Market power of collecting societies

8.64 Calls for reform or repeal of the statutory licences stem in part from the market power of collecting societies. Collecting societies have been said to have a ‘de facto monopolistic nature’.[70] Although this can be grounds for criticism, it also has its benefits. As a rule, it has been written, ‘there should be only one organisation for any one category of rights owner open for membership to all rights owners of that category on reasonable terms’.[71]

8.65 The ACCC stated that while collective licensing can improve efficiency in licensing, it also has costs, particularly in relation to competition.[72] Without collecting societies, rights holders might compete with one another. Without competition, users may have no alternative means of obtaining a licence for the copyright material they need. This gives collecting societies market power, which could be used to set excessive fees or to impose ‘otherwise restrictive terms and conditions in the blanket licensing of their repertoire’.[73] The ACCC submitted that there may be

a trade-off between the efficiency benefits that collecting societies offer by lowering licensing transaction costs and the possible lessening of competition in the licensing of material arising from the collecting society’s market power.[74]

8.66 As discussed in Chapter 3, the ACCC has considered measures to control the market power of collecting societies and called for the repeal of s 51(3) of the Competition and Consumer Act (Cth), which provides a limited exemption from some of that Act’s prohibitions on restrictive trade practices for contraventions resulting from copyright licensing.[75] The repeal of this provision has previously been recommended by the Ergas Committee.[76] The ACCC submitted that ‘a blanket exemption for conditions imposed in IP licensing and assignment arrangements is not justified’ and the licensing or assignment of intellectual property IP rights ‘should be subject to the same treatment under the CCA as any other property rights’.[77] Repeal of s 51(3) would

prevent copyright owners imposing conditions in relation to the licence or assignment of their IP rights for an anticompetitive purpose or where the conditions had an anticompetitive effect. All other uses would be unaffected.[78]

8.67 The focus of this Inquiry has been on exceptions and statutory licences, rather than the related question of the adequacy of measures to regulate the market power of collecting societies. But the ALRC agrees that s 51(3) of the Competition and Consumer Act should be repealed.[79]

8.68 The Copyright Act also requires the Copyright Tribunal, if asked to do so by a party to a proceeding, to have regard to any relevant guidelines issued by the ACCC.[80] The Copyright Tribunal may also make the ACCC party to proceedings, if the ACCC applies.[81]

8.69 The ACCC has been a party to proceedings before the Tribunal and is currently drafting guidelines for consultation. The guidelines will relate to matters the ACCC considers relevant to the determination of reasonable remuneration and other conditions of licences which are the subject of determination by the Copyright Tribunal. The ACCC may play a greater role in Copyright Tribunal proceedings in the future.

8.70 Another way to reduce the market power of collecting societies may be to ensure that users may choose to obtain licences directly from rights holders, rather than through collecting societies under a statutory licence. This is discussed in the following section.

[70] K Garnett, G Davies and G Harbottle, Copinger and Skone James on Copyright (16th ed, 2011), [27–15].

[71] Ibid, [27–12]: ‘The existence of two or more organisations in the same field may diminish the advantages of collective administration for both rights owners and users. For the rights owners, competing societies lead to duplication of function and reduction in economies of scale in operation and thus are unlikely to bring benefits to their members. For the user, a multiplicity of societies representing a single category of rights owner would also cause uncertainty, duplication of effort and extra expense. The user would have to check, for each work he wished to use, which society controlled it and whether he had the appropriate licence. For both parties, administration costs would be greater, reducing the revenue available for distribution to rights owners and increasing the overall cost of obtaining licences for the user.’

[72] ACCC, Submission 658.

[73] Ibid. See also ACCC, Submission 165: ‘This may raise concerns about the potential creation and exercise of market power. Competition concerns may arise from collecting societies’ market power and the likelihood that a collecting society would have both the ability and incentive to exercise that market power (leading to higher licence fees) in its dealings with both its members and potential licensees.’

[74] ACCC, Submission 165.

[75] Ibid.

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

[77] ACCC, Submission 165.

[78] Ibid.

[79] See further in Ch 3.

[80] Copyright Act 1968 (Cth) s 157A.

[81] Ibid s 157B.