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Directorate-General for Internal Policies of the Union EUROPEAN PARLIAMENT sTUDY Directorate-General for Internal Policies of the Union Policy Department Citizens’ Rights and Constitutional Affairs THe COLLeCTiVe MANAgeMeNT Of RigHTs iN eUROPe THe QUesT fOR effiCieNCY LegAL AffAiRs JULY 2006 eN Directorate-General Internal Policies Policy Department C Citizens Rights and Constitutional Affairs THE COLLECTIVE MANAGEMENT OF RIGHTS IN EUROPE THE QUEST FOR EFFICIENCY STUDY IP/C/JURI/ST/2005-90 PE 378.260 EN This note was requested by The European Parliament's committee on Legal Affairs. This paper is published in the following languages: EN, FR. Author: KEA - EUROPEAN AFFAIRS Manuscript completed in July 2006. Copies can be obtained through: Tel: 31178 Fax: 2832365 E-mail: [email protected] Informations on DG Ipol publications: http://www.ipolnet.ep.parl.union.eu/ipolnet/cms The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. 2 TTHE CCOLLECTIVE MMANAGEMENT OF RRIGHTS IN EEUROPE TTHE QQUEST FOR EEFFICIENCY July 2006 3 TABLE OF CONTENTS TABLE OF CONTENTS 4 EXECUTIVE SUMMARY 7 THE COLLECTIVE MANAGEMENT OF RIGHTS IN EUROPE: THE QUEST FOR EFFICIENCY 10 PART I 12 RIGHTS MANAGEMENT IN THE EUROPEAN UNION 12 CHAPTER 1 THE MANAGEMENT OF COPYRIGHT AND RELATED RIGHTS IN THE EUROPEAN UNION - THE ISSUES 13 SECTION I THE SONGWRITERS AND COMPOSERS 13 SECTION II COLLECTING SOCIETIES 15 SECTION III THE TRIGGER FOR CHANGES: DIGITAL DELIVERY OF MUSIC 17 SECTION IV A COMMERCIAL BATTLE AS MUCH AS A REGULATORY ISSUE 19 SECTION V EFFICIENCY FOR ALL? 20 SECTION VI COPYRIGHT – A BOTTLENECK TO THE EMERGENCE OF NEW SERVICES? 21 SECTION VII THE VIEWS OF THE EUROPEAN COMMISSION 23 SECTION VIII RIGHTS MANAGEMENT AS A CULTURAL ISSUE? 24 SECTION IX CONCLUSION 25 CHAPTER 2 MUSIC RIGHTS MANAGEMENT IN EUROPE 27 SECTION 1 INTRODUCTION ON COPYRIGHT AND RIGHTS MANAGEMENT 27 SECTION 2 COLLECTIVE MANAGEMENT – BENEFITS AND COSTS 29 The functions of collecting societies 29 Rights usually managed collectively 31 Main advantages of collective licensing 31 Main disadvantages of collective licensing 32 CHAPTER 3 THE RIGHT MANAGEMENT BUSINESS IN MUSIC 35 SECTION 1 THE ECONOMIC VALUE 35 SECTION 2 THE SOCIAL VALUE 39 SECTION 3 THE TRADE VALUE 40 4 SECTION 4 CULTURAL AND SOCIAL FUNDS 40 CHAPTER 4 EU INSTITUTIONS AND RIGHTS MANAGEMENT 43 SECTION 1 THE EUROPEAN PARLIAMENT 43 SECTION 2 THE EUROPEAN COMMISSION 44 Internal Market 44 EC competition 48 SECTION 3 THE EUROPEAN COURT OF JUSTICE 51 CHAPTER 5 THE COMPLEXITY OF A REGULATORY APPROACH 52 SECTION 1 RIGHTS TERRITORIALITY VS INTERNAL MARKET 52 SECTION 2 RIGHTS MANAGEMENT AND LOCAL CULTURE 53 CHAPTER 6 RECENT MARKET DEVELOPMENTS 55 SECTION 1 MCPS+PRS DEALS WITH GEMA, EMI MUSIC PUBLISHING AND SGAE. 55 SECTION 2 IMPALA – MONETISING ONLINE LICENSING FOR SMES 56 CONCLUSION – PART I 58 PART II 62 NATIONAL RULES GOVERNING COLLECTIVE MANAGEMENT OF RIGHTS 62 CHAPTER 1 THE APPLICABLE LAW REGULATING COLLECTIVE MANAGEMENT 64 SECTION 1 LAWS APPLICABLE TO COLLECTIVE RIGHTS MANAGEMENT 64 SECTION 2 RIGHTS COVERED BY MANDATORY COLLECTIVE MANAGEMENT 64 CHAPTER 2 THE STATUS OF COLLECTING SOCIETIES AND PROVISIONS ON COMPETITION LAW 68 SECTION 1 LEGAL STATUS OF COLLECTING SOCIETIES 68 SECTION 2 SITUATION OF LEGAL MONOPOLIES 69 CHAPTER 3 PROVISIONS ON GOVERNANCE, TRANSPARENCY, ACCOUNTABILITY AND SUPERVISION 70 SECTION 1 GOVERNANCE, TRANSPARENCY AND ACCOUNTABILITY 70 SECTION 2 SUPERVISION 73 5 CHAPTER 4 RULES ON MEDIATION AND DISPUTE SETTLEMENTS 77 SECTION 1 CONFLICTS BETWEEN MEMBERS AND COLLECTING SOCIETIES 77 SECTION 2 CONFLICTS BETWEEN USERS AND COLLECTING SOCIETIES 77 SECTION 3 FOLLOW-UP TO MEDIATION AND ARBITRATION PROCEDURES 79 CHAPTER 5 SOCIAL AND CULTURAL FUNCTIONS OF COLLECTING SOCIETIES 80 PART III 82 DETAILS OF NATIONAL LEGISLATIVE FRAMEWORKS 82 TABLE 1 THE APPLICABLE LAW REGULATING COLLECTIVE MANAGEMENT 83 TABLE 2 THE STATUS OF COLLECTING SOCIETIES AND PROVISIONS ON COMPETITION LAW 92 TABLE 3 PROVISIONS ON GOVERNANCE, TRANSPARENCY, ACCOUNTABILITY AND SUPERVISION 99 TABLE 4 RULES ON MEDIATION AND DISPUTE SETTLEMENTS 118 TABLE 5 SOCIAL AND CULTURAL FUNCTIONS OF COLLECTING SOCIETIES 123 ANNEX A BIBLIOGRAPHY 129 ANNEX B INTERVIEWS 132 ANNEX C GLOSSARY 135 ANNEX D QUESTIONNAIRE FROM THE CONTRACT NOTICE 137 6 EXECUTIVE SUMMARY In the EU there are approximately 65 music licensing societies that collected € 5 billion in 2004 on behalf of authors, composers, publishers, performers and record companies. Collecting societies in music representing authors, composers and performers count around 900 000 members in the EU (the definition of members includes: authors, composers, music publishers, musicians and performers). This study examines the legal framework governing collective management in the field