The CSs enable the functioning of markets for the use of copyright works, especially when it is impossible for right owners (holders) to contact users of their work directly. By managing bundles of rights on behalf of their members, CSs obtain significant economies of scale and scope in administering, licensing, and enforcing copyrights. These economies reduce transaction costs that are too high to make the individual enforcement of copyrights economically feasible. The economies, the territorial nature of copyrights, and traditional forms of copyright mass use made CSs national, natural monopolies. In some countries, the market position of CSs is strengthened and accepted by additional functions fulfilled by CSs, such as the provision of social benefits or cross-subsidizing less popular music categories. Another feature of national CSs is their linkage through reciprocal representation agreements. The primary purpose of the agreements is to offer licenses for a broader range of copyrighted works (domestic and non-domestic) and to protect domestic copyrighted works in another territory.
CSs activities’ features and conduct were a trigger to proceedings conducted by national competition authorities and the European Commission (EC). They focused mainly on the relationship of CSs with users and their members and on reciprocal representation agreements.
Pricing policy was one of the critical issues concerning relationships between CSs and users. The principal case on this issue is the Tournier case (1989). The European Court of Justice (ECJ) stated that a national copyright-management society imposes unfair trading conditions when the charged royalties are appreciably higher than those in the other Member States. Therefore, any differences in the rates of royalties charged by national CSs must be justified by referencing objective and relevant dissimilarities between CSs in question (Tournier, paragraphs 36-46).
The ECJ judgment in the Tournier case also addressed issues regarding the relationship between CSs and users. Firstly, a CS may only refuse direct access to its national repertoire for users from the other Member States for efficiency reasons (Tournier, paragraph 24). Secondly, the refusal to grant the user access only to part of the repertoire (the foreign one) does not restrict competition if it entirely safeguards the interests of right owners without increasing the costs of management and monitoring of copyrighted work use (Tournier, paragraph 33).
The legal framework of the relationship between CSs and their members was set up in the EC decision concerning the German collective management organization, GEMA (1971). The EC stated that the requirement to assign existing and future members’ rights entirely to GEMA could constitute abuse of a dominant position (GEMA, part II, paragraph C). Therefore, the EC obliged GEMA to amend the rules of its statute, allowing members to assign all their rights to GEMA or divide them by category and assign them to various CSs (GEMA, article 1). Moreover, the other amendments to the statute rules should allow members to withdraw the administration of specific rights categories without incurring penalties while maintaining membership (GEMA, article 1). The EC also indicated that the statutory provisions that discriminate against CS members regarding income distribution and voting rights should be withdrawn (GEMA, article 1). Moreover, any discrimination on nationality must automatically be regarded as an infringement of art 102 TFEU (ex Article 86 TEEC) (GEMA, part II, paragraph C).
Reciprocal representation agreements were of interest to the ECJ in Tournier and Lucazeau, and others (1989) cases. The Court stated that such agreements at that time were economically justified due to the requirements of physical monitoring of copyright usage, and as such, did not fall under art 101(1) TFEU (ex Article 85(1) TEEC) (Lucazeau and others, paragraphs 13-14). However, the development of the digital network environment has changed the possibilities of exploiting copyrighted works allowing for its worldwide reach and monitoring at a distance. These changes have renewed the EU institutions’ interest in reciprocal representation agreements. An agreement between CSs to grant international copyright licenses to radio and TV broadcasters wishing to make musical works available to the public via the Internet posed a challenge to the EC (IFPI Simulcasting case (2002)). Ultimately, a new product brought to the market (simulcasting licenses for the use of licensed right in more than one country), benefits to consumers, and opening up CSs to competition (IFPI Simulcasting, paragraphs 84-95) were decisive factors in granting an individual exemption for this agreement under Article 101(3) TFEU until 2004. In turn, the provisions of the model reciprocal agreement concerning the exploitation of musical works on modern platforms (Internet, satellite, and cable) were the subject of a complaint to the EC against CISAC (CISAC, 2008). The EC found that the exclusivity clause concerning CSs’ members’ acceptance, license issuing, and the territory of intervention resulted in geographic market segmentation and thus infringed Article 101 TFEU (ex Article 81 TEC) (CISAC, paragraphs 250-252). However, due to the lack of sufficient evidence, the Commission’s claims were rejected by the EU General Court (CISAC v Commission, 2013, paragraph 182). Shortly after the Court’s ruling, the EU adopted a legislative solution in the form of Directive 2014/26, which requires CSs to take steps to adapt their licensing activities to the digital age.
The music licensing landscape in the US is different from the EU. Although the performing rights organizations (PROs) in the US are similar to CSs, their activity concentrates on certain rights. Antitrust concerns related to the activities of PROs led to the adoption of specific regulations. An example is antitrust consent decrees that restrict activities of the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc (BMI).
