Competition issues and copyright reform

3.80 Copyright law and competition law are largely complementary in that both seek to promote innovation, higher living standards, and expand the choices and benefits to society.[103]

3.81 The ACCC considered that competition in copyright markets will generally maintain incentives for the creation of copyright material and promote fair licensing schemes for the wide dissemination and efficient use of copyright material.[104]

3.82 The ACCC considers the uncertainty created by s 51(3) of the Competition and Consumer Act 2010 (Cth) which undermines the capacity of competition law to regulate anti-competitive conduct, including unilateral exercise of market power, to be detrimental to the proper operation of copyright licensing.

3.83 Section 51(3) of the Competition and Consumer Act 2010 provides an exception to some of the restrictive trade practices provisions of that Act in relation to intellectual property licensing. The ACCC submitted that s 51(3) of the Consumer and Competition Act[105] should be repealed, noting that in other jurisdictions, such as the United States, intellectual property rights are subject to the same competition laws as all other property rights, without apparent impact on the rights of creators or incentives for production of copyright material:

In order to fully exploit the substantial potential benefits arising in the digital economy, it is important that competition laws are able to complement IP laws, including copyright laws, by preventing anti-competitive conduct associated with copyright usage that is not in the public interest.[106]

3.84 The ACCC has a long-standing position in favour of repealing s 51(3), on the basis that this would simply prevent copyright owners from imposing conditions in relation to the licence or assignment of their intellectual property rights for an anti-competitive purpose or where the provisions had an anti-competitive effect. All other uses would be unaffected.[107]

3.85 The Ergas Committee regarded s 51(3) as seriously flawed and unclear and noted that the National Competition Council had previously recommended repeal of s 51(3). The repeal and replacement of s 51(3) of the Trade Practices Act (now Consumer and Competition Act) was recommended. [108]

3.86 In 2013 repeal of s 51(3) was again recommended, by the House of Representatives Standing Committee on Infrastructure and Communications in its July 2013 report, At What Cost? IT Pricing and the Australia Tax.[109] The Committee recommended the repeal of s 51(3) on the basis that it constrains the ACCC unjustifiably from investigating restrictive trade practices in relation to intellectual property rights.[110]

3.87 The ACCC considers that intellectual property should be regarded in the same light as other property and that the authorisation process in the Consumer and Competition Act is appropriate in assessing whether licensing activity confers benefits that outweigh anti-competitive effects:

It is now accepted that, generally, IP laws do not create legal or economic monopolies. IP laws create property rights and the goods and services produced using IP rights compete in the marketplace with other goods and services.[111]

3.88 The ALRC is aware of a number of ‘user friendly’[112] licensing arrangements that demonstrate a dynamic marketplace able to address consumer needs. Rights holders consider this removes the need for government intervention by way of amendments to copyright law, for example, in the form of exceptions allowing greater private copying. It is clear that many licensing practices are pro-competition and pro-consumer, and presumably the application of a general competition test, in the absence of s 51(3), would pose no problems.

3.89 The ALRC is recommending that voluntary collective licensing arrangements be allowed to develop alongside statutory licensing.[113] At present, collecting societies administering collective copyright licences are not necessarily open to the full gaze of Australian competition law. In 2000, the Intellectual Property Competition Review Committee (Ergas Committee) took the view that all collecting societies ‘whether declared or not, should generally be subject to the scrutiny that ... authorisation procedures allow’.[114]

3.90 Small publishers may face serious problems with the exercise of market power in the context of voluntary collective licensing of educational material.[115] Collecting societies offering voluntary licences are currently subject to authorisation proceedings and this would also apply to new and developing licensing arrangements.

3.91 An aspect of copyright markets is the tendency to market failure where there is widespread use of copyright material with no way of tracking that use. This is a situation that collective and statutory licensing is designed to address, as discussed elsewhere in this Report.[116]

3.92 However, the mere existence of a licensing situation, particularly a statutory licence, does not create a market. As the Australian War Memorial pointed out, licensing creates a false value for some material which has no economic value.[117] Similarly, the Council of Australasian Museum Directors does not support the concept that certain unremunerated use exceptions should operate only when the use cannot be licensed: ‘this allows for future forms of licensing which may add unnecessary cost and complexity to the copyright system’.[118]

3.93 Choice points out that ‘the right of creators to be commercially rewarded for their works is not the same as a right to endless commercial exploitation of a work’.[119]

3.94 To facilitate licensing of copyright material around the EU, a digital hub has been recommended in the UK.[120] The ACCC submitted that efficient licensing might be facilitated by a digital hub, as recommended by the UK Hargreaves Review. The ALRC notes the 2013 proposal by Professor Michael Fraser and David Court[121] for an Australian Copyright Registry.

