Re Applications by Australasian Performing Right Association Ltd - [1999] ACompT 3

THE AUSTRALIAN COMPETITION TRIBUNAL
Re Applications by Australasian Performing Right Association Ltd [1999] ACompT 3
Matter Nos 4 and 5 of 1998
RE APPLICATIONS BY AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LTD PURSUANT TO SS 101 AND 101A OF THE TRADE PRACTICES ACT 1974
VON DOUSSA J, DR B I ALDRICH & PROFESSOR R C DUNCAN
SYDNEY
16 JUNE 1999

INDEX

Paragraph No.

1. INTRODUCTION 1

Background to proceedings 1

Statutory regime under the TPA 17

Copyright in original literary and musical works 34

Protection of foreign works 45

Collecting societies 50

2. APRA’S STRUCTURE AND RULES 63

Input arrangements 63

Output arrangements 69

Distribution arrangements 70

Overseas arrangements 78

3. THE CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS AND THE ALLEGED ANTI-COMPETITIVE CONDUCT IN ISSUE 79

4. THE ACCC DETERMINATION ON 14 JANUARY 1998 89

Opt-out system proposed 97

Appeal mechanism proposed 98

The fifty per cent rule 100

5. THE HEARING BEFORE THE TRIBUNAL 101

APRA’s contentions 103

ACCC’s contentions 109

FACTS’ contentions 115

6. APRA’S ADMINISTRATION OF PERFORMING RIGHTS 120

Collective administration 120

The assembly of APRA’s repertoire 131

Licensing of music users 133

Collection and enforcement of royalty payments 148

Distribution 151

International cooperation 166

Cost of administration 176

7.

CHANGING CIRCUMSTANCES
183

The changing market for music 183

Growing user resentment of APRA’s administrative practices 187

Criticisms of the APRA blanket licence 196

8. REGULATION OF PERFORMING RIGHT COLLECTING SOCIETIES 210

Australia – the Copyright Tribunal 210

The European Union 220

United Kingdom 229

Ireland 239

Canada 247

United States of America 258

9. PUBLIC BENEFITS AND ANTI-COMPETITIVE DETRIMENTS 286

The relevant market 286

Benefits and detriments 293

10.
CONCLUSIONS
307

Determining the public benefit 307

The Copyright Tribunal 312

A new dispute resolution mechanism 316

The blanket licence 332

The fifty per cent rule 336

Encouraging response to changing circumstances 344

Evaluation of the opt-out proposals 347

Summary 359

THE AUSTRALIAN COMPETITON TRIBUNAL

NOS. 4 & 5 OF 1998

RE:

APPLICATION FOR REVIEW OF THE DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 14 JANUARY 1998 DENYING AUTHORISATION IN RELATION TO APPLICATION NOS A30186, A30187, A30188, A30190, A30191 AND A30193; AND OF THE GIVING OF NOTICE BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION ON 14 JANAURY 1998 UNDER SUBSECTION 93(3) IN RELATION TO NOTIFICATION NO. N30751 (STANDARD ARRANGEMENTS FOR THE ACQUISITION AND LICENSING OF THE PERFORMING RIGHTS IN APRA’S MUSICAL REPERTOIRE)

BY:

AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LIMITED

Applicant

MEMBERS:

JUSTICE VON DOUSSA, DR B I ALDRICH & PROFESSOR R C DUNCAN

DATE:

16 JUNE 1999

PLACE:

SYDNEY

REASONS FOR DECISION
1. INTRODUCTION
Background to proceedings

These are two applications for review. The first is brought under s 101 of the Trade Practices Act 1974 (Cth) (the TPA) to review the determination of the Australian Competition and Consumer Commission (ACCC) dated 14 January 1998 to refuse six out of eight applications for authorisation made by Australasian Performing Right Association Limited (APRA). The second is made under s 101A of the TPA in respect of the determination made on the same date by ACCC to give notice to APRA under s 93(3) of the TPA.
APRA is a voluntary collecting society. Its members are either original music composers or lyricists or their heirs or assignees. In these reasons we adopt the term “writer” in relation to musical works to include both the composer of the music and the author of any associated lyrics. Under APRA’s framework of collective administration, writers and music publishers (who have acquired copyright rights from writers) assign copyright in the performing rights in musical works to APRA. APRA licences the use of the musical works on conditions and against fees which it determines as appropriate, collects the fees and distributes them amongst its members. APRA monitors the public performance use of the works and takes appropriate action to enforce copyright rights.
The applications for authorisation concerned four aspects of APRA’s collective administration system:
·Input Arrangements – the terms upon which membership of APRA is granted, and the assignment of copyright performing rights by members to APRA;
·Output Arrangements – the licensing arrangements between APRA and the users of musical works;
·Distribution Arrangements – APRA’s arrangements pursuant to which it distributes fees collected from licensees to its members, and in particular a distribution rule that purports to guarantee that composers receive at least fifty per cent of the distribution in respect of works composed by them; and
·Overseas Arrangements – reciprocal arrangements entered into between APRA and similar overseas collecting societies pursuant to which each grants the other exclusive rights to licence works in their repertoires within their respective geographical areas.
The history of APRA, and overseas collecting societies with which it is affiliated, is discussed in detail later in these reasons. APRA has operated in Australia since 1926. With the advent of television in Australia in 1956, television broadcasters became substantial users under licence of musical works in APRA’s repertoire. From 1963 the terms of agreements between APRA and the television operators were governed by an award made by the Hon Mr Justice Spicer, Chief Judge of the Commonwealth Arbitration Court, pursuant to an arbitration under s 13A of the Copyright Act 1912 (Cth). The award provided for fees fixed as a percentage of gross earnings of licensees. Over the next ten years there were a number of disputes between APRA and various television operators, and the Federation of Australian Commercial Television Stations (FACTS). The disputes were resolved in 1973 when a new licence scheme for television stations was set in place. That scheme also provided for fees fixed as a percentage of gross earnings calculated according to an agreed formula that allowed certain deductions from gross revenue. That scheme operated until 22 October 1993, with APRA offering the 1973 licensed scheme to all existing and new operators of commercial television stations.
On 17 May 1993 FACTS, on behalf of all commercial television licensees, purported to terminate their APRA licences from midnight on 30 June 1994.
On 10 September 1993 APRA referred a proposed licence scheme to the Copyright Tribunal under s 154 of the Copyright Act 1968 (Cth).
On 17 September 1993 FACTS filed an application in the Copyright Tribunal under s 157 of the Copyright Act 1968, and on 2 March 1994 each FACTS member also filed a similar application.
APRA had traditionally offered to its licensees, including the television stations, a blanket licence covering all works in APRA’s repertoire. In the Copyright Tribunal proceedings FACTS contended that the fees payable by licensees should not be calculated by reference to gross earnings, and other methods for determining fees were proposed, including a scheme under which a broadcaster would hold six separate licences, three being blanket licences, and three being “per program” licences, with payments calculated in arrears. FACTS asserted that the fees currently being paid by licensees were too high, and the new scheme being proposed by it would result in a substantial overall reduction in fees paid by each television operator. APRA opposed the scheme proposed by FACTS on a number of grounds.
In the Copyright Tribunal proceedings FACTS and its members also alleged that APRA’s activities contravened provisions of the TPA. FACTS argued that the blanket licences were anti-competitive, and that the APRA system prevented FACTS members competing directly in the market for music rights. FACTS argued that its members should be able to acquire performing rights direct from writers, and to commission works which would be taken into account in calculating licence fees payable to APRA. In other words, FACTS was seeking to establish a situation where writers could “opt out” of the APRA system in respect of individual works. The question of “opting out” has remained a central issue of contention.
On 9 May 1995 Amalgamated Television Services Pty Ltd commenced proceedings in the Federal Court of Australia under the TPA against APRA and one of its members, alleging that aspects of APRA’s collective administration system contravened ss 45, 45A, 46 and 47 of the TPA.
On 17 November 1995 APRA lodged eight applications for authorisation under s 88(1) and one notification under s 93(1) of the TPA in relation to the arrangements complained about by FACTS and its members in the Federal Court proceedings.
On 16 October 1996 ACCC issued a draft determination in respect of the 1995 application. ACCC proposed to deny authorisation on each application. A pre-decision conference was held on 3 December 1996.
On 27 August 1997 following a number of conferences between APRA and the ACCC, and correspondence between APRA, FACTS and ACCC, APRA offered to make certain changes to its system. ACCC did not consider the proposed changes sufficient to justify the grant of authorisations.
On 15 October 1997 APRA withdrew the 1995 applications for authorisation and notification and lodged eight new applications and a notification relating to APRA’s system as it would operate after the making of the proposed changes. Those changes are detailed in para 68 of these reasons. The applications and notification related to APRA’s arrangements with its members (in particular the input arrangements and the circumstances in which a member could obtain a reassignment of performing rights or some of them), the output arrangements constituted by APRA’s blanket licences, the distribution arrangements, and the overseas arrangements with affiliated collecting societies.
On 3 December 1997 ACCC issued a draft determination indicating that it would deny authorisation to all the arrangements other than those relating to contracts with affiliated societies and that it would issue a notice under s 93(3). A final determination to that effect was issued on 14 January 1998. The ACCC’s reasons for its determination are discussed in Section 4 below.
