At the end of February, the Court of Justice of the EU ruled
in a dispute between Czech collecting society OSA and a local
spa. OSA had complained to the country’s courts
that a domestic law exempting health establishments from paying
royalties for music played to their guests was incompatible
with the EU Copyright Directive.
The Krajský soud v Plzni referred the issue to the
Luxembourg court, and asked it to clarify whether the monopoly
that OSA has within the Czech Republic for collecting royalties
is compatible with the freedom to provide services and EU
The Court ruled that the exemption was incompatible with EU
law, and that the monopolies enjoyed by national collecting
societies to collect royalties for their members are lawful
under Article 102
So far, so good for collecting societies.
"[T]he court provided significant support to the collective
management system, by recognising the potential benefits of
having a single licensing entity in a particular market," Gadi
Oron, director of legal and public affairs at the International
Confederation of Societies of Authors and Composers (CISAC),
told Managing IP.
"In essence, the Court understood that a restriction of the
number of licensing entities that operate in a specific country
could be in the interests of the creators. It agreed that a
monopolistic position of the society could be justified on the
basis of the need to protect, enforce and license rights
But the judges then raised the possibility that national
collecting societies might abuse the dominant position they
"Where such a collecting society imposes fees for its
services which are appreciably higher than those charged in
other Member States and where a comparison of the fee levels
has been made on a consistent basis, that difference must be
regarded as indicative of an abuse of a dominant position
within the meaning of Article 102 TFEU."
Some lawyers believe that the decision steps outside the
reticent, box-ticking exercise that the Court often performs
for references. "It is quite bullish of the court regarding
dominance and the assessment of abuse and how to do it," said
Bristows partner Pat Treacy. "I think that the Court is saying
that it is fed up with the time and effort it has spent on
collecting society issues. It is saying that if they
don’t operate efficiently then competition law can
Treacy said that earlier efforts to challenge the way that
collecting societies operate using Article 101 of
Europe’s competition rules (which prohibit deals
that restrict competition) have failed.
In 2008 the
Commission issued an antitrust decision after investigating
practices used by Europe’s network of collecting
societies to manage copyright licensing. It told 24 European
collecting societies to stop restricting competition, reserving
its toughest criticism for a practice that saw societies limit
their ability to offer their services to authors and commercial
users outside their own country.
One year ago, however,
the General Court annulled the Commission’s
decision on the issue of concerted practice in respect of
all the appellants except
Stim of Sweden. It found that the Commission had not
provided enough evidence to support its allegations or to
refute arguments made by the collecting societies that their
practices were not the result of concerted action but of the
need to fight effectively against the unauthorised use of
So does the Court of Justice’s latest ruling in
the OSA case offer a green light to IP owners and licensees to
challenge collecting societies on other competition law
"Yes," says Bristows’ Osman Zafar. "The Court
explicitly says that collecting societies have a dominant
position. That effectively says that the first hurdle is met.
It puts a target on the back of collecting societies."
But while the Court might be signalling that collecting
societies could fall foul of Article 102, there are plenty of
practical hurdles that will make it difficult for would-be
The Court sets out in its OSA ruling some of the issues that
national courts must assess when deciding whether a collecting
society has abused its dominant position. Relevant factors
include the imposition of fees that are "appreciably higher
than those charged in other Member States" (collecting
societies must justify such differences by referring to
objective dissimilarities between the member states), and
prices that are excessive "in relation to the economic value of
the service provided".
"Within Europe, published rates charged by collecting
societies in different countries can be very different," says
Chris Johnstone of Music Choice, whose complaint to the
European Commission in 2000 about collecting society practices
put music licensing under a legal spotlight.
This is because local economic conditions still outweigh the
harmonising effect of the single market, he says, creating
difficulties for any licensee to evaluate why one country has a
higher rate than another.
"I suspect that licensees look long and hard before they
bring a time-consuming and expensive competition law claim on
this basis. Collecting societies may simply counter that the
prices that they charge reflect the local economic
That is not the only problem for licensees.
Given that collecting societies do not necessarily represent
the same rights and repertoires, it is very difficult to
compare societies in different member states, particularly when
the relevant data may not be in the public domain.
In addition, the cost and energy of fighting a case for many
years with an uncertain outcome will make most copyright users
think twice before bringing a case, says another
The ruling comes in the same month that EU member states
adopted a directive on the way that collecting societies work.
directive on collective management of copyright and
multiterritorial licensing of online music was adopted by
the European Council unanimously last week (although some
made statements about how they interpreted the new
The directive will allow
multi-territorial licensing of online music services and should
increase the transparency of collecting societies by setting
out minimum standards for the way they are governed and the
timeliness with which they pay royalties to rights holders.
Collecting societies have also
recently been subject to scrutiny by national authorities, for
example in the UK
Hargreaves Report. So will new legislative efforts,
combined with market shifts to online distribution of music,
change the culture of collecting societies?
Says Johnstone of Music Choice: "Generally the collective
licensing industry does seem to be evolving in a positive way,
especially in relation to broadcasting and online where there
are a number of initiatives to make music licensing more