CMOs public performance tariffs: Spanish court indirectly urges for the application of an “European average” criterion but then uses the UK one. Is there any room for discretion besides the CRM Directive?

In this guest post David Serras Pereira (SCM) discusses a recent decision which is interesting to anyone working in the collective rights management sector.

Here's what David writes:

CMOs public performance tariffs: Spanish court indirectly urges for the application of an “European average” criterion but then uses the UK one. Is there any room for discretion besides the CRM Directive?

Another interesting Spanish decision (here – search using reference 2000/2019 of Catalunya - Barcelona Court) concerning copyright collective management organizations (CMOs)’ tariffs was issued on November 7th last in the context of proceedings between a music promoter and Spanish CMO SGAE. 

The Audiencia Provincial de Barcelona considered that the criterion applied in relation to the public performance tariffs used by SGAE was too ‘heavy’ for a heavy metal show, and thus reversed the decision at first instance. 

Usually, CMOs have their own “Book of Tariffs”, which are applicable to different types of events and venues. At the time when the proceedings began, SGAE applied a 10% licence fee on the box office income (it is now 8,5%). The 10% fee was considered abusive by the court while, curiously, pointing to another CMO’s (UK PRS for Music) criteria as a fair and good percentage to apply, ie 3% on the box office income. 

The case began in 2013, when promoter of Def Leppard y Whitesnake, by the name of Rocknrock, refused to pay the 10% licence fee requested by SGAE, claiming that SGAE did not represent all rightsholders and that it had abused its dominant position. 

Regarding the latter aspect, the Spanish Competition Authority in separate proceedings sanctioned SGAE with a EUR 3 million fine following this and other matters (here). This eventually led SGAE to reduce the fee from 10% to 8,5%. 

In its ruling, the Barcelona court considered that SGAE had a monopoly and that 8,5% was still too high a percentage. The court pointed, among other things, to the fact that the percentage asked by SGAE was above the European average and, unexpectedly, indicated the UK case as the role model: 3% of box-office revenue, which is perhaps the lowest or one of the lowest in all EU. 

The decision can still be appealed to the Supreme Court and a final ruling will have to be made, but the decision raises a number of interesting points. 

The tariffs of a CMO (as a body representing several rightholders) normally reflect the criteria that the individual rightholders considered to be fair for licensing use of their works (either decided during a general assembly or by other means). 

It is possible for a court to make an intervention in the exclusive rights’ nature setting a maximum threshold not decided by the rightholders themselves? The basis for any such intervention should be framed in the context of the CRM Directive (here; Recitals 31 and 35 and Articles 16(2) and 35), which followed the Commission Recommendation 2005/737/EC (here). Even prior to the adoption of the directive, in OSA the Court of Justice of the European Union highlighted how tariff setting might also fall within the scrutiny of competition authorities. 

From the Directive it follows that, while tariff setting is in principle a matter of autonomy, there are some limits to it, ie:

• Tariffs should be determined on the basis of objective and non-discriminatory criteria 
• Tariffs should be reasonable in relation to, inter alia, the economic value of the use of the rights in a particular context and the nature and scope of the use of the work 
• Tariffs should offer appropriate remuneration to rightsholders for the use of their rights 
• Tariffs should be made public by the CMO 

This decision raises the following issues: 

a) Can rightholders right to set up how much they want to charge for the licensing of their creations be limited beyond the limitations set up by the CRM Directive and national legislation? 

b) If so, can such limitation be based on an European average of licencing practices of all the CMOs? 

c) Can it be considered abusive any tariff that is not close to the 3% one used by PRS? 

If SGAE decides to appeal, we will have to wait for the Supreme Court decision.