In the present proceedings before this Tribunal APRA seeks to challenge those aspects of the determination which were unfavourable to it. APRA has contended that the aspects of its collective administration system which were the subject of its applications and notification to ACCC should be authorised. FACTS has intervened in the proceedings before the Tribunal to oppose the orders sought by APRA. ACCC has also appeared and presented a case which opposes the orders sought by APRA, substantially upon the grounds on which it refused authorisation, and gave notice under s 93(3).
Statutory regime under the TPA
The eight applications for authorisation lodged with ACCC by APRA on 15 October 1997 were lodged pursuant to s 88(1) of the TPA and relate to possible breaches of s 45 of the TPA. Section 45 prohibits a corporation from making or giving effect to a contract or arrangement or arriving at an understanding if the contract, arrangement or understanding contains an exclusionary provision or has the purpose or has or is likely to have the effect of substantially lessening competition. Section 4D provides that a provision shall be taken to be an exclusionary provision if the contract, arrangement or understanding is between persons any two or more of whom are competitive with each other, and the provision has the purpose of preventing, restricting or limiting the supply of goods or services or the acquisition of goods or services from particular persons, classes of persons, and in particular circumstances or conditions.
Section 93(1) of the TPA provides that a corporation that engages, or proposes to engage, in conduct of a kind referred to in s 47(2), (3), (4) or (5), (6), (7), (8) or (9) may give to ACCC notice, in prescribed form, setting out particulars of the conduct or proposed conduct. Section 47 prohibits a corporation from engaging in the practice of exclusive dealing which has the purpose or has or is likely to have the effect of substantially lessening competition. Where a corporation has lodged a notification under s 93(1) the corporation’s conduct is deemed not to have a substantial lessening effect on competition for the purposes of s 47 unless ACCC gives a notice under s 93(3).
Section 88(1) of the TPA empowers ACCC upon application by a corporation, to grant an authorisation to the corporation to make a contract or arrangement, or arrive at an understanding where a provision of the proposed contract, arrangement or understanding would be, or might be an exclusionary provision or would have the purpose, or have or might have the effect of substantially lessening competition within the meaning of s 45, and to give effect to such a provision. Under s 90(6) ACCC is directed not to make a determination granting an authorisation under s 88(1) in respect of a provision (not being a provision that is or might be an exclusionary provision):
“unless it is satisfied in all the circumstances that the provision of the proposed contract, arrangement or understanding…would result, or be likely to result, in a benefit to the public and that that benefit would outweigh the detriment to the public constituted by any lessening of competition that would result, or be likely to result, if -
(a) the proposed contract or arrangement were made or the proposed understanding were arrived at, and the provision concerned were given effect to…”
Under s 90(8) ACCC is directed not to make a determination granting an authorisation under s 88(1) in respect of a provision of a proposed contract, arrangement or understanding that is or may be an exclusionary provision:
“unless it is satisfied in all the circumstances that the proposed provision or the proposed conduct would result, or be likely to result, in such a benefit to the public that the proposed contract or arrangement should be allowed to be made, the proposed understanding should be allowed to be arrived at, or the proposed conduct should be allowed to take place…”
In Re Media Council of Australia (No.2) (1987) ATPR 40-774 at 48,418 and Re 7‑Eleven Stores [1994] ATPR 41-357 at 42,654 the Tribunal observed that in substance, the tests postulated in ss 90(6) and 90(8) are the same.
In substance the same test is also to be applied by ACCC in considering whether to give a notice under s 93(3) of the TPA. ACCC is empowered to give such a notice if it is satisfied that the engaging by a corporation in conduct or proposed conduct has the purpose or has or is likely to have the effect of substantially lessening competition and that in all the circumstances the conduct or proposed conduct has not resulted or is not likely to result in a benefit to the public, or any such benefit to the public would not outweigh the detriment to the public constituted by any lessening of competition.
An application for authorisation can be sought and granted for a series of contracts that are in similar terms, subject to the requirements of ss 88(13) and 88(14). In support of its applications for authorisation, APRA supplied ACCC with current lists of its members, licensees and overseas affiliates, and ACCC proceeded to consider the applications on the basis that authorisation was sought in relation to all the parties to the proposed contracts, arrangements or understandings that were the subject of the applications for authorisation and the notification.
On application to the Tribunal for review under s 101, the Tribunal is empowered to make a determination affirming, setting aside or varying the determination of the ACCC, and for the purposes of the review may perform all the functions and exercise all the powers of ACCC including the imposition of conditions: s 102(1). Such a determination by the Tribunal shall be deemed to be a determination by ACCC: s 102(2). The function of the Tribunal is therefore to review, by way of rehearing, the decision of the ACCC, and to reach its own conclusions on the application of the relevant tests set out in ss 90(6) and 90(8) of the TPA.
The function of the Tribunal on the application under s 101A to review the notice under s 93(3) is similar. The Tribunal is directed by s 102(4) to apply the same test which ACCC was required to apply under s 93(3), and if satisfied that in all the circumstances that a benefit to the public exists which outweighs the detriment to the public constituted by any lessening of competition, to set aside the notice, and if not so satisfied to affirm the notice.
The assessment of benefit and detriment requires the identification of a relevant market or markets. In Re Concrete Carters Association (Vic) (1977) 31 FLR 193 at 202 the Tribunal said that the assessment “can only be made in the overall context of the function performed by the applicants, of the industry in which they operate, and of the market or markets which would be affected by such conduct.”
The Tribunal must make its own findings of fact having regard to the totality of information before it, and reach its own conclusions. The material before the Tribunal in this case comprised the evidentiary material available to ACCC at the time of its determination, supplemented by extensive oral and documentary evidence adduced by the three parties which participated in the hearing – APRA, FACTS and ACCC. It is the determination, not the published reasons, of ACCC which is the subject of review before the Tribunal and it is normally no part of the function of the Tribunal to “review” what ACCC determined as right or wrong on the material before it: Re Herald and Weekly Times Limited (1978) 17 ALR 281 at 295-296. In the present case, however, the published reasons of ACCC have received unusual prominence in the conduct of the review as they identify a limited number of discrete aspects of APRA’s system which ACCC considered tilted the balance against APRA’s system (save in respect of the overseas arrangements) even though there was a clear net public benefit in other respects. These discrete matters of concern, and others identified by FACTS, have been central to the evidence and submissions led on the review. An unusual feature of the case has been that ACCC and FACTS, in addition to criticising specific aspects of the APRA system, have advanced their own alternatives which they contend would provide additional benefits such that authorisation would be appropriate. Notwithstanding these features, the function of the Tribunal is to examine and weigh, on the one hand, anti-competitive aspects of the conduct, proposed conduct, and relevant provisions of the proposed contracts, arrangements or understandings in respect of which APRA has sought authorisation and given notification, and, on the other hand, the public benefits arising therefrom.
In weighing relevant public benefits and detriments, the Tribunal must compare the position which would or would be likely to exist in the future, on the one hand if authorisation were to be granted, and on the other hand if it were absent. This has been called the “future with-and-without test”, which the Tribunal has consistently applied in its decisions: Re Queensland Independent Wholesalers Limited [1995] ATPR 41-438 at 40,928 & 40,960; Re Media Council of Australia [1996] ATPR 41497 at 42,241; and Re: AGL Cooper Basin Natural Gas Supply Arrangements [1997] ATPR 41-593 at 44,175. The Tribunal has given a wide meaning to the notion of “benefit to the public” in the statutory tests. In Re 7-Eleven Stores at 42,677 the Tribunal said:
“Public benefit has been, and is, given a wide ambit by the Tribunal as, in the language of Queensland Cooperative Milling Association Limited, Defiance Holdings Limited [1976] ATPR 40-012 (at 17,242), ‘anything of value to the community generally, any contribution to the aims pursued by the society including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress’. Plainly the assessment of efficiency and progress must be from the perspective of society as a whole: the best use of society’s resources. We bear in mind that (in the language of economics today) efficiency is a concept that is usually taken to encompass ‘progress’; and that commonly efficiency is said to encompass allocative efficiency, production efficiency and dynamic efficiency.”

