Irish Competition Authority Decisions

1. Notification was made by Mechanical Copyright Protection Society Limited (MCPS) and Mechanical Copyright Protection Society Ireland Limited (MCPSI) on 30th September, 1992 with a request for a certificate under Section 4(4) of the Competition Act, 1991 or, in the event of a refusal by the Competition Authority to grant a certificate, a licence under Section 4(2) in respect of a number of agreements with (a) members of MCPS on the one hand, (b) licensees and other users of copyright musical works, on the other.

2.1 A total of eighteen agreements were notified to the Authority on 30th September, 1992 by MCPSI. Two of these were membership agreements between MCPS and its own members, while the remainder were between MCPS and different categories of users of copyright in musical works, for which MCPSI acts as a royalty-collecting society. Some of the agreements involve the UK-based parent company, MCPS, while others involve its Irish subsidiary, MCPSI. A full list of the agreements notified is below.

2.2 CA/483/92E - MCPS/ Membership Agreement

CA/487/92E - MCPSI/Schedule of Fees from Production Music Library Catalogues

CA/492/92E - MCPS/ In-Flight Entertainment Licence

CA/496/92E - MCPSI/ Amateur Cinematographers Recording Licence

CA/499/92E - MCPS/ Production Music Code of Conduct (Production Companies)

2.3 Notification CA/489/92E was withdrawn by MCPSI in March 1997. Notifications CA/484/92E, CA/486/92E, CA/491/92E, CA/493/92E, CA/494/92E and CA/497/92E were withdrawn in April 1999. Notification CA/496/92E was rejected by the Authority in April 1999, on the basis that it did not constitute an agreement between undertakings.

2.4 Notification Nos. CA/483/92E, CA/485/92E, CA/487/92E, CA/490/92E, CA/495/92E, CA/498/92E and CA/499/92E are the subject of a separate decision by the Authority [1]. This decision deals with the remaining two user agreements originally notified and currently before the Authority, i.e. CA/488/92E and CA/500/92E. Notification CA/484/92E, withdrawn earlier this year, was re-notified on 16 July 1999 as Notification CA/8/99, and will also be the subject of a separate decision.

3.1 MCPSI is a wholly-owned subsidiary of MCPS, having its current registered office at Copyright House, Pembroke Row, Lower Baggot Street, Dublin 2. It was incorporated on 7 May, 1991; users and customers of MCPS in Ireland were advised in May 1991 that, with effect from 1 July, 1991, they would be dealing with MCPSI in relation to the licensing and contractual arrangements they previously had with MCPS. In order to avail of the services of MCPSI, prospective members apply for membership of MCPS. Thus, MCPSI does not have a membership in its own right, but acts as an agent for MCPS, as well as the many copyright collecting societies throughout the world who have reciprocal arrangements with it. MCPS has 371 Writer-Members and 140 Publisher- Members in Ireland. MCPSI also acts as agent for the copyright owners of musical and related literary works, in licensing the copyright in those works for mechanical reproduction on sound recordings and the synchronisation of the works to audiovisual recordings.

MCPS

3.2 MCPS is a company limited by shares with its registered office at 29-33 Berners Street, London W1P 4AA. It is wholly-owned by the Music Publishers Association of the United Kingdom, a company limited by guarantee representing music publishers in the United Kingdom, and has operated a branch or agency in the State since the mid-1970s.

3.3 CA/488/92E

Those issued with licences under this agreement would generally be advertising agencies (for music used on TV and Radio advertisements), production companies and facility houses (for the use of music in corporate videos, television programmes and on general film release).

CA/500/92E

This standard-form agreement covers licences to independent radio stations in relation mainly to in-house advertisement production. MCPSI deals with over 25 such radio stations under this licensing arrangement.

4.1 The “products” involved here are the musical and related literary works (or parts of such works), the Rights in which are directly or indirectly controlled or administered in the Territory by the MCPS Member; “Rights” includes the right to make or authorise the making of sound-bearing copies of the work, and the right to issue or authorise to be issued to the public such copies.

4.2 The primary activity of MCPS/ MCPSI is acting as an agent for the copyright owners of musical and related literary works, in licensing the copyright in those works for mechanical reproduction on sound recordings and the synchronisation of those musical and related literary works to audiovisual recordings. In the opinion of the Authority, the relevant market is the market for the provision of intermediation services between composers and users of musical and related literary works for mechanical reproduction on sound recordings and the synchronisation of those musical and related literary works to audiovisual recordings.

4.3 Copyright, in relation to an original literary, dramatic, musical or artistic work, is the exclusive right to do, or to authorise other persons to do, certain acts in relation to that work. Such acts include reproducing the work in any material form, publishing it, performing it in public, broadcasting it, causing it to be transmitted to subscribers to a diffusion service or making any adaptation of it. The authorisation of other persons to use copyright material is normally by way of licence in return for payment of royalties to the copyright owner.

