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)   (Text with EEA relevance)
Date: 2006-05-23
Institutions: European Commission
Subjects: audiovisual industry, competition law, economic concentration, exchange of information, intellectual property, merger control, music

C 122/2

EN

Official Journal of the European Union

23.5.2006

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 Agree-
ment)

(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 infringe-
ment 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 commit-
ments.
Interested parties may submit their observations
within the time limit fixed by the Commission.

2. The parties and the agreement

2. On 27 February 2003 the record company Universal Inter-
national 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 socie-
ties (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.

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.

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 administra-
tion 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 provi-
sion 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 assess-
ment of the Commission, this clause has the object and
may have the effect of crystallising current market struc-
tures and preventing any future potential competition
from collecting societies towards music publishers and/or
record companies.

4. The main content of the offered commitments

(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).

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

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

Warner.

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 Agree-
ment.

23.5.2006

EN

Official Journal of the European Union

C 122/3

8. With regard to clause 9(a) the parties to the Cannes Exten-
sion 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 socie-
ties.

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

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 commer-
cial 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:

10. The Commission intends, subject

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 Directo-
rate General for Competition, to be binding.

to market

testing,

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