It is necessary to note the provisions of s 51(3) of the TPA which provides:
“A contravention of a provision of this Part other than section 46, 46A or 48 shall not be taken to have been committed by reason of –
(a) the imposing of, or giving effect to, a condition of –
(i)a licence granted by the proprietor, licensee or owner of a …copyright…
(ii)…
to the extent that the condition relates to –
(iii)…
(iv)…
(v)the work or other subject matter in which the copyright subsists…
(vi)…”
This section was not the subject of detailed submissions by any party in the course of the hearing. ACCC in its determination noted the provision, and a submission from APRA that, because of s 51(3), the output arrangements did not require authorisation. ACCC observed, correctly, that whether or not APRA’s licences which comprised the output arrangements are covered by the exemption in s 51(3) was not a matter for ACCC to decide. Rather, the issue was whether ACCC should grant authorisation having regard to the tests provided in s 90 of the TPA. The power to grant authorisation exists where the making or giving effect to a provision of a contract, arrangement or understanding “might be” of a prescribed kind. It is irrelevant that the application for authorisation may be unnecessary: Re Concrete Carters Association. In that decision, the Tribunal at 245246 said:
“we agree with the view propounded by the commission in the Shell case (Re Shell Co. of Australia Ltd. [1975] ATPR 35.220) and adopted by this Tribunal in Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd. (1976) 25 FLR, at p 180 that where an applicant believes on what appear to him to be good grounds, that his conduct (if not authorized) may be in breach of the Act and he applies for authorization accordingly, the tribunal’s duty, on an application for review, is to decide the application on the public benefit grounds spelt out in the Act and it is not one of those grounds that the application might appear to be unnecessary.”
In the present case there were reasonable grounds for APRA to apprehend that its conduct if not authorised might be in breach of the TPA, as breach had been asserted by FACTS in the Federal Court proceedings.
Section 51(3) by its terms has limited application. It covers only conditions in a licence granted in respect of a work in which copyright exists. It does not cover future intellectual property, and could not apply to protect APRA’s input arrangements insofar as they cover future works. It would not apply to a case where APRA refused to grant a licence, for example where APRA refused a request to grant some form of licence other than a blanket licence. Further, it does not purport to apply to the granting or assignment of licences.
Whilst further reference will be made to s 51(3) of the TPA in the course of these reasons, our decision is not dependent upon that subsection and would be the same even if it were not in the TPA. We mention this as the National Competition Council in its draft report “Review of Sections 51(2) and 51(3) of the Trade Practices Act 1974”, November 1998 proposed recommending to the Federal Government that s 51(3) should be repealed.
Copyright in original literary and musical works
Section 31(1) of the Copyright Act 1968 provides:
“(1) For the purposes of this Act, unless the contrary intention appears, copyright, in relation to a work, is the exclusive right:
(a)in the case of a literary, dramatic or musical work, to do all or any of the following acts:
(i)to reproduce the work in a material form;
(ii)to publish the work;
(iii)to perform the work in public;
(iv)to broadcast the work;
(v)to cause the work to be transmitted to subscribers to a diffusion service;
(vi)to make an adaptation of the work;
(vii)to do, in relation to a work that is an adaptation of the first-mentioned work, any of the acts specified in relation to the first-mentioned work in subparagraphs (i) to (v), inclusive…”
The performing rights which are collectively administered by APRA comprise the rights of the kind specified in subparagraphs (iii), (iv) and (v), the rights of public performance, broadcasting (including television) and transmission by a diffusion service.
The rights recognised in s 31(1) are, by s 13 the acts comprised in the copyright in a work. A work is defined in s 10 to mean a literary, dramatic, musical or artistic work.
The Act distinguishes between copyright in a work, and copyright in subject matter other than works. In particular, s 85 provides for copyright in sound recordings, s 86 for copyright in cinematographic films, s 87 for copyright in television broadcasts and sound broadcasts, and s 88 for copyright in published editions of works.
Section 32 specifies the circumstances in which copyright subsists in an original work. Broadly, the work must be either published in Australia or be made by an Australian citizen. Copyright subsists upon the work being made. It is not dependent upon registration.
Section 33 provides for the duration of copyright, in general fifty years after the death of the author of the work. Section 35 deals with ownership of copyright in original works; in general, the owner of the copyright is the author except where the work is made by the author in pursuance of terms of his or her employment.
Section 196 provides that copyright is personal property and, subject to that section, is transmissible by assignment by will or by devolution by operation of law. Copyright may be assigned either totally or partially (s 196(3)) or may be the subject of a licence (s 196(4)), which may be either an exclusive licence or a non-exclusive licence. Section 197 provides for the assignment or licence of future copyright, that is copyright in works yet to be made. Copyright once assigned, may be the subject of further assignment.
The Act makes provision for the enforcement of copyright by action for infringement: see ss 36 to 39A and 114 to 131. An action for infringement may be brought by the owner of copyright. Under s 119, an exclusive licensee has the same rights of action and is entitled to the same remedies as an owner, and concurrently with the rights and remedies of the owner. Section 120 makes provision for the joinder of an owner and exclusive licensee as parties to an infringement action in which both the owner and licensee have concurrent rights. Where, however, the original owner of the copyright assigns it to another, the assignee thereby becomes the owner of the copyright, and may bring an action for infringement in the name of the assignee alone. This right is of central importance to APRA when it seeks to enforce copyright against a user who is not appropriately licensed.
The notion that an assignment of copyright or future copyright may be either total or partial is further expanded in ss 30 and 196(2). Section 30 recognises that different persons may be the owners in respect of the doing of different acts or classes of act and s 196(2) provides that an assignment of copyright may be limited in any way including so as to apply to only one or several of the classes of act that s 31(1) provides that an owner shall have the exclusive right to do. Thus it is recognised that the original owner of copyright in a literary or musical work, relevantly a writer, may assign the exclusive right to do some only of the acts specified in s 31(1). Of importance to this case, the Act recognises that a writer may assign the performing rights whilst retaining, or assigning to another person, the right to do other acts pertaining to the copyright.
In the music industry the following terms are frequently used to describe rights of copyright owners:
·The mechanical right is the right to record music (and if applicable the words of a song) on to record, cassette or compact disc (the right arising under s 31(1)(a)(i));
·The synchronisation right is the right to use music and lyrics on a soundtrack of a film or video (s 31(1)(a)(i)); and
·Performing rights, which, as already noted, are the rights to perform in public, to broadcast (including television), and to transmit by cable (s 31(1)(a)(iii), (iv) and (v)).
The role of publishers in the music industry is extensive. Publishers usually acquire from writers mechanical rights and the right to publish sheet music. They may also acquire synchronisation rights and performing rights.
Protection of foreign works
Whilst under the Copyright Act 1968, s 32, copyright subsists in works first published or made in Australia, copyright protection is also extended to authors of works in foreign countries. Part VIII of the Copyright Act 1968 makes provision for the Act to be applied in relation to specified countries other than Australia. This is achieved by the Copyright (International Protection) Regulations 1969 (Cth). The effect of these regulations is that protection is given in Australia to certain foreign works, recordings, films and published editions (including the performing rights in relation to musical works), on the same basis as protection is given to like Australian works. The countries in relation to which the Copyright Act 1968 has been applied include member countries of the Berne Convention and the Universal Copyright Convention and now exceed some 150 countries: see Schedule 1, Parts I, II, III and V of the Regulations.
The Berne Convention for the Protection of Literary and Artistic Works was concluded in Berne in 1886, was revised at Berlin in 1908, at Rome in 1928, at Brussels in 1948, at Stockholm in 1967 and at Paris in 1971. A detailed account of the history of the Berne Convention and its provisions may be found in Lahore “Copyright and Designs”, Butterworths, paras [2085] and [56,000] and following. Australia acceded to the Paris revision of the Convention on 1 March 1978. However, Australia has been bound by the Berne Convention since its inception, originally as a result of the ratification by the United Kingdom of the first Convention of 1886. Following the signing of the Berne Convention, the Berne Union was established, and Australia became a member of the Berne Union in its own right on 14 April 1928. The Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) concluded in 1994 now requires all World Trade Organisation members to apply the provisions of the Berne Convention in relation to the subject matter and rights accorded by it.
The Universal Copyright Convention was prepared and organised under the auspices of UNESCO. It was signed at Geneva in 1952, and revised at Paris in 1971 (concurrently with the revision of the Berne Convention). Australia acceded to the Universal Copyright Convention on 1 May 1969, and to the Paris revision on 28 February 1978.
The Berne Convention establishes three basic principles for the international protection of copyright, and also establishes certain minimum standards of protection relating to the works protected, the scope of the protection and the duration of the protection. The three basic principles are:
·National treatment. Article 5(1) (of the Paris Act) provides that authors shall enjoy, in respect of works which are eligible for protection under the Convention, in countries of the Berne Union other than the country of origin, the rights which their respective laws grant to their nationals, as well as the rights specially granted by the Convention;
·Automatic protection. Article 5(2) provides that the enjoyment and exercise of protection under the Convention shall not be subject to any formality. In particular this Article has the consequence that no formality such as registration of copyright is required for protection in a country other than the country of origin of the work; and
·Independence of Protection. Article 5(2) further provides that the enjoyment and exercise of the protected rights shall be independent of the existence of protection in the country of origin of the work. This has the consequence that the extent of protection, as well as the means of redress to protect those rights, shall be governed exclusively by the laws of the country where protection is claimed.
The Universal Copyright Convention also provides for similar national treatment (Articles I and II). The Convention makes provision to accommodate the principle of the Berne Convention that the enjoyment and exercise of rights shall not be subject to any formality. The United States of America acceded to the Berne Convention in 1989. The USA had hitherto maintained systems with strict formalities as to notice and registration. Changes which occurred in the United States laws after 1989 regarding registration are of importance in understanding evidence led before the Tribunal regarding the protection of performing rights under the United States law.
Collecting societies
The exclusive rights attaching to copyright may be exercised individually by the owner of the right but in many instances, including in respect of performing rights, this is not a practical option. The authors of a study by the World Intellectual Property Organization (WIPO) entitled “Collective Administration of Copyright and Neighboring Rights”, Geneva 1990, observe:
“As early as at the time of the establishment of the international copyright system, there were, however, certain rights—first of all, the right of public performance of non-dramatic musical works—that could, only with difficulty, be exercised individually, and since then, with the ever newer waves of new technologies, the field in which individual exercise of rights is impossible or, at least, impractical, has been constantly and rapidly widened. There are ever more cases where individual owners of rights are unable to control the use of their works, negotiate with users and collect remuneration from them.”
The study observes that a possible solution to these practical difficulties is a non-voluntary licensing system. However, the study continues:
“There is a much more appropriate option, namely the collective administration of exclusive rights.
In the framework of a collective administration system, owners of rights authorize collective administration organizations to administer their rights, that is, to monitor the use of the works concerned, negotiate with prospective users, give them licenses against appropriate fees and, under appropriate conditions, collect such fees and distribute them among the owners of rights. This can be considered as the definition of collective administration.
It cannot be denied that, with such collective administration, the control by the owners of rights over certain elements of exercising their rights becomes more or less indirect, but, if the collective administration system functions appropriately, those rights will still preserve their exclusive nature and—although through collective channels—they can prevail in the fullest manner possible under the present circumstances.
Although a collective administration system serves primarily the interests of owners of copyright and neighboring rights, such a system also offers advantages to users who, thus, can have access to the works needed by them in a simple manner, and—because collective administration decreases the costs of negotiations with users, of monitoring users and of collecting fees—fairly cheaply.”
The study notes that voluntary collecting societies were founded as early as the mid-nineteenth century, with one of the early ones being the French Society, “Société des auteurs, compositeurs et éditeurs de musique” (SACEM). The study continues:
“At the end of the last century and during the first decades of this one, similar authors’ organizations (so-called performing rights societies) were formed in nearly all European countries and in some other countries as well. Cooperation developed rapidly among those organizations and they felt a need for an international body to coordinate their activities and contribute to a more efficient protection of authors’ rights throughout the world. It was in June 1926 that the delegates from 18 societies set up the International Confederation of Societies of Authors and Composers (CISAC). The membership of CISAC has been constantly widening since then and now also includes, in addition to the more traditional ones, societies dealing with other types of works (such as works of fine art and audiovisual works)."
Collecting societies in respect of performing rights were established in the United States in 1914, the American Society of Composers, Authors and Publishers (ASCAP), and in the United Kingdom in 1914, The Performing Right Society (PRS). APRA was founded in 1926 in Australia, with PRS as one of its founding members. These collecting societies have remained as permanent institutions.
APRA was and remains a full member of CISAC. CISAC is an international non-governmental, non-profit making organisation whose statutes provide that its principle aims are:
“a)     to ensure the safeguarding, respect and protection of the moral and professional interests attaching to every kind of literary or artistic production;
b)        to watch over and contribute to the respecting of the economic and legal interests attaching to the said productions both in the international sphere and that of national legislation;
c)        to co-ordinate the technical activities of the Authors’ and Composers’ Societies and ensure their collaboration in this field, subject to the understanding, however, that each Society is master of its internal organisation;
d)        to constitute an international centre of research and information.”
CISAC has established a “Model Contract of Reciprocal Representation between Public Performance Rights Societies”. This model contract forms the basis of agreements between collecting societies around the world. It forms the basis of APRA’s agreements with its affiliated societies which establish reciprocal arrangements under which a performing rights society in a particular country controls, for the purposes of issuing licences and collecting royalties, virtually the world repertoire of musical works. APRA now has reciprocal arrangements with fifty-eight countries.
The evidence led before the Tribunal is to the effect that the performing rights collecting societies with which APRA is affiliated all adopted basically similar collective administrative systems which remain in operation, subject only to changes which have been imposed on the societies in some countries by competition laws. The nature of these changes has been the subject of detailed evidence and submissions before the Tribunal, and is discussed later in these reasons.
Central to the collective administration system is the expectation that writers will in practice assign copyright in the performing right to the collecting society. The society, as owner, then has the capacity to licence performing rights to users. The long established activities of APRA in the Australian music industry has resulted in it becoming the owner of the performing rights in almost all musical works in this country, and through its affiliations with overseas collecting societies, as assignee, controls virtually all the worldwide repertoire of musical works. The collecting societies in other countries are in a similar position. This control plainly has the potential to restrict competitive negotiations as to the terms and conditions of use of the copyright work and may affect both access to the material and the price to be paid for it. Dissatisfaction between the groups of users and collecting societies is commonplace. In 1932 a Royal Commission was established in Australia to enquire into and report on the exploitation of performing rights. The Commissioner, the Hon Mr Justice Owen, in his report published 24 May 1933 concluded that the evidence before the Commission established that APRA was “to all intents and purposes, a super-monopoly controlling or claiming to control most of the music which users in public must use and is able to dictate its own terms”. On the other hand, the Commissioner found that there was a substantial public interest promoted by the activities of APRA. The Commissioner said:
“When questions such as have been discussed before this Commission are under consideration, there may be a tendency to overlook the fact that authors, composers and publishers have rights which have been for long and are still recognized by law and that the performing right is one of the most valuable of such rights and is assignable. The right of authors, composers and publishers, who individually cannot effectively protect their interests, to form organizations such as the Performing Right Society (England) and the Australasian Performing Right Association may be questioned by some, but that right has been well established and the necessity for such organizations, in the interest both of the owners of copyright and of users, has been recognized by the Courts in England.”