4.3.1 Separate societies exist to administer different rights in musical works or recordings, and a composer or publisher may be a member of a number of societies, as required. The Irish Music Rights Organisation (IMRO) is the collecting society that deals with performing rights . MCPS is the collecting society for mechanical copyright, which is the restriction on reproducing the work in any material form, while the corresponding collection society in relation to copyright in sound recordings is Phonographic Performance Ireland Limited (PPI).

4.3.2 The rationale for collecting societies originates in industries such as the music industry where, due to the nature of the market, the copyright holder might otherwise be unable to enforce his copyrights at all. Collecting societies have an intermediation role, in that they facilitate users of music and sound recordings in using music legally through the payment of fees, which are then re-distributed back to their members, the copyright owners. Collective licensing and enforcement of copyright in relation to musical works is common throughout the world, wherever copyright is enforced, and the 1963 Act recognises the role of collective licensing bodies in Ireland.

4.4.1 The total turnover for MCPS in the United Kingdom and Ireland for the year ended 31 December 1998 was IR£221m, compared to IR£105m in 1992. Of the end-December 1998 total, IR£4.38m (c.2%) represented revenue collected in Ireland. The major portion of MCPSI’s royalty etc. income (c.90%) is derived from commercial recording by record companies, and the proportion of its income arising from licences under the agreements which are the subject of this decision, while not known precisely, is likely to be less than 5%. MCPSI claimed that it would be very difficult to assess its market share, as it has no figures for the level of direct collection by copyright owners. However, an estimate of the share of the market of mechanical royalties would be that 95% of all mechanical royalties accruing in Ireland would be collected by MCPS.

5.1 Copyright law in Ireland is governed by the Copyright Act, 1963, which covers literary, dramatic, musical and other works. Copyright for sound recordings lasts during the lifetime of the creator and for 50 years after his/her death. Section 17 of the 1963 Act creates a separate copyright in sound recordings (i.e. separate from the copyright in original work created by section 8).

5.2 Part V of the 1963 Act recognises the existence of copyright collection societies, and gives a wide jurisdiction to the Controller of Industrial and Commercial Property in determining disputes between licensing bodies and persons requiring licences. Section 31 gives the Controller a specific jurisdiction to determine disputes in relation to royalties payable.

5.3 The Copyright and Related Rights Bill, 1999 was published in April 1999. The aim of the Bill is to update copyright law, which now falls far behind agreed international and European standards. The Bill is, by any yardstick, a very extensive set of legislative proposals in this area.

5.4 The area of copyright law, both in Ireland and internationally, is dealt with more thoroughly in the Authority’s related Decision 569 of 8 October, 1999, MCPS/MCPSI/Various Agreements .

6.1 MCPSI grants these Licences for the synchronisation of that part of the MCPS Repertoire comprising recognised commercially-exploited music performed by recognised artists, for television and radio broadcast. Licences are normally granted to television or radio production companies, where they are, in turn, supplying the end product to the actual broadcasters. The standard licence terms appear on the back of the invoice issued by MCPSI. There is no rate card, because the copyright owner has the right to refuse its use or to set the rate he wants i.e. the rates are individually negotiated between the owner and those seeking to use the material. The licence is then issued by MCPSI at the rate specified by the member. Such licences would usually be issued to advertising agencies, production companies and facility houses.

6.2 Under this agreement, MCPSI grants to the independent radio station a licence to make recordings of the Works (production musical works and library sound recordings), for a period of one year, for the sole purpose of dubbing onto commercial advertisements to be broadcast (Clause 1). Under Clause 2, the independent radio station agrees to notify MCPSI of its use of the Works each month. MSPSI can enter the premises of the independent radio station for verification purposes under Clause 3. There are upwards of 25 independent radio stations registered with the IRTC. An annual royalty fee is agreed with individual stations, based on the coverage of the station, together with the likely number of advertisements being produced.

7.1 MCPSI drew the attention of the Authority to International Copyright and Neighbouring Rights [2] and, in particular, to an article entitled “ Collective Administration of Rights” by Michael Freegard [3] therein. MCPSI referred specifically to the principles set out in that article, which demonstrated that, while copyright is itself a statutory monopoly in relation to the author’s rights, nevertheless collective administration of rights is the only practical method of ensuring an orderly and user-friendly copyright law, especially in the field of mass entertainment, notwithstanding that a priori competition principles might suggest scepticism.