of copyright and neighbouring rights in the European Union, with a particular emphasis on musical works1. The report also provides information on the economic, social and cultural value of collective management, predominantly in the field of music, highlighting Europe’s competitive strength in rights management and the characteristics of rights management in the European Union. It provides members of the European Parliament with information on national legislation governing collective management as well as a briefing on the reforms proposed by the European Commission in relation to the provision of online music services. The study analyses the different options and summarises the views of the stakeholders. It considers the consequences of the scenario promoted by the European Commission with respect to: - copyright and its management - stakeholders’ interests (users as well as right holders) - EU internal market and competition objectives - EU cultural objectives It assesses the justification for the European Commission’s action in this field and considers policy issues linked to the latest regulatory development in light of the EP’s work, the ECJ jurisprudence as well as the latest market developments. The merit of the Commission’s Recommendation coupled with DG Competition investigation is to trigger an important re-think on rights management. It also launches a debate on the place of copyright and its exercise in the European integration process as well as the Lisbon strategy. The concept of territoriality needs to factor in new ways of dissemination. This involves the setting up of structures to accommodate cross border usage. Should these changes be market-led or subject to intervention by the regulator? The European Commission seems determined to limit the effect of rights territoriality on the free provision of services. It also wants to limit the consequences of the monopolies that are inherent to collective rights management. 1 In line with the priority of the European Parliament to consider this issue in light of recent Commission interest in collective management of musical works in the on-line sector in particular. 7 Essentially collective management enables right owners and users to jointly access lower transaction costs. By reducing transaction costs, collective management increases the range of rights that are traded. Facilitating trade is the key function of collective management bodies as transaction costs will often be a deterrent to unilateral action (in particular for individuals and small businesses) with the result that no trade occurs. The more right owners join a collecting society the further potential of reducing costs exists given the scope for gains from economies of scale. However it should be added that collective management also enhances the monopoly position of the management body whilst at the same time putting those bodies with less valuable repertoire at risk of becoming unviable. Whilst nobody amongst the users’ groups interviewed2 contest the benefits in efficiency gains from collective management, they would like regulators to look at the risk of excessive licence fee as a result of abuse of monopoly power or of management inefficiency. They seek more transparency in particular in relation to cost allocation. They are concerned about productive inefficiency. It remains to be seen who will gain from this upheaval triggered by the recommendation of the European Commission and whether the quest for the relative notion of “efficiency” and legal certainty will be shared by all stakeholders, whether users or right holders. The study concludes that a regulatory approach at EU level is rendered very difficult for essentially the following reasons: - the territorial nature of copyright and the sheer complexity of licensing activities at international level - the political imperative of promoting local cultures and diversity in a linguistically and culturally fragmented market - the various tariffs and state of development of collective management at national level - the difficulty of defining management efficiency in the implementation of competition rules - the difficulty of ruling on collective management for all types of right holders and users (in particular why would the quest for efficiency and the development of online services be limited to music and online licensing of authors’ rights?) - the difficulty of providing pan European licences in the absence of a minimum of collaboration between the local collecting societies enabling the reciprocal representation of repertoire and a one stop shop. Obstacles to EU rules in rights management are also due to the difficulty of setting up a pan European arbitration or dispute settlement mechanisms because
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