The Commissioner recommended that in order to protect the interests of the public against disputation between APRA and broadcasters a tribunal should be established to determine disputes arising out of the performance in public of musical works, and/or the use of records in public. This led to the insertion in 1933 of s 13A into the Copyright Act 1912 which provided a means for voluntary arbitration of disputes by an arbitrator appointed by the Governor-General.
In 1951 in the United Kingdom a Committee (the Gregory Committee) was established to report on the law of copyright. Its terms of reference were wide and included the activities of performing right societies, as there was a strong current of resentment against the licensing practices of PRS. The Committee concluded that there should be a standing tribunal to determine disputes between collecting organisations controlling performing rights and would-be users (Recommendation 42).
The Gregory Committee report led to the establishment by the Copyright Act (UK) 1956 of a Performing Right Tribunal, now the Copyright Tribunal, with power to review the reasonableness of licensing schemes and fees of collecting societies. In Australia, a Copyright Tribunal was established in 1968 by Part VI of the Copyright Act 1968 following another inquiry into Copyright Law by the Spicer Committee, appointed in 1959. The Spicer Committee, at paras 343-357, gave reasons for recommending the establishment of a body similar to that recommended by the Gregory Committee.
The Copyright Act 1968 was framed to enable Australia later to accede to the Berne Convention Australia (along with the UK and a number of other countries) having reserved the right when acceding to the Berne Convention to enact legislation necessary in the public interest to prevent any abuse of monopoly rights by copyright owners. (See Sam Ricketson “The Berne Convention for the protection of literary and artistic works: 1886-1986” (1987) at para 9.72-9.73. A similar right is also recognised in Article 40 of the TRIPS Agreement.) In the Second Reading Speech on the Bill for the Act the Attorney-General of the day, the Hon Nigel Bowen QC, MP, restated that the law of copyright was to protect creative works so that authors and composers (among others) could, during the continuance of copyright protection, control the uses to which their works were put and get some return from the exploitation of their works. He said the main function of the Copyright Tribunal would be to arbitrate disputes between copyright owners and persons who wished to make public performances and broadcasts of protected works.
Plainly a legislative purpose of the Copyright Tribunal in Australia is to act as a curb on potential abuse of the monopoly or near monopoly power gained by a voluntary collecting society by aggregating the rights of individual copyright owners. The effectiveness of the Copyright Tribunal in that respect, and the scope of its powers and functions have been canvassed by both parties to these proceedings. An issue for determination is whether the Copyright Tribunal provides a sufficient restraint on APRA to prevent it acting in a manner that substantially lessens competition.
2. APRA’S STRUCTURE AND RULES
Input arrangements
APRA was incorporated in New South Wales on 4 January 1926 as a company limited by guarantee. It is a non-profit association of writers, music publishers and other music copyright owners who allow APRA to administer certain performing rights on their behalf. APRA’s structure, as well as its mode of operation, generally accords with standards specified by CISAC.
At times material to these proceedings, the Memorandum and Articles of Association defined “Performing Right” in the following way:
“‘Performing Right’ shall mean and include, subject to the exceptions set out below, the rights in relation to a copyright work of performing in public, broadcasting (including televising), and causing to be communicated or transmitted to the public other than by way of performing in public or broadcasting but including transmission to subscribers to a diffusion service, in all parts of the world, by any means and in any manner whatsoever, and the right of authorising any of the said acts, but shall not include the right of performing in public, broadcasting (or televising), or causing to be communicated or transmitted to the public other than by way of performing in public or broadcasting but including transmission to subscribers to a diffusion service or of authorising any of the said acts, in relation to any of the following classes of works performed in the following manner, unless performed by means of a cinematograph film:
(i) dramatico-musical works performed in their entirety;
(ii)in the case only of a public performance, any works or excerpts therefrom, performed in a dramatic context;
(iii)oratorios and large choral works (that is, choral works written to exceed 20 minutes duration), performed in their entirety;
(iv)the whole or any part of any music and of any words associated therewith composed for or used in conjunction with a ballet, if accompanied by a visual representation of that ballet or part thereof.”
The effect of this definition is to define performing rights as a portion of an author’s public performance, broadcasting and diffusion rights under s 31(1)(a)(iii), (iv) and (v) of the Copyright Act 1968. That proportion is known as the “small rights” or “performing rights”. The exceptions contained in the definition are known as the “grand rights” which are retained by the writer and do not form part of the rights which are collectively administered by APRA. Article 3 contains further definitions of “dramatico-musical work”, “dramatic context”, “ballet” and other expressions which are used.
Article 6 defines eligibility for membership which is open, in particular, to any composer, author or publisher of a copyright work (paragraph 6(a)), and to a person who owns or controls the performing right in a copyright work or any interest in the performing right (paragraph 6(b)). An applicant for membership must apply on a form prescribed by the Board: Article 7. A person may be admitted to membership as a Writer Full Member or a Publisher Full Member, or as an Associate Member. Associate members (who will include members admitted under paragraph 6(b)) are not entitled to notice of, or to attend or vote at general meetings, but in other respects have the same rights and privileges as full members (which includes the right to receive a distribution). The eligibility rule is not subject to any geographical limitation either as to residence or place of origin of the copyright. APRA presently has members in Australia, New Zealand and a number of South Pacific countries.
Important to these proceedings are Articles 9, 17 and 22, together with the application form for membership. Immediately prior to amendments passed by the members in March 1998 (to effect changes proposed by APRA following the pre-decision conference with ACCC) Article 9 provided that a member by not less than three years notice in writing to the Secretary to expire on a 30 June could determine his or her membership of APRA. Article 17(a) required that every member shall, on election and at any time thereafter, on request of APRA assign to it the performing right in all or any works or parts of works present or future of which the member is the composer, author and/or publisher, such assignment to operate for and during the period of the assignor’s membership, subject to termination as provided by the Articles. Article 17(b) provided that pending such assignment every member, by virtue of his or her election, granted to APRA the sole power and authority to authorise, permit or forbid the exercise of the performing right in respect of all or any works or parts of works, present or future of which the member is the composer, author and/or publisher, to grant licences for the exercise of the performing rights, to collect fees due on the grant of such licences or by way of damages or compensation for infringement of the performing right, to institute enforcement proceedings, and to protect generally the performing right in the works. This provision, and a corresponding one in the application for membership form, meant that APRA obtained copyright in the performing rights in musical works at the time of creation, not at the later point when the work was formally notified to APRA and assigned. This remains the usual position under the amended Articles. Article 22 provided that no member shall be at liberty to alienate or exercise the performing right vested in APRA by the member, or controlled by it by virtue of the membership; nor enter into any contract to write or compose any work for any non-member without reserving the performing right; nor institute or undertake legal proceedings without the sanction of APRA’s Board in respect of the performing right of any work being controlled by APRA.
The amendments passed in March 1998, which are those which govern the rules of APRA for the purposes of the applications for authorisation and notification now under review, have the following effect:
·Article 9. The notice period for cessation of membership has been reduced to six months expiring on either a 30 June or 31 December;
·Article 17 now makes provision for a member at any time after admission to membership to require APRA to reassign, or may on admission reserve, one or more of the categories of performing right in all of the members’ works which would otherwise be under the control of APRA. This opt-out provision, in form, follows rulings of the Commission of the Economic Communities which required the German performing right collecting society Gesellschaft für musikalische Aufführungs- und mechanische Vervielfältgungsrechte (GEMA) to include a similar provision in its membership rules. The GEMA decisions are discussed later in these reasons. As amended, Article 17(a) and (b) now provide:
“(a)Subject to the provisions of this Article, every member shall on request by the Association assign, or cause to be assigned to the Association:
(i)the Performing Right in all or any works or parts of works, present and/or future, of which he is the composer, author and/or publisher; and/or
(ii)the whole or any part of the Performing Right in any work or part of a work to the extent that any such right or part of a right is or shall during his membership be or become vested in him.
Such assignment shall be in the form prescribed from time to time by the Association and shall operate for and during the period of the assignor’s membership, subject however to earlier or later termination as may be provided by these Articles.
(b)Every member may at any time after admission require (subject to Article 17(c)) the Association to assign to him, or may on admission reserve to himself one or more of the following categories of the Performing Right in all of his works:
(i)the right of performance in public;
(ii)the broadcasting right;
(iii)the right of communication or transmission to the public other than by way of public performance or broadcasting but including transmission to subscribers to a diffusion service;
(iv)the right of live performance in public;
(v)the right of performance in public by the exhibition of cinematograph films;
(vi)the right of performance in public by other means;
(vii)the sound broadcasting right;
(viii)the television broadcasting right;
(ix)the right of communication or transmission to the public by cable television; and/or
(x)the right of communication or transmission to the public by other wired means.”
Article 17(c) provides that before 1 January 2000 a member may give not less than six months notice in writing, and after that date not less than three months notice in writing to APRA requiring it to “assign to him one or more of the categories of the Performing Right listed in Article 17(b) in all of his works”. Article 17(d) provides that a member seeking to have one or more of the categories of performing right assigned shall comply with reasonable conditions for the assignment prescribed by the Board, shall provide APRA with a written consent and release from all persons interested in the works in the relevant categories of the performing right and releasing APRA from obligations to collect royalties; and shall provide APRA with a written indemnity against actions arising from the use by any licensee of APRA of the members’ works in the relevant categories of the performing right. Article 17(e) provides that where a member reserves a category of performing rights or obtains an assignment of them, those rights shall not be assigned or reassigned to APRA for at least twelve months. Consequential amendments have been made to the former Article 17(b) which has been renumbered Article 17(f); and
·Article 22, whilst amended, continues to require that no legal proceedings shall be instituted or undertaken by a member without the sanction of the Board in respect of the performing right of any works for the time being controlled by APRA.
Output arrangements
The objects of APRA include the power to grant licences, permits or authorities for the use and exercise by others of performing rights acquired from members, and to charge and collect fees for such use. The output arrangements with licensees are made pursuant to these general powers in the Articles.
Distribution Arrangements
The distribution of licence fees, royalties and other moneys collected from licensees is governed by Article 93. All moneys received by APRA are to be applied first to the payment of expenses of and incidental to the conduct, management and operation of APRA, and then, subject to Article 95, shall be allocated and distributed amongst the members and affiliated societies in accordance with a method of entitlement to be fixed from time to time by the Board: Article 93(a). Article 93(b) requires that the method of entitlement fixed by the Board shall comply with the terms and conditions of any agreement in force from time to time between APRA and any member or affiliated society. APRA asserts that this Article has the effect that the Board is required to comply with the terms and conditions of APRA’s agreement with CISAC. Article 95 makes special provision for allocation before distribution of moneys to superannuation, benevolent, pension or similar funds, for the promotion of works written by APRA members, and to establish a reserve fund.
The distribution rules fixed by the Board contain a complex formula intended to achieve a fair distribution to members based on the use of the performing rights assigned by members to APRA, and the value attached to that use. The formula is based on “performance credits”, which are performance credit points allotted to a musical work based on logged performances. Revenue received is allocated to one of twenty-one different distribution pools and then distributed according to performance credits to each of the members in respect of whose works revenue has been received. The distribution pools cover use in the following broad categories, television, radio, mechanical performance, live performance, concerts, cinema and discos. Where there are two or more joint writers, or a publisher who has an interest pursuant to contract, the distribution rules provide for an apportionment of the receipts in respect of a particular work between the composer, the lyricist and the publisher as the case may be.
Two aspects of the distribution rules have assumed importance in the course of the proceedings. The first aspect has been referred to as the “fifty per cent rule”, and the second concerned an apparent anomaly regarding the distribution of revenue to an associate member. In the course of evidence it was explained that this apparent anomaly arose because the literal interpretation of the distribution rules did not reflect actual practice. The distribution rules have since been amended by resolution of the Board notified on 16 December 1998, and this aspect is no longer an issue. Associate members are rewarded in the same way as full members under the distribution rules.
The fifty per cent rule is applied as a matter of policy as the APRA Board understands this to be a requirement of CISAC. The effect of the rule is that the share of performing right royalties allocable to a writer or writers of a work shall not be less than fifty per cent. The evidence is to the effect that APRA will not accept as a member a copyright holder who has acquired that interest from a writer if the contracted entitlements result in the writer receiving less than fifty per cent of the royalties.
In the course of consideration of APRA’s applications for authorisation by ACCC, APRA asserted, and ACCC accepted, that APRA was bound by the rules of CISAC not to countenance any variation from this rule. APRA asserted that if it were to abolish the rule, that would threaten APRA’s continued membership of CISAC, and APRA’s reciprocal arrangements with overseas affiliates.
The fifty per cent rule is not expressed in the Articles or other contractual documents entered into between APRA and its members. The rule finds expression in rule 4.04 of the distribution rules fixed by the Board under Article 93(a). Rule 4 deals with “allocation of shares”. Rule 4.02 says that member shares are entitled to a royalty allocation in accordance with APRA’s rules. Rule 4.03 provides a formula for the allocation of shares of a musical work between a composer, a lyricist and a publicist “in the absence of specific notification of contractual agreement to the contrary”. Rule 4.04 provides:
“Contractual variations to the above rules are subject to the overriding rule that the share allocable to the writer or writers of a work cannot be less than 50%.”
It was conceded by all parties in the course of the hearing, that this rule does not impose any contractual or other restriction upon a writer from entering into some other arrangement with a publisher or producer, for example the assignment of all revenue arising from the performing right in a work to a publisher or producer. At the most, the rule requires only that APRA in the first instance distributes fifty per cent of the revenue to the composer. Other contractual arrangements between the composer and others would then operate to require the composer to account for the money to those to whom the revenue had been assigned.
So far as APRA asserts that the fifty per cent rule is an overriding requirement of CISAC, distribution rule 2 provides:
“2.01In formulating Distribution Rules the Board is bound by Article 93 to observe and comply with the terms and conditions of agreements between the Association and
(i) its members
(ii) affiliated societies.
2.02Although not binding, the Board endeavours as far as possible to comply with resolutions of the International Confederation of Societies of Authors & Composers (‘CISAC’) related to principles governing the fair and equitable distribution of royalties.”
There is nothing in the Statutes of CISAC referring to the fifty per cent rule, and Article 29 of the Statutes says that decisions of CISAC “have the character of recommendations only.” Nevertheless, the evidence indicates that the fifty per cent rule is adhered to by CISAC members around the world.
Overseas arrangements
As owner by assignment of performing rights in musical works, APRA is entitled to protection overseas of that copyright under the Berne Convention and the Universal Copyright Convention. Under arrangements with affiliated societies APRA exercises those rights in respect of overseas performances. Pursuant to Article 18, APRA, under its reciprocal obligations, also exercises and enforces in Australia the performing rights in overseas works on behalf of members of affiliated societies.
3.THE CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS AND THE ALLEGED ANTI-COMPETITIVE CONDUCT IN ISSUE