3.95 The ALRC makes no specific recommendations for a digital hub for Australia, but notes that technological solutions could be used to lower transaction costs and, importantly, to ensure accurate recording of actual usage of copyright material. Technological solutions can be tailored for particular uses. Examples of this include the Clickview system for facilitating the licensing of broadcast material in education,[122] and the Nightlife system for facilitating licensing of music in entertainment venues, which uses proprietary software and hardware to track, register and update music used so as to ensure ‘transactional transparency’.[123]

3.96 The ACCC noted that there is a lack of economic research regarding the magnitude of transaction costs of licensing in the Australian context, especially regarding these costs in relation to the digital economy.[124] The ACCC submitted that the ALRC Inquiry may result in the submission of valuable evidence regarding transaction costs and inefficiencies for both creators and users from those who participate in the assignment or licensing of copyright material. ‘Where costs of licensing exceed benefits, this may affect overall production of copyright material especially where users are increasingly creators’. [125]

3.97 One of the themes in this Inquiry is that licensing solutions should be used wherever possible to allow creators to control their material, and to gain maximum revenue. The ALRC considers that licensing arrangements for copyright licensing should be assessed against the same general competition law framework that applies to other transactions across the Australian economy.

3.98 The ALRC notes that, given the relevance of s 51(3) of the Consumer and Competition Act to the other recommendations in this Report, that the repeal of s 51(3) should be considered, as an integral aspect of equipping copyright law for the digital economy.

[103] Intellectual Property and Competition Review Committee, Review of Intellectual Property Legislation under the Competition Principles Agreement (2000), 6. See also H Bakhshi, I Hargreaves and J Mateos-Garcia, A Manifesto for the Creative Economy (2013), 91.

[104] ACCC, Submission 658.

[105] Competition and Consumer Act 2010 (Cth) s 51(3) provides a limited exception for certain licence conditions from some competition provisions of the Act.

[106] ACCC, Submission 165. See also ACCC, Submission 658. This recommendation was made previously by the Intellectual Property and Competition Review Committee, Review of Intellectual Property Legislation under the Competition Principles Agreement (2000) and is discussed further in Ch 17.

[107] See also Copyright Advisory Group—Schools, Submission 707.

[108] Intellectual Property and Competition Review Committee, Review of Intellectual Property Legislation under the Competition Principles Agreement (2000), 203.

[109] House of Representatives Standing Committee on Infrastructure and Communications, At What Cost? IT Pricing and the Australia Tax (2013).

[110] Ibid, Recommendation 8.

[111] ACCC, Submission 165; See also ACCC, Submission 658.

[112] APRA/AMCOS, Submission 247;iGEA, Submission 192. See also APRA/AMCOS, Submission 247;Australian Film/TV Bodies, Submission 205.

[113] See Ch 8.

[114] Intellectual Property and Competition Review Committee, Review of Intellectual Property Legislation under the Competition Principles Agreement (2000), 126.

[115] Endeavour Education, Submission 870.

[116] Ch 8.

[117] Australian War Memorial, Submission 720.

[118] CAMD, Submission 719.

[119] Choice, Submission 745.

[120] I Hargreaves, Digital Opportunity: A Review of Intellectual Property and Growth (2011).

[121] D Court and M Fraser, Call for 21st Century Copyright Register (2013).

[122] Screenrights, Submission 288; Screenrights, Submission 646.

[123] Nightlife, Submission 657.

[124] See discussion of possible economic evidence in assessing copyright law in Board on Science, Technology and Economic Policy, Copyright in the Digital Era: Building Evidence for Policy (2013).

[125] ACCC, Submission 165. These current transaction costs are commented on in other Chapters.