The methodology for pricing copyright materials is under scrutiny, with the release on 23 October 2018 of the Australian Competition and Consumer Commission's draft Copyright Guidelines for public consultation. If finalised, the principles set out in the Copyright Guidelines are intended to provide a framework to assist the Copyright Tribunal of Australia in making decisions on the reasonable pricing and terms and conditions of voluntary copyright licences and licence schemes.
What has prompted the ACCC to release the Copyright Guidelines?
The Copyright Tribunal is an independent body governed by the Copyright Act 1968 (Cth) and the Copyright Regulations 2017 and was established to address cases where a monopoly or quasi-monopoly exists by reason of the licensing of copyright material by a collecting society.
Existing or proposed licence schemes can be referred to the Copyright Tribunal whose task is to determine the reasonableness of the terms and conditions of those licences. The Copyright Tribunal acts as a constraint on the exercise of market power by collecting societies through its ability to confirm or vary a proposed or existing licence scheme, or substitute a new scheme for the one referred to it.
However, the task of determining an appropriate methodology for pricing copyright materials is particularly challenging given the significant variance in type, volume and utility of copyright materials.
When considering an application in relation to a voluntary licence or licence scheme, the Copyright Tribunal must have regard to any relevant ACCC guidelines if requested to do so by a party to the proceeding. In this context the ACCC has released the draft Copyright Guidelines, which are intended to assist the Copyright Tribunal in determining the reasonable remuneration for copyright materials.
What types of licences do the Copyright Guidelines address?
While there are a variety of revenue sources available to copyright owners and content creators, the Copyright Guidelines relate specifically to copyright licensing arrangements administered by collecting societies.
In Australia, it is not uncommon for copyright owners to assign their rights to collecting societies that establish licence schemes for particular industries or classes of users under which they offer "blanket licences" containing standard fees and conditions. While these licensing arrangements can be an efficient way to overcome the high transaction costs of direct copyright licensing, there can be the potential for market distortion if there is a misuse by the collecting society of its market power.
What effect will the guidelines have?
The Copyright Guidelines are ultimately intended to assist the Copyright Tribunal in matters where it has been asked to consider the reasonableness of voluntary licences or licence schemes that are brought before it. While advisory in nature and not determinative, the principles contained in the guidelines will likely be an important factor for the Copyright Tribunal if it is asked to consider voluntary licences or licence schemes.
The Copyright Tribunal's finding will be binding not only on the parties to the proceeding, but orders made in relation to a licence scheme will generally bind all other users of the copyright material to which that scheme relates.
Additionally, the guidelines may also facilitate licence discussions between copyright users and collecting societies when negotiating reasonable copyright remuneration by providing insight into the economic framework that the ACCC considers could reasonably be adopted and the approaches that can be used in applying that framework. In turn, this could potentially reduce the number or scope of matters requiring determination by the Copyright Tribunal.
What key matters do the Copyright Guidelines address?
The Copyright Guidelines set out various economic principles that the ACCC considers relevant to determining an appropriate methodology for pricing copyright material and which focus on countering any market power held by collecting societies in the provision of blanket licences.
These include:
- an overview of the economics of copyright and copyright licensing;
- collective licensing and direct licensing; and
- pricing principles to constrain market power.
Ultimately, the ACCC recommends two methods as appropriate for pricing copyright materials if feasible in the circumstances of the case:
- benchmarking: ie. using appropriate existing rates as a source of information for determining reasonable remuneration; and
- constructing a hypothetical bargain between a licensor and licensee with equal bargaining power.
The Copyright Guidelines state that where possible both approaches should be used as a cross-check against one another. If there are substantial differences between prices determined using the two approaches, then further investigation may be required.
What next?
The ACCC is seeking public comment and submissions on the draft Copyright Guidelines before it moves towards issuing final guidelines.
Australian businesses, particularly those that are party to or may require licences from a collecting society, should consider making an online submission to the ACCC consultation hub by 5.00 pm on Tuesday 20 November 2018.