Four of the authorisation applications and the notification lodged by APRA are concerned with the input arrangements.
Application A30187 relates to alleged exclusionary provisions contained in contracts between APRA and each of its members whereby each member is to assign to APRA the performing right in any musical and associated literary works in which the member owns the copyright, subject to APRA’s Articles. These contracts will be constituted by the proposed standard form of assignment for APRA members.
Application A30190 relates to alleged agreements affecting competition constituted by contracts between APRA and each of its members evidenced by the standard form of assignment.
Application A30193 relates to alleged agreements affecting competition constituted by proposed contracts between APRA and each of its members constituted by the Articles of APRA. The relevant provisions of the Articles are the eligibility provisions of Article 6, and Articles 17 and 22 as now amended.
Application A30188 relates to alleged exclusionary provisions contained in contracts between APRA and each of its members constituted by the Articles 9, 17 and 22 of APRA’s Articles, as amended.
Notification N30751 relates to alleged exclusive dealing constituted by APRA’s method of acquiring members’ performing rights. It covers members’ assignments, the eligibility provisions of Article 6, and Articles 17 and 22 as amended.
Two applications relate to the output arrangements. Application A30186 concerns alleged exclusionary provisions contained in proposed contracts between APRA and each of its licensees by which APRA will grant a licence to exploit performing rights in the works contained in its repertoire under a non-exclusive blanket licence.
Application A30191 relates to alleged agreements affecting competition which would be constituted by contracts between APRA and each of its licensees.
One of the above applications was considered by ACCC to also concern the distribution arrangements. Application A30193 relates to alleged agreements between APRA and its members affecting competition, constituted by APRA’s Articles. The application was considered to extend to APRA’s distribution rules, including the fifty per cent rule.
Two applications relate to the overseas arrangements. Application A30189 relates to alleged exclusionary provisions of proposed contracts between APRA and each of its affiliated societies overseas whereby the affiliated society will assign to APRA the performing right in works in the society’s repertoire for the territories controlled by APRA. Application A30192 relates to alleged agreements affecting competition which would be constituted by the proposed contracts between APRA and each of its affiliated societies.
4. THE ACCC DETERMINATION ON 14 JANUARY 1998
Whilst APRA’s operations extend beyond Australia, the relevant market to be considered was that within Australia and its Territories: s 4E of the TPA. ACCC appears to have accepted, broadly, that the relevant market was the market for the acquisition and supply by assignment, licence or otherwise of performing rights in relation to musical and associate literary works in which copyright exists. ACCC considered it was inappropriate to separate input and output markets saying:
“The Commission considers that such a separation does not encompass potential substitution possibilities or assist in the analysis of competitive effects or public benefits. APRA is essentially a joint venture of composers, which replaces direct supply by composers to users. Defining separate input and output markets would ignore the possibility of direct dealing and thereby miss the claimed anti-competitive effects and the claimed public benefits (in terms of reduced costs) of the APRA System.
The Commission agrees that little will turn on market definition in this matter. In the circumstances, it is unnecessary to define the market more particularly than is required to weigh up the public benefits and anti-competitive detriments of the APRA System.”
The Commission undertook an assessment of anti-competitive detriments, and then of public benefits.
The following anti-competitive detriments were identified:
·Concentration. The input arrangements restricted the ability of users to obtain access to a portion of the composer’s or publisher’s rights and therefore limited the opportunity for members to compete with each other for user licences and in respect of price. Some users did not always require a blanket licence. The proposed opt-out scheme (now Article 17(b)) would introduce some scope for direct dealing, but the requirement that members opt out in relation to whole categories or forms of utilisation of rights for all their works, rather than on a work by work basis, plus a lack of commitment by APRA to adjust blanket licence fees in line with direct licensing, made it unlikely that opt out would occur;
·Import competition. Australia is a net importer of copyright material. APRA’s reciprocal arrangements had the effect of preventing or discouraging overseas societies from competing in Australia by providing direct access to their repertoire to Australian users, although ACCC noted the possibility of direct dealings with copyright owners in the United States, and possibly with European and Irish composers under opt-out provisions which existed in the rules of collecting societies in those countries;
·Barriers to entry. ACCC took the view that the sophisticated administrative and enforcement systems required for successful collective licensing arrangements posed a considerable hurdle for the creation of alternative mechanisms or new entrants into the market, and that the current input arrangements further reduced the likelihood of entry. Whilst the proposed amendments (now the reduced requirement of notice of termination in Article 9, and the opt-out provision of Article 17(b)) would help facilitate the creation of alternative mechanisms or new entry into the market, the scope for that was limited. APRA’s blanket licences also limited the likelihood that other collecting societies would enter the market as there was very little incentive for a user to acquire rights from a niche society or directly from composers or publishers in the absence of some adjustment to the blanket licence fee;
·Countervailing power. ACCC was not persuaded by APRA’s submissions that the Copyright Tribunal provided adequate countervailing power to protect users against an abuse by APRA of its position as a monopoly supplier; and
·Monopoly conduct of APRA. ACCC considered that the APRA system and associated barriers to import competition, market entry or the creation of alternative mechanisms meant that users were currently excluded from entering into direct arrangements with members of APRA, and were prevented from negotiating the price paid for the vast majority of music works or the basis on which those works were made available. The likelihood of direct dealing was not significantly improved by the then proposed amendments to the Articles.
ACCC considered that as music performing rights were “public goods”, in which consumption is non-rivalrous (i.e., one person’s consumption does not diminish the amount available for another), APRA’s monopoly position which enabled it to “give less and charge more” would find expression in the limitation of access to musical works, both new and old. ACCC considered this represented a misallocation of resources in both the short and long run as APRA’s ability to charge monopoly prices would tend to encourage excessive production of new works and membership of APRA.
As to the distribution arrangements ACCC considered any method for allocation and distribution of funds to members had the potential to be anti-competitive, and would be a price agreement deemed to be anti-competitive. It recognised however that it would not be feasible to have all members nominate a price for their music. ACCC concluded that the combination of the input arrangements and the fifty per cent rule effectively made it impossible for a user wishing to commission works to acquire all rights and entitlements to the commissioned work composed by an APRA member, giving rise to inefficiencies and misallocation of risk bearing in relation to such works.
ACCC considered that the APRA system limited competition between members. Whilst members might still compete in relation to the amount of airplay, record sales, etc., there could be a flow-on effect in terms of distributions by APRA, the APRA system displacing price competition between members and preventing the development of alternatives that might deliver a more efficient and competitive outcome.
ACCC considered there was actual evidence of monopolistic behaviour by APRA in the dealing with some of its customers, reference being made to the situation of the Greater Union Organisation and Village Roadshow which had made submissions. On the question of monopoly conduct ACCC concluded:
“…it can be seen that the APRA System has the overall effect of limiting arrangements between composers and users. They are, for practical purposes, prohibited from dealing with each other directly and setting their own terms. Arrangements must be made between the users and APRA, even in respect of performing rights that exist in works contained in repertoires of overseas societies. It is clear that some licensees are not satisfied with the arrangements offered by APRA and seek alternative options. For those licensees, the failure by APRA to offer products that meet the requirements of the market gives rise to anti-competitive effects.”
The following public benefits were identified:
·Lower transaction costs. ACCC accepted that there is a measure of public benefit arising from low transaction costs resulting from the input arrangements and the collective administration monitoring and enforcement of performing rights in music. ACCC accepted that if restrictions on members in the input arrangements were removed completely, members would have a choice as to how to administer their rights or part of their rights, and this would lead to an increase in administration and monitoring costs, but considered that it was unlikely that the majority of members would wish to administer performing rights in their own works so that the impact on associated administrative costs was unlikely to be great;
·Certainty. There was a public benefit in the certainty provided by APRA’s ability to give a comprehensive licence in respect of virtually all musical works available worldwide. ACCC noted APRA’s claim that if it were to depart from the blanket licence system there would be a loss of certainty in protection to users, and increased administrative and transaction costs. However, ACCC said:
“This, of course, assumes that an ‘opt-out’ arrangement would be based on an assignment-back system (as exists in the UK) as opposed to (say) a licence-back arrangement or combination of assignment and licence-back, which would be less likely to result in removal of rights from the repertoire, creating a ‘hole’ in the repertoire.”
Whilst the removal of some works from the repertoire might give rise to the need for users, particularly broadcasters, film makers and producers of live productions, to obtain more than one licence, the public benefits claimed by APRA arising from the single licence were not clear cut and might differ between different users. In the case of large users such as those just mentioned, ACCC considered that there was, and should be, greater scope for flexibility in licensing arrangements. In the case of smaller users, and those where the use of music was spontaneous and unpredictable there was a greater public benefit in the certainty given by a blanket licence. ACCC concluded:
“The Commission accepts that there would be greater costs for APRA in administering, negotiating and monitoring additional licences. However, it would appear that the majority of licensees, particularly those that have spontaneous and unpredictable use, would continue to choose the blanket licence. The transaction cost increase to APRA of offering other licences would therefore be likely to be limited to and should be able to be offset by APRA against those users who choose licences other than blanket licences, although the Commission notes that APRA has expressed some doubt in this regard.”
·Copyright protection and enforcement efficiencies. ACCC accepted that there were significant public benefits from containment of costs of enforcement and encouragement of compliance arising from blanket licences in respect of users who are small or whose requirements are spontaneous and unpredictable, and that there were limited public benefits in respect of users who were large or whose requirements were predictable and planned;
·Countervailing market power. ACCC considered it was difficult to predict in many situations who would have the stronger bargaining power, but concluded, on balance, that some users such as film producers and radio and television broadcasters may have significant bargaining power in respect of the majority of members and that there was a significant risk that those users would force down the prices that would be paid to composers for access to their works; and
·Encouragement of creative and cultural activity. The Commission recognised that there are public benefits arising from encouraging creative and cultural activity and that the potential for “free riding” in relation to musical works might inefficiently discourage the creation of new works. However, ACCC was not convinced that the public benefits claimed arose from the activities in respect of which authorisation had been sought and notification made.
ACCC qualified its findings of public benefit by saying that many of them arose purely from APRA’s role as a collecting society and not from the restrictions for which the authorisation has been sought and notification given, and were therefore not relevant to the question of whether there is overall a net public benefit.
After reviewing the operation of a number of overseas collecting societies, ACCC, whilst noting the differences in overseas markets, expressed its satisfaction that overseas collecting societies demonstrate that input and output arrangements which are different to APRA’s current arrangements are feasible and can be effective.
In its final assessment of the net public benefit ACCC concluded its determination as follows:
“8.5     Conclusions about the applications for authorisation
8.5.1    In the Commission’s view, there have been many market changes since APRA’s establishment in 1926 and, given the advancements in new technology, there may now be more reasons and opportunities than ever before for niche societies and alternatives to APRA to develop.
8.5.2    The Commission believes that the proposed input, output and distribution arrangements do not give rise to a balance of public benefits over anti-competitive detriment such that authorisation can be granted. In the Commission’s view the ‘opt out’ system proposed by APRA is unlikely to be utilised because it only provides for members to ‘opt out’ in relation to entire categories or forms of utilisation of works and does not provide for the adjustment of blanket licence fees. However, the Commission believes that if an ‘opt out’ system incorporating the key features identified by the Commission in paragraph 8.4.24 was introduced, there would be a real possibility of competitive pressure being exerted on APRA. The Commission also considers that the introduction by APRA of an appropriate appeal mechanism, and the alteration of its distribution arrangements so that the 50 per cent rule does not apply in circumstances where a member assigns all rights to a work to a third party, are required to effect a change in the balance of public benefits and anti-competitive detriment sufficient for authorisation to be granted in respect of the proposed input, output and distribution arrangements.
8.5.3    The Commission considers that the overseas arrangements are likely to give rise to a balance of public benefits and anti-competitive detriments such that authorisation can be granted provided that the standard agreement comprising the overseas arrangements is altered so as to entitle the parties to the agreement to terminate the agreement by provision to the other of six months’ notice in writing. Alteration of all overseas arrangements is to be effected by 31 December 1998.
8.6      Conclusions about the notification
8.6.1    Consistent with the above conclusions, the Commission is satisfied in respect of APRA’s notification of exclusive dealing conduct constituted by the proposed input arrangements, that the conduct would have the purpose or is likely to have the effect of substantially lessening competition, and any benefit to the public would not outweigh the detriment to the public constituted by the lessening of competition that is likely to result from the conduct.”
It will be noted that ACCC considered that three alterations to the input, output and distribution arrangements would alter the balance of public benefits and anti-competitive detriment sufficient for authorisation to be granted. These three matters had been raised in the draft determination, and discussed with APRA in the pre-decision conferences. However, APRA refused to accept that the requirements were necessary, and chose, instead to seek authorisation on the basis of the proposed amendments to Articles 9, 17 and 22 of the Articles. It is upon these three factors in particular that evidence and submissions before the Tribunal have focussed. Each factor was discussed in detail in the determination.
Opt-out system proposed
Paragraph 8.4.24 referred to in the conclusion reads as follows:
“After reviewing overseas arrangements and the needs of users and composers, the Commission has concluded that an ‘opt out’ option which formed part of an overall collecting system that delivered public benefits outweighing the adverse effects on competition, should incorporate the following key features:
·composers are able to opt out on a work by work basis as well as by category of right or form of utilisation;
·‘opting out’ may be by way of either assignment of commissioned works or through a licence back;
·blanket licence fees should be adjusted to reflect direct dealing; and
·where commissioned works are assigned to a new owner, the 50% distribution rule should no longer apply.
These features will facilitate maximum use of direct dealing, where this is efficient, with minimum impact on APRA’s repertoire and costs. They will also encourage the efficient allocation of risk taking through the commissioning and assignment of works where appropriate.”
Appeal mechanism proposed
ACCC considered that some mechanism, other than the Copyright Tribunal, was necessary to enable disputes between APRA and small users, or over small issues, to be resolved in a cost effective way. This was seen as an important protection against the exercise of monopoly power by APRA. ACCC proposed an appeal mechanism similar to that implemented by another collecting society, the Phonographic Performance Company of Australia Limited (PPCA), which licences the broadcast and public performance rights in sound recordings and music videos, although ACCC considered that the model should be altered to provide that APRA should assume responsibility for the costs of proceedings. The PPCA standard licence agreement provided for a dispute resolution system under which the licensee could refer to a Board of Review any of the terms and conditions of a licence on one month’s notice. The Board of Review consists of three members, one nominated by PPCA, one by the Australian Institute of Arbitrators, and one by a trade association most closely associated with the business in which the licensee operated. Legal representation is not allowed. The Board has no power to award costs. The proceedings of the Board are informal, and a party aggrieved by the decision can make application to the Copyright Tribunal (which has the jurisdiction to decide the dispute in any event). The cost of proceedings before the Board, including but not limited to any professional costs incurred by any Board member, stenographer’s fees and fees for hiring of a hearing room are shared equally between the licensee and PPCA.

