Europe's music industry may face an in-depth antitrust probe by the now-expanded European Union (EU), as the EU warns 16 European copyright licensing authorities that they may be in breach of antitrust rules.
Sixteen collecting societies around the European Union may be in breach of antitrust rules because the cross-licensing arrangements they have made to distribute royalties to lyric authors and songwriters may lead to an effective lock-up of national territories, the Commission said.
If proven to be the case, this would transpose into the Internet the national monopolies that these societies have traditionally held in the offline world, the Commission said.
There should be competition between collecting societies to the benefit of the companies that offer music on the Internet and to the consumers that listen to it, the Commission said.
The 16 collecting societies notified the European Commission of their agreement to cooperate in the online world in April 2001. The agreement, known as the Santiago agreement, was initially signed by the collecting societies of the UK, France, Germany and the Netherlands. All other collecting societies in the EU, including the Swiss society but excluding the Portuguese body, subsequently signed up.
The purpose of the agreement is to allow each of the participating societies to grant to online commercial users such as Apple's iTunes Music Store one-stop shop copyright licences, which give the online music traders access to the music repertoires of all collecting societies in all the territories.
However, Europe's regulators are concerned that several cross-licensing agreements between societies had caused a de facto "lock up" of national territories, thereby extending national monopolies to the Internet.
The loss of territoriality brought about by the Internet and the digital format of products such as music files are difficult to reconcile with traditional copyright licensing schemes based on national procedures, the Commission said.
Once made available on the Internet, a musical work is accessible from almost anywhere in the world, yet the traditional way of licensing music requires a commercial user to sign a copyright license for each territory in which it has customers.
The Santiago agreement is intended to adapt this traditional framework to the online world to allow the legal downloading or streaming of music onto people's computers. The Commission said it supported this aim, but it considers that such crucial developments in online-related activities must be accompanied by an increasing freedom of choice by consumers and commercial users throughout Europe in order to create a genuine Europe-wide single market.
The structure put in place by the parties to the Santiago agreement results in commercial users being limited in their choice to the monopolistic collecting societies established in their own member state, it said.
Apple has been forced to delay launching iTunes in the European Union because it has been unable to strike a workable arrangement with the collecting societies.
"The collecting societies are the main reason why European citizens still do not have a legal Europe-wide way of accessing music through their computers," said a person from the computer industry who asked not to be named.