# C_2006122EN.01000201.xml

| 23.5.2006 | EN | Official Journal of the European Union | C 122/2 |
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23.5.2006

EN

Official Journal of the European Union

C 122/2

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Notice published pursuant to Article 27(4) of Council Regulation (EC) No 1/2003 in Case COMP/C.2/38.681 — Universal International Music BV/MCPS and others (The Cannes Extension Agreement)

(2006/C 122/02)

(Text with EEA relevance)

1.   Introduction

| 1. | According to Article 9 of Council Regulation (EC) No 1/2003 (1), the Commission may decide — in cases where it intends to adopt a decision requiring that an infringement is brought to an end and the parties concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment — to make those commitments binding on the undertakings. Such a decision may be adopted for a specified period and shall conclude that there are no longer grounds for action by the Commission. According to Article 27(4) of the same Regulation, the Commission shall publish a concise summary of the case and the main content of the commitments. Interested parties may submit their observations within the time limit fixed by the Commission. |
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1.

According to Article 9 of Council Regulation (EC) No 1/2003 (1), the Commission may decide — in cases where it intends to adopt a decision requiring that an infringement is brought to an end and the parties concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment — to make those commitments binding on the undertakings. Such a decision may be adopted for a specified period and shall conclude that there are no longer grounds for action by the Commission. According to Article 27(4) of the same Regulation, the Commission shall publish a concise summary of the case and the main content of the commitments. Interested parties may submit their observations within the time limit fixed by the Commission.

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2.   The parties and the agreement

| 2. | On 27 February 2003 the record company Universal International Music BV filed a complaint with the Commission concerning a clause of the Cannes Extension Agreement (the Agreement), which is an agreement concluded among thirteen European mechanical copyright collecting societies (2) and the five major music publishers (3). The aim of the Agreement is to regulate certain issues in the relations between the thirteen collecting societies and the five major publishers in the administration of mechanical copyright for the reproduction of sound recordings on physical carriers. The Agreement was subsequently notified to the Commission under the procedure of Regulation No 17. The notification procedure was discontinued after the entry into force of Regulation (EC) No 1/2003. |
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2.

On 27 February 2003 the record company Universal International Music BV filed a complaint with the Commission concerning a clause of the Cannes Extension Agreement (the Agreement), which is an agreement concluded among thirteen European mechanical copyright collecting societies (2) and the five major music publishers (3). The aim of the Agreement is to regulate certain issues in the relations between the thirteen collecting societies and the five major publishers in the administration of mechanical copyright for the reproduction of sound recordings on physical carriers. The Agreement was subsequently notified to the Commission under the procedure of Regulation No 17. The notification procedure was discontinued after the entry into force of Regulation (EC) No 1/2003.

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3.   The preliminary assessment

| 3. | The Commission informed the thirteen collecting societies and the five major publishers by letter dated 24 January 2006 of its preliminary assessment within the meaning of Article 9(1) of Regulation (EC) No 1/2003. |
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3.

The Commission informed the thirteen collecting societies and the five major publishers by letter dated 24 January 2006 of its preliminary assessment within the meaning of Article 9(1) of Regulation (EC) No 1/2003.

| 4. | According to the Commission's preliminary assessment two clauses of the Agreement raise serious concerns as to their compatibility with Article 81 of the EC Treaty and 53 of the EEA Agreement. The first is clause 9(a) of the Agreement which relates to the granting of rebates by collecting societies to record companies in the context of Central Licensing Agreements, which are multi-repertoire one-stop-shop licenses for the whole EEA territory. The second is clause 7(a)(i), which relates to the ability of collecting societies to undertake commercial publishing or record producing activities. |
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4.

According to the Commission's preliminary assessment two clauses of the Agreement raise serious concerns as to their compatibility with Article 81 of the EC Treaty and 53 of the EEA Agreement. The first is clause 9(a) of the Agreement which relates to the granting of rebates by collecting societies to record companies in the context of Central Licensing Agreements, which are multi-repertoire one-stop-shop licenses for the whole EEA territory. The second is clause 7(a)(i), which relates to the ability of collecting societies to undertake commercial publishing or record producing activities.

| 5. | According to clause 9(a) of the Agreement a collecting society would have to obtain the written consent of the ‘relevant member’ before granting a rebate to a record company in the context of a Central Licensing Agreement. The rebate is calculated as a percentage of the administration fees paid to collecting societies by their members for the administration of the members' copyright. Given that a Central Licensing Agreement normally concerns the entire repertoire of a collecting society (that of its members and that of the other collecting societies, made available to it by means of reciprocal representation agreements) this clause would mean that a collecting society would have to obtain the written consent of all of its members, which can be thousands. It is also possible to interpret the clause as requiring the consent of the other collecting societies' members or other collecting societies as well. The provision therefore can have the effect of preventing the granting of rebates by a collecting society that negotiates a Central Licensing Agreement with a record company. |
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5.