The Tribunal notes that in the United States, ASCAP has a Board of Review to deal with disputes between ASCAP management and members, and that the MMC recommended that a similar body be introduced by PRS (Recommendation 35). APRA may wish to consider whether the ADR process should also be available to members in the event of a dispute with APRA. If the ADR process were extended to members this would make provision to deal with the argument raised in the economists’ evidence that in theory APRA’s monopoly position could lead to inefficiencies in its internal administration. Whilst the evidence suggested many aspects of APRA’s administration were efficient, even praiseworthy – particularly with respect to the levels of administrative costs and licence fees – there was evidence, to which we have referred, suggesting that APRA is not as responsive as it might be to the changing requirements of its licensees. This kind of lack of responsiveness might be perceived by members as indicative of administrative inefficiency that could impact on their distributions. APRA may consider it prudent to make a preemptive change that would provide a practical avenue for dissatisfied members to air their grievances.
The precise form of a new ADR process should now be developed by APRA, taking into account the features outlined above. The Tribunal envisages that the implementation of a satisfactory ADR process would become a condition for the grant of authorisation.
The blanket licence
Blanket licences are essential for efficient licensing. The task of devising a scheme which allows for the adjustment of a blanket licence fee to reflect music use is a task for the Copyright Tribunal.
APRA’s output arrangements, which rely centrally on the use of the blanket licence, provide a cost efficient way for users of music to obtain the lawful right to use virtually the world wide repertoire. In the vast majority of cases the users are small businesses which could not otherwise obtain lawful access to most of this music, and could gain access to any part of it only at considerable expense. Under the output arrangements, they can do so, often under only one annual transaction. Compliance in this way with the law ensures that royalties are collected and distributed to the creators of the works - a recognised public benefit that the notion of copyright enshrined in the Copyright Act 1968 is intended to achieve.
Blanket licences have been criticised by certain users as requiring users to pay for music that they do not want. As noted earlier in these reasons (see para 197 above and following) this is a misplaced criticism arising from a misunderstanding of the blanket licence. The blanket licence format is offered by collecting societies worldwide, and is generally recognised as the essential device for efficient licensing of the use of music in all but a few circumstances. The Tribunal agrees with this view of blanket licences.
The proposed MBL in Canada and the per program licences in the United States are blanket licences, and differ only from those offered by APRA in that they provide for adjustment of the fee in respect of programs broadcast by the licensee which do not contain licensed music. It is plainly within the power of the Copyright Tribunal to approve or devise a similar (or different) scheme that allows for a fee adjustment to blanket licences in Australia. The real and substantial difficulty that besets the introduction of a blanket licence that allows for such a fee adjustment in Australia is not the monopoly power of APRA but the complexity of working out how to provide for the calculation of the adjustment – and for the reporting of music use that underlies such a calculation – in a way that does not so increase transaction costs as to defeat the exercise. The parties did not offer a solution to that difficulty in evidence before the Tribunal. We have noted the nature of the schemes devised in the United States and Canada for adjusting blanket licences’ fees to reflect the amount of use of licensed music. There is no reason to believe that a scheme for adjusting blanket licences could not be devised for the Australian copyright environment. That task is, however, one for the Copyright Tribunal, assisted with evidence and submissions directed to the task.
APRA also pointed out another factor that would influence the utility of a scheme that allowed broadcasters to adjust a blanket licence fee to reflect use of directly commissioned works licensed to the broadcaster under an opt-out scheme of the kind proposed by ACCC and FACTS. If the reduction in the blanket licence fee (after allowing for the added reporting and other administration costs) were less than the licence fee paid to the writer, there would be little point in the broadcaster using the modified licence. Commissioned music could be used under the existing regime as it would be covered by the ordinary blanket licence. Thus the fee likely to be offered to the writer would for this reason be pegged at a level which would give little or no incentive to the writer to undertake self-administration of the work. The evidence leaves a large question mark over whether there is likely to be any practical utility in opt out schemes like those proposed by ACCC and FACTS.
The fifty per cent rule
Whilst only a recommendation of CISAC, the rule appears to be generally applied world wide. The Tribunal considers the rule is of only incidental significance. In practical terms the rule does not prevent a writer and a producer agreeing to share royalties on some other basis. If any anti-competitive detriment arises from the rule it is overridden by risk to APRA’s international affiliations if it were removed. Modification of the rule should not be a pre-requisite to authorisation.
We have earlier commented that the evidence before the Tribunal does not establish that the fifty per cent rule reflected in distribution rule 4 is any more than a recommendation by CISAC. However, as a matter of practice, Mr Cottle, who is a member of the Administrative Council and the Asian Pacific Committee of CISAC considers that the rule must be complied with. He believes that departure from it would threaten APRA’s continued affiliation with CISAC and its position as a member of the world community of authors’ collecting societies. Evidence as to the position in overseas societies lends support to Mr Cottle’s opinion.
Both ACCC and FACTS contended that the fifty per cent rule has a significant anti-competitive effect. ACCC submitted that the rule has the potential to inhibit direct commissioning of works by users because it is likely that users and composers will wish to agree to an up-front payment in respect of the commissioned works (with or without provision for the payment of a royalty stream in addition).
In our opinion the rule is only of incidental significance. It is not the fifty per cent rule which prevents producers and others dealing direct with writers for an assignment or licence of performing rights. That restriction arises from the obligation assumed by the writer under the input arrangements constituted by Article 17, and the application for membership. In the absence of that restriction the writer would be free to enter into an arrangement of any kind for the assignment of performing rights and associated revenue, and that would also become the position in the event that a writer opted out of the Article 17 restriction (either under the existing Article 17(b) or, if the rules are amended to permit it, on a work-by-work basis).
In its determination, ACCC sought as a condition for authorisation “the alteration of (APRA’s) distribution arrangements so that the fifty per cent rule does not apply in circumstances where a member assigns all rights to a work to a third party”. If the member were freed from the input arrangement to assign all rights of work to a third party, the distribution rules would for this reason have no application anyway to the works assigned unless the assignor as a member of APRA, later sought to enter them into APRA’s repertoire.
If there were a modified opt-out system which allowed a writer to obtain a non-exclusive licence, revenue received by the writer in respect of the writer’s dealings with performing rights under a sub-licence would not be subject to APRA’s distribution rules. The revenue would go direct to the writer, or at the writer’s direction. The only revenue received by APRA in respect of the performing rights on the work would come from revenue derived from use by other APRA licensees.
In its submissions to the Tribunal, ACCC argued that the rule potentially inhibited the commissioning of works even in situations where the performing rights were assigned to APRA, because the commissioner might wish to receive more than fifty per cent of the royalty stream. The thrust of FACTS’ case was that producers wished to acquire the right to all royalties for exploitation of the performing rights, that is, to buy out the performing rights so that the music was “cleared at source”.
We have noted earlier that the evidence is clear that the distribution rule does not purport to prevent, and does not in fact prevent, writers entering into agreements with publishers and others whereby they receive less than a fifty per cent share of revenue from the performing rights. It is open to writers, producers and to publishers to arrive at whatever allocation they wish for the revenue stream as between themselves. There was no evidence that they felt inhibited from entering into such an agreement by the fact that there may have to be some accounting between them outside the APRA distribution system. Moreover, the evidence of Ms Howland acknowledged that if APRA receives an authority from a member to pay a distribution due to the member to a third party, APRA will act on that authority. This would provide a simple means whereby the writer could direct payment to the commissioning party.
The rule has its rationale in the belief that generally writers are in an inherently inferior bargaining position in their relationships with users, and that, through the collecting societies, the rule works to ensure the continuation of creative output from writers by guaranteeing to them a fair return for the use of their works. APRA’s affiliations with other international collecting societies ensures that the performing right interests of its Australian members are appropriately administered overseas. It would be a very substantial detriment to the Australian members, and would threaten the due payment of overseas earnings to them if APRA’s membership of the international collecting society community were threatened. On the evidence, that risk must be accepted as a real one. If there is any anti-competitive detriment arising from the continuation of the fifty per cent rule, which is open to doubt, the detriment is outweighed by the obvious public benefit of APRA retaining its international affiliations.
Encouraging response to changing circumstances
At times APRA has shown an indifference to the interests and concerns of users in the changing market for music which produces resentment and hostility amongst some users. This is damaging to APRA’s reputation. The Tribunal considers that modification to the input arrangements that allow opt out for single works for performance in carefully defined circumstances would encourage APRA to respond to change.
In paragraphs 183-195 we considered evidence concerning the changing market for music, and APRA’s responses to the changes.
At present APRA’s policies are pitched to achieve user compliance and efficient internal administration, and show a degree of indifference to the interests and understandable concerns of users. Only a little choice of licensing schemes is offered, and schemes on offer are designed to suit public performance licence administration, even in the case of television and diffusion licences. This behaviour is suggestive of a monopoly, convinced of its virtue, and encourages resentment and hostility among users. The Tribunal considers this behaviour is damaging to APRA’s reputation, and potentially a public detriment that could weigh against APRA in future reviews of APRA’s system under competition law. It is to the public benefit that APRA understands and responds to changes in the market for music in ways that seek to accommodate the needs of music users. Competition laws require as much from the holder of a privileged monopoly. It is not suggested that APRA should resile from the pursuit of its members’ interests, but timely and sufficient responses to reasonable user concerns should mark future policies and behaviour of APRA, both in the public interest and in the interests of its members.
The Tribunal has considered how to encourage response to changing circumstances. We consider that if APRA’s input arrangements were modified to allow opt out for single works for performance in carefully defined circumstances that would be a significant first step. The Tribunal recognises that such a modification would have potential risk to the integrity and utility of the APRA system, and would need to be monitored closely.
Evaluation of the opt-out proposals
The Tribunal considers a scheme which permits a non-exclusive licence back to a member of APRA of the performing rights in Australia for a specific work or works to allow the member to grant a sub-licence would not threaten the integrity of the APRA system, and should be required.
The submissions of ACCC and FACTS that APRA’s input arrangements should be modified to allow direct dealing between writers and users such as television broadcasters, and that there should be a mechanism for fee adjustment built into the output arrangements are interrelated matters. Unless there is a resolution of both matters, the introduction of changes to the input arrangements is likely to have little practical impact. FACTS sought initially to address the question of licence fee adjustment by applying to the Copyright Tribunal which has jurisdiction over the output arrangements. That application was not necessarily dependent on a weakening of APRA’s input arrangements as adjustments were sought in respect of non-music programs, and could have been sought also in respect of programs that used music that was not in APRA’s repertoire – e.g., music in the public domain, or music acquired from a music library in the United States that had not been entered into the repertoire of a collecting society. However, it is the question of the input arrangements that has come on for hearing first, before this Tribunal. As neither Tribunal has jurisdiction over both matters, we think we should proceed to determine the question of the input arrangements, and do so on the footing that it will not be impossible for the parties or the Copyright Tribunal to arrive at a method and formula for adjusting licence fees, and moreover to arrive at a result that is not influenced by any inappropriate exercise of monopoly power by either side.
APRA’s input arrangements presently depend on the requirement of exclusive assignment, subject only to the GEMA exception in Article 17(b). Article 17(b) is criticised by ACCC and FACTS on the ground that it is not likely to be utilised by a writer because the difficulties of self-administering a category of works are too great. The GEMA exception, as we have pointed out, was proposed by the Commission of the EC not to facilitate individual administration of a copyright work by a writer, but to remove a barrier to entry which would confront another collecting society. As such, we consider Article 17(b) provides a measure of constraint on the monopoly position of APRA, and would assist, for example in the establishment of a collecting society in a niche market for a particular type or types of music. Overseas competition authorities have also required that the notice provisions for termination of membership be reduced to lessen the barriers to entry to one year under the GEMA decisions, and to two years in Canada. Under APRA’s amended Article 9, the notice period is significantly shorter and, we think is likely to be the minimum period required to enable APRA to process changes to its records and notification of the changes to affiliated overseas collecting societies.
The GEMA exceptions were considered by the MMC and the Irish Competition Authority to have a wider importance on the basis that they provided an avenue for self-administration. However, there is no evidence that such a use has been made of the amended rules by individual writers, presumably because of the difficulties of administering at large a number of works. It is notable that in recommending further modification of the exclusivity rule, both MMC and the Irish Competition Authority limited the further exception which they required from PRS and IMRO to a very narrow and precise situation. Both exceptions were limited to specific works to be performed on specific occasions. But by far the most limiting requirement was that the assignment (in the case of PRS) or the non-exclusive licence (in the case of IMRO) was to be to the member to enable the member to perform the specified work or works on the specified occasions. The exception was to facilitate live performances by a songwriter member. Where the writer is conducting a live performance, monitoring functions such as those normally carried out by a collecting society to detect the use of a work, and to recover appropriate royalties would not arise.
In our opinion it is notable that notwithstanding pressures from major users for a more liberal modification of the exclusivity rules, the changes settled upon in the United Kingdom and Ireland were so restricted in their application. We think this reflects a recognition that the exclusivity rule is central to the operation of a collecting society. Unless the collecting society is able to obtain and retain the ability to licence a comprehensive repertoire of works, the many benefits which have maintained the viability of collecting societies will be lessened. Licensees will not simply obtain comprehensive protection against infringement, transaction costs for licensees will increase, administration costs of the society in respect of recording input information, monitoring use, and effecting distribution will increase significantly, and monitoring and enforcement of copyright by the society will become difficult. Those who attempt self-administration are likely to face an imbalance of bargaining power when dealing with producers and large users of music, and to encounter considerable difficulty in policing their copyright, particularly in respect of overseas performances, and will be at risk of losing royalties. It is understandable that suggested modifications to the requirement of exclusive assignments have been approached with great caution, and we think this Tribunal should proceed in the same way.
The opt-out proposals contended for by ACCC and FACTS seem to disregard the deliberate limitation to the exceptions granted to the requirement of exclusivity imposed by the Articles of PRS and IMRO. The opt-out proposals, even those restricted to a scheme permitting non-exclusive licences to members, envisage that the member could then deal freely with the performing right attaching to the work or works opted out so as to grant to a third party a sub-licence to exploit performing rights, e.g., to a television producer, in consideration, perhaps, of a once-and-for-all, up-front payment. The proposals go far beyond the modifications to the Articles of PRS and IMRO. As APRA points out in its submissions, s 36 of the Copyright Act 1968 provides that it is an infringement of the copyright in a work to do an act comprised in the copyright without the licence of the owner of the copyright. Under a non-exclusive licence on terms similar to those available to a member of IMRO, APRA would remain the owner of the copyright and the third party would still require a licence from APRA to perform the music. APRA’s submissions acknowledge that the apparent intent of the licence-back proposals suggested by ACCC could be achieved by the writer retaining or receiving back the right to grant a sub-licence, or by APRA appointing the composer as APRA’s agent. Neither of these proposals were directly explored in evidence before us. There was no suggestion that APRA should appoint a member as its agent. The implications of allowing a member to grant a sub-licence were, however, indirectly explored in that APRA witnesses gave evidence about administration difficulties that would arise if third parties, like producers, could obtain permission to exploit performing rights direct from the writer.

