant position in the market for the management of public performance and intellectual property rights of the composers of pieces of music which are exploited in the music concerts that take place in Spain.

The alleged abuse by SGAE of its monopoly power is a long-standing accusation, but until now, the accusations have been levelled at SGAE without enough proof to back them up. In 2005, the Association of Music Promoters (Asociación de Promotores Musicales) filed a complaint before the former Competition Defense Service (Servicio de Defensa de la Competencia) denouncing these alleged anticompetitive practices carried out by SGAE, but the case was dismissed by the Competition Defense Service and subsequently rejected by the Court for the Protection of Competition (Tribunal de Defensa de Competencia). In contrast, in 2009, Spain’s National High Court considered that the facts had not been sufficiently investigated and ordered the Commission to continue its investigative activities in order to resolve the following three questions. Firstly, whether the fees were justified in comparison with other European countries and having regard to the case-law of the Supreme Court (Tribunal Supremo) and the Court of Justice of the European Union. Secondly, whether the alleged anticompetitive practice had been carried out over a long period of time and in a substantial number of cases. Finally, whether the alleged cartel existed between SGAE and foreign intellectual property rights management entities. The Supreme Court upheld this order and the Department for Competition Investigation (Dirección de Investigación de Competencia) initiated sanction proceedings on April 15th of 2013.

In its decision, the Commission stated that “the amount of the fees applied by SGAE to licenses related to public performance rights of the composers of pieces of music performed in concerts in Spain, has abusive effects on the concert promoters, since SGAE has taken advantage of its dominant market position to charge them fees which are much higher than those charged in other European countries, with the result that the promoters are obliged to pay much higher fees than those that would be payable if fees were fixed at a competitive level.” In particular, the investigation has revealed that 73% of the Member States have a fee which is substantially lower than the 10% established by SGAE.

According to the Commission, the penalty was established taking into consideration the size of the affected market, the market share, as well as the importance and duration of the infringement. Apart from the fine, the Commission ordered SGAE to discontinue the infringing conduct within three months and to refrain from committing similar practices which hinder competition. In a statement issued, SGAE declared its intention to appeal the decision before the Supreme Court. In the meantime, the Department for Competition is responsible for overseeing compliance with the decision.

Copyright picture: Mr López Rus

 

photo credit: Hani Amir via photopin cc

Music Industry: comments on the Indies vs. Google controversy

In recent months we have followed with interest the controversy arising from complaints by independent labels against the practices of Google and its subsidiary Youtube, due to the introduction by this economic group of its expected streaming subscription service.

The independent labels, grouped together in the organization IMPALA (http://www.impalamusic.org/), have complained that Youtube has abused its dominant position, by attempting to force smaller record labels to join Youtube’s streaming platform under worse contractual conditions than the “majors”,  and by threatening to withdraw their videos from Youtube if they do not accept these conditions.

The contract allegedly imposed on independent labels by Youtube was leaked by specialized media (http://www.digitalmusicnews.com/permalink/2014/06/23/fk-heres-entire-youtube-contract-indies) and certainly contains some remarkable clauses. For example, a permanent “least favoured nation” clause, whereby independent labels are obliged to accept lower royalties if these are negotiated by the “majors”. The situation reached such a point that Youtube announced that within a matter of days, it would begin to delete the videos of labels which refused to accept the terms of Youtube’s licenses for its new streaming service.

Nevertheless, fuelling the controversy even more, some independent operators like BELIEVE DIGITAL (http://www.believedigital.co.uk/) stated that the economic conditions proposed by Youtube were in line with market conditions and no threats to withdraw content from the Youtube portal had been received. http://www.musicweek.com/news/read/youtube-why-one-significant-indie-music-group-has-signed-licensing-deal/058772-

IMPALA’s response in defense of its members was twofold: firstly, it took mass media action, which spread like wildfire on social networks and throughout the music industry, condemning what it viewed as an abusive practice by Youtube; secondly, a complaint was lodged before the Community competition authorities,  accusing Google’s subsidiary of practices that were abusive of its dominant position contrary to Community competition law  (http://www.impalamusic.org/content/dispute-between-youtube-and-independent-music-companies-%E2%80%93-formal-process-starts-brussels).

Finally, according to some media reports, Youtube decided to backtrack and withdraw its threat to remove videos from its platform, with this being interpreted as a small victory for the independent labels.

The conclusion to be drawn from this episode is that, for weaker operators in an industry such as the music industry, it is not just important –but essential- to have a strong sector association, with a suitable communication policy, efficient counselling and defense of the interests of its members. This is the only way to explain this small victory against Youtube or IMPALA’s other successes of the past, such as that in the case of Impala v. Commission (T-464/04) in which, for the first time in history, the Court of First Instance set aside an European Commission decision on an economic concentration (the Sony-BMG merger).