7.2 MCPSI claimed that, having regard to the statutory role envisaged for licensing bodies by Part V of the Copyright Act, 1963, it was clear that Irish legislative policy favours the creation of collective collecting/licensing societies. The jurisdiction conferred on the Controller of Industrial and Commercial Property by the 1963 Act existed in part to prevent unfair exploitation of either side of the author/user market by the other, or of the public, and the jurisdiction extended to individual copyright users. The Authority, therefore, ought not to attempt to “second guess” the Controller in the function of acting as guardian of the public interest and authors’ and users’ interests in relation to the use of copyright. They also stated that existing mechanisms for collective bargaining and for licensing were operating satisfactorily both from the copyright owners’ and the users’ point of view, as well as in the public interest.

8. MCPSI submitted arguments in support of the issue of a licence in respect of the agreements, but these are not considered relevant to this decision.

9.1 On 13 August, 1999, the Authority published notice of its intention to issue a certificate in respect of the arrangements the subject of this decision, and invited any observations within two weeks from the date of publication of the notice. IMRO requested an extension of that deadline by four days, to enable it to finalise and make a submission to the Authority. The request was granted, and a submission was received from IMRO within the extended time.

9.2 IMRO stated that its submission was in accordance with its publicly-stated intention to enter the market for the collective licensing and enforcement of mechanical reproduction copyrights. However, the Authority is satisfied that the submission is more relevant to the subject matter of the Authority’s related Decision No. 569 of 8 October, 1999 - MCPS/ MCPSI/ Various Agreements . The IMRO submission is, therefore, considered in more detail in that decision.

9.3 Using its powers under section 4(5) of the Competition Act, 1991, the Authority decided to invite the Tanaiste and Minister for Enterprise, Trade and Employment, and the Minister for Arts, Heritage, Gaeltacht and the Islands, to offer observations on its intention to grant a Certificate in this case, as it considered that they were, in the words of that section, “Ministers of the Government concerned with the matter”. The Tanaiste indicated that she had no observations to offer; no substantive reply was received from the Minister for Arts, Heritage, Gaeltacht and the Islands.

10.1 Section 4(1) of the Competition Act, 1991, states that “ all agreements between undertakings, decisions by associations of undertakings and concerted practices, which have as their object or effect the prevention, restriction or distortion of competition in goods or services in the State or in any part of the State are prohibited and void ”.

10.2 Section 3(1) of the Competition Act defines an undertaking as “ a person, being an individual, a body corporate or an unincorporated body engaged for gain in the production, supply or distribution of goods or the provision of a service ”. MCPSI is engaged for gain in acting as a collecting society for mechanical copyright and is, therefore, an undertaking. The members of MCPS are engaged for gain in creating works that are to be commercially exploited and are, therefore, undertakings.

10.3.1 Synchronisors are engaged for gain in the provision of synchronisation of a particular portion of the MCPS repertoire for television and radio broadcast and are, therefore, undertakings, the licence agreement is an agreement between undertakings, and it has effect within the State.

10.3.2 There is no rate card for the synchronisation of musical works because the owners of copyright have the right to refuse to let it be used or to set the rate they want. The licence is then issued by MCPSI at the rate specified by the member. In the opinion of the Authority, none of the standard terms in the Synchronisation Licence contravene Section 4(1) of the Competition Act, 1991.

10.4.1 Independent radio stations are engaged for gain in as commercial radio stations and are, therefore, undertakings. The licence agreement is an agreement between undertakings and it has effect in the State.

10.4.2 In the opinion of the Authority, the restriction that MCPSI can enter the independent radio station’s premises is no more than is necessary to police the agreement. In the opinion of the Authority, it would not be feasible for MSPSI to continually monitor the output of the over twenty independent radio stations in the State to ensure compliance with this agreement. In the light of this, and of the fact that royalty rates are individually negotiated in the case of each radio station, none of the terms of the agreement, in the opinion of the Authority, contravene Section 4(1) of the Act.

11. In the Authority’s opinion, Mechanical Copyright Protection Society Limited (MCPS), Mechanical Copyright Protection Society Ireland Limited (MCPSI), and their members and licensees are all undertakings and the agreements are agreements between undertakings. In the Authority’s opinion, based on the facts in its possession, the notified agreements do not contravene Section 4(1) of the Competition Act, 1991.

12. The Competition Authority has issued the following certificate:

The Competition Authority certifies that, in its opinion, on the basis of the facts in its possession, the following agreements for the use of copyright musical works, notified under Section 7 of the Competition Act, 1991, on 30 September 1992, do not contravene Section 4(1) of that Act.

For the Competition Authority,

Declan Purcell

Member

8 October, 1999

[1] Decision No. 569 of 8 October, 1999.

[2] S.M. Stewart (2nd Edn) (London) 1989 Butterworths

[3] formerly Chief Executive of the Performing Right Society Ltd.