It is not suggested by APRA that a scheme could not be devised by which, under a non-exclusive licence to a member, APRA authorised the member to grant a sub-licence to another person. We therefore proceed on the footing that this is possible.
We consider that the introduction of an opt-out system on a work-by-work basis which permitted a member either to withhold commissioned work, or to obtain a reassignment of the work already within APRA’s repertoire, should not be required as a condition of authorisation. We think that the risk of harm to the essential structure of APRA, in the ways mentioned above, is too great. On the other hand, an opt-out system under which a member could obtain from APRA a non-exclusive licence for a specific work or works would carry fewer risks. In particular, the non-exclusive licence would not create a “hole” in APRA’s repertoire, and, in the interests of the member, would leave in place a structure under which royalties are collected for local use by other licence holders, and for overseas use.
A non-exclusive licence back to a member subject to the same limitations as the IMRO rules would not provide FACTS with the latitude that it is seeking to deal directly with writers. Indeed, such a modification would probably be used no more than it has been in Ireland under the IMRO modification or anywhere under the PRS modification.
The non-exclusive licence-back proposal contended for by ACCC, set out in para 111 above, would permit a producer of television programs to negotiate directly with a writer, but without the need to specify where and when the production would later be broadcast.
We have already commented that the evidence leaves a question mark over the practical utility of such a scheme, and whether it would be used. However, there is force in the submissions of ACCC that until the exclusivity rule is modified, competitive potentials that might accompany the change will not emerge. We think the appropriate course is to authorise rules that cautiously relax the requirement of exclusive assignment, to test if and how that change affects competition. At the same time the modifications should not be so extensive that they carry the risk of damaging the essential structure of APRA as a collecting society. For that reason, we think that the possible variants 3(a) and (b) to the licence-back proposal suggested by ACCC should be incorporated.
Much of the evidence as to incompatibility of systems between APRA and overseas operators concerns difficulties that would arise in respect of overseas performance of APRA’s Australian repertoire. Those difficulties could be avoided by limiting a non-exclusive licence under the ACCC proposal to Australian performances. To allow the proposed scheme to operate in respect of overseas performances would give rise to incompatibility problems between the systems of different overseas collecting societies, and would be likely to give rise to the sorts of problems encountered by the live performer who endeavoured to self-administer works at concerts in Europe under the PRS rule: see para 237 above. We are persuaded by evidence led by APRA that these problems would not be satisfactorily overcome by variant 3(c) to the ACCC proposal as overseas collecting societies, whose systems would not accommodate such notification, would probably ignore it. On balance, we are not satisfied that a system which permitted opting out by a member on a work by work basis in respect of performances outside Australia should be authorised. We think the risk to the continued efficient operation of the APRA system is, at this time, too great.
The grant of a non-exclusive licence is likely to result in administrative expense for APRA. These added expenses should fall on the member seeking the non-exclusive licence, not on other members of APRA. The PRS rules approved by the Fair Trading Office contain the requirement that:
“The member shall pay to the Society such sum as may be calculated from time to time by the Board. In calculating such sum, the Board shall only be entitled to take into account any expenses which may be reasonably incurred by the Society in connection with and/or arising out of the granting of the assignment”. (Rule 11A(e))
We think that a term along these lines should also be included.
Summary
In summary, the input arrangements of APRA, which require an exclusive assignment of performing rights subject only to Article 17(b), could be modified in the manner that we have mentioned without creating undue risk to the essential elements of APRA’s role as a collecting society and should be modified in that manner. Similarly, we think a case for a simplified dispute resolution process has been established.
Whilst we consider that the public benefits arising from APRA’s collective administration of performing rights exceed the anti-competitive detriments flowing from its operations, we consider that authorisation should be withheld until these two matters have been put in order by APRA. We think the appropriate course is to adjourn the proceedings to enable APRA to design rules for a non-exclusive opt-out system on a work-by-work basis, and an alternative dispute resolution procedure. A similar course was followed by the Tribunal in Re Media Council (No 2) at 48,455.
It also follows from these conclusions that pursuant to s 102(4) of the Trade Practices Act the notice given by ACCC to APRA under s 93(3) should be set aside.
Subject to these matters being attended to, we think it would be appropriate to grant an authorisation until 30 June 2004. We do not think the authorisation should be for longer as technological and other changes are constantly having an effect on aspects of the relevant market.
We think the matter should be adjourned for about nine months. This is a substantial time, but we recognise that the task of designing a proposal along the lines envisaged, and obtaining comment from members and licensees who may wish to utilise an opt-out scheme, will not be an easy one. The matter will then be relisted for the Tribunal to consider APRA’s proposals for change with a view to granting authorisation if the proposals are approved by the Tribunal. In the meantime an interim authorisation should be given in respect of the six applications that were not authorised by ACCC.
The notice given by ACCC to APRA under s 93(3) is set aside.

