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Friday, 12 September 2008

Copyright royalties and competition: the AG opines on yet another angle

Available so far in just nine European languages -- none of which is English -- the Opinion of the Advocate General opinion in Case C-52/07 Kanal 5 and TV 4 v STIM makes interesting reading (unless you don't read the right languages, in which case it looks quite menacing on the page). It seems to the IPKat that the copyright/competition law interface is becoming more important by the day, so he's getting very excited about the outcome of this case.

This reference arose out of a dispute between the Swedish music copyright collection society STIM and the Swedish television broadcasters TV 4 and Kanal 5. STM currently sets royalties for the use of its portfolio of works by TV 4 and Kanal 5 as a percentage of income. Separate royalty rates for advertising and subscription income were set by reference to the proportion of airtime devoted to music, using a banded structure. In contrast, for the State-funded broadcaster SVT, which had no advertising or subscription revenues, the music royalty was calculated on the basis of notional advertising income and an estimate of the proportion of airtime which that station devoted to music. As for smaller broadcasters, royalties were based on audience figures and the proportion of airtime devoted to music.

TV 4 and Kanal 5 were not happy about this: after the Swedish competition authority rejected their complaints they took the matter to the relevant Swedish tribunal, which referred four questions to the ECJ concerning the application of Article 82 EC. These questions sought advice on whether particular methods for the calculation of royalties would constitute an abusive exercise of their collective copyrights. In particular, TV 4 and Kanal 5 maintained that the calculation of royalties by STIM's method was abusive because

* that method failed to take account of available information about the actual use made of the copyright licences by the broadcasters: music is typically broadcast at periods of low audience, to which little advertising revenue is attributable. What's more, music is not broadcast very much in the middle of sports programmes which, being very popular, presumably help to drive up subscription income.

* it discriminated between them and the State broadcaster SVT (this submission presumably implies an allegation that there is a relevant form of competition between SVT and the commercial broadcasters).

The UK intervened, arguing that the questions to be determined were whether the charges were sufficiently linked to use and whether public and private broadcasters competed with each other, these both being matters for the Swedish court rather than the ECJ to decide.
According to the Advocate General:

* the law on exploitative abuse (e.g. is a dominant enterprise acting "to reap trading benefits which it would not have reaped if there had been normal and sufficiently effective competition"?) governs the broadcasters' claims concerning the lack of link between use and royalties.

* the levying of a charge in respect of a fixed proportion of turnover without any reference to the amount of music broadcast would be abusive and could not be justified by administrative convenience.

* before a charging method could be found to be abusive due to an alleged lack of link between the royalties and the benefits to the broadcaster of using music, one must first identify an alternative method that might provide a more accurate, and to reject any objective justification of the less accurate method by reference to, for example, administrative costs.

* in general, no conclusion about the abusive character of a charging method can be reached in the abstract.

* a for discriminatory abuse, the ECJ should leave it to the Swedish court to decide (i) whether the difference in calculation methods is actually discriminatory and (ii) whether SVT competes with private broadcasters in a "downstream market for television".

The opinion does not discuss whether competition for audiences without a commercial purpose on the part of SVT would be a relevant form of competition for this purpose.
The IPKat thanks Franck Latrémolière (Reckon), for letting this monolingual moggie know what's going on.

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