According to clause 9(a) of the Agreement a collecting society would have to obtain the written consent of the ‘relevant member’ before granting a rebate to a record company in the context of a Central Licensing Agreement. The rebate is calculated as a percentage of the administration fees paid to collecting societies by their members for the administration of the members' copyright. Given that a Central Licensing Agreement normally concerns the entire repertoire of a collecting society (that of its members and that of the other collecting societies, made available to it by means of reciprocal representation agreements) this clause would mean that a collecting society would have to obtain the written consent of all of its members, which can be thousands. It is also possible to interpret the clause as requiring the consent of the other collecting societies' members or other collecting societies as well. The provision therefore can have the effect of preventing the granting of rebates by a collecting society that negotiates a Central Licensing Agreement with a record company.

| 6. | Clause 7(a)(i) provides that collecting societies shall never engage into any activities that might be the activities of a publisher or a record company. According to the assessment of the Commission, this clause has the object and may have the effect of crystallising current market structures and preventing any future potential competition from collecting societies towards music publishers and/or record companies. |
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6.

Clause 7(a)(i) provides that collecting societies shall never engage into any activities that might be the activities of a publisher or a record company. According to the assessment of the Commission, this clause has the object and may have the effect of crystallising current market structures and preventing any future potential competition from collecting societies towards music publishers and/or record companies.

4.   The main content of the offered commitments

| 7. | The parties to the Cannes Extension Agreement do not agree with the Commission's preliminary assessment. They have, nevertheless, offered commitments according to Article 9 of Regulation (EC) No 1/2003, in order to meet the Commission's competition concerns. The commitments relate to both clause 9(a) and clause 7(a)(i) of the Agreement. |
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7.

The parties to the Cannes Extension Agreement do not agree with the Commission's preliminary assessment. They have, nevertheless, offered commitments according to Article 9 of Regulation (EC) No 1/2003, in order to meet the Commission's competition concerns. The commitments relate to both clause 9(a) and clause 7(a)(i) of the Agreement.

| 8. | With regard to clause 9(a) the parties to the Cannes Extension Agreement have offered a commitment to reformulate the wording of the clause. The new wording of clause 9(a) will provide that a collecting society may grant a rebate to a record company, if so decided by the competent body of that society. It also provides that, with the exception of four cases specifically mentioned in the clause, all rebates or other discounts to record companies shall be included in the Rate, as defined in the Agreement, and shall not reduce the income of the Members of the collecting societies. |
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8.

With regard to clause 9(a) the parties to the Cannes Extension Agreement have offered a commitment to reformulate the wording of the clause. The new wording of clause 9(a) will provide that a collecting society may grant a rebate to a record company, if so decided by the competent body of that society. It also provides that, with the exception of four cases specifically mentioned in the clause, all rebates or other discounts to record companies shall be included in the Rate, as defined in the Agreement, and shall not reduce the income of the Members of the collecting societies.

| 9. | With regard to clause 7(a)(i) the parties to the Cannes Extension Agreement have agreed to delete the clause and not to enter in a clause with similar effect for the future. |
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9.

With regard to clause 7(a)(i) the parties to the Cannes Extension Agreement have agreed to delete the clause and not to enter in a clause with similar effect for the future.

5.   Invitation to make comments

| 10. | The Commission intends, subject to market testing, to adopt a decision under Article 9(1) of Regulation (EC) No 1/2003 declaring the commitments summarised above and published on the Internet, on the website of the Directorate General for Competition, to be binding. |
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10.

The Commission intends, subject to market testing, to adopt a decision under Article 9(1) of Regulation (EC) No 1/2003 declaring the commitments summarised above and published on the Internet, on the website of the Directorate General for Competition, to be binding.

| 11. | In accordance with Article 27(4) of Regulation (EC) No 1/2003, the Commission invites interested third parties to submit their observations on the proposed commitments. These observations must reach the Commission not later than one month following the date of this publication. Interested third parties are also asked to submit a non-confidential version of their comments, in which commercial secrets and other confidential passages are deleted and are replaced as required by a non-confidential summary or by the words ‘[commercial secrets]’ or ‘[confidential]’. Legitimate requests will be respected. |
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11.

In accordance with Article 27(4) of Regulation (EC) No 1/2003, the Commission invites interested third parties to submit their observations on the proposed commitments. These observations must reach the Commission not later than one month following the date of this publication. Interested third parties are also asked to submit a non-confidential version of their comments, in which commercial secrets and other confidential passages are deleted and are replaced as required by a non-confidential summary or by the words ‘[commercial secrets]’ or ‘[confidential]’. Legitimate requests will be respected.

| 12. | Observations can be sent to the Commission by e-mail (GREFFE-ANTITRUST@cec.eu.int), by fax (No (32-2) 295 01 28) or by post, under reference number COMP/C.2/38.681 — Universal International Music BV/MCPS and others, to the following address:





  European Commission |
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| Directorate-General for Competition |
| Antitrust Registry |
| B-1049 Brussels |
| Fax (32-2) 295 01 28 |

12.

Observations can be sent to the Commission by e-mail (GREFFE-ANTITRUST@cec.eu.int), by fax (No (32-2) 295 01 28) or by post, under reference number COMP/C.2/38.681 — Universal International Music BV/MCPS and others, to the following address:

European Commission

Directorate-General for Competition

Antitrust Registry

B-1049 Brussels

Fax (32-2) 295 01 28

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(1)  Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ L 1, 4.1.2003, p. 1-25).

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(2)  The thirteen societies are: AEPI, AustroMechana, GEMA, MCPS, MCPSI, NCB, SABAM, SDRM, SGAE, SIAE, SPA, STEMRA and SUISA.

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(3)  The five major music publishers are BMG, EMI, Sony, Universal and Warner.

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