I certify that the preceding three hundred and sixty-four (364) numbered paragraphs are a true copy of the Reasons for Decision herein of the Tribunal.
Associate:
Dated:            16 June 1999
Counsel for APRA                :          Mr D K Catterns QC with Mr A I Tonking
Solicitor for APRA                :          Banki Haddock Fiora
Counsel for FACTS               :          Mr W H Nicholas QC with Mr C P Comans
Solicitor for FACTS              :          Boyd House & Partners
Counsel for ACCC                :          Mr A J L Bannon SC with Mr J R J Lockhart
Solicitor for ACCC               :          Australian Competition and Consumer Commission
Dates of hearing  :          26, 27, 28, 29 & 30 October 1998 & 2, 3, 4, 5, 6, 9, 11,
  12 & 13 November 1998
Date of decision  :          16 June 1999

Paragraph No.
1.	INTRODUCTION	1
Background to proceedings	1
Statutory regime under the TPA	17
Copyright in original literary and musical works	34
Protection of foreign works	45
Collecting societies	50
2.	APRA’S STRUCTURE AND RULES	63
Input arrangements	63
Output arrangements	69
Distribution arrangements	70
Overseas arrangements	78
3.	THE CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS AND THE ALLEGED ANTI-COMPETITIVE CONDUCT IN ISSUE	79
4.	THE ACCC DETERMINATION ON 14 JANUARY 1998	89
Opt-out system proposed	97
Appeal mechanism proposed	98
The fifty per cent rule	100
5.	THE HEARING BEFORE THE TRIBUNAL	101
APRA’s contentions	103
ACCC’s contentions	109
FACTS’ contentions	115
6.	APRA’S ADMINISTRATION OF PERFORMING RIGHTS	120
Collective administration	120
The assembly of APRA’s repertoire	131
Licensing of music users	133
Collection and enforcement of royalty payments	148
Distribution	151
International cooperation	166
Cost of administration	176
7.	CHANGING CIRCUMSTANCES	183
The changing market for music	183
Growing user resentment of APRA’s administrative practices	187
Criticisms of the APRA blanket licence	196
8.	REGULATION OF PERFORMING RIGHT COLLECTING SOCIETIES	210
Australia – the Copyright Tribunal	210
The European Union	220
United Kingdom	229
Ireland	239
Canada	247
United States of America	258
9.	PUBLIC BENEFITS AND ANTI-COMPETITIVE DETRIMENTS	286
The relevant market	286
Benefits and detriments	293
10.	CONCLUSIONS	307
Determining the public benefit	307
The Copyright Tribunal	312
A new dispute resolution mechanism	316
The blanket licence	332
The fifty per cent rule	336
Encouraging response to changing circumstances	344
Evaluation of the opt-out proposals	347
Summary	359

THE AUSTRALIAN COMPETITON TRIBUNAL	NOS. 4 & 5 OF 1998
RE:	APPLICATION FOR REVIEW OF THE DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 14 JANUARY 1998 DENYING AUTHORISATION IN RELATION TO APPLICATION NOS A30186, A30187, A30188, A30190, A30191 AND A30193; AND OF THE GIVING OF NOTICE BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION ON 14 JANAURY 1998 UNDER SUBSECTION 93(3) IN RELATION TO NOTIFICATION NO. N30751 (STANDARD ARRANGEMENTS FOR THE ACQUISITION AND LICENSING OF THE PERFORMING RIGHTS IN APRA’S MUSICAL REPERTOIRE)
BY:	AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LIMITED Applicant
MEMBERS:	JUSTICE VON DOUSSA, DR B I ALDRICH & PROFESSOR R C DUNCAN
DATE:	16 JUNE 1999
PLACE:	SYDNEY