Case C‑372/19 - Royalties collected by a collective management organization for communication to the public of musical works protected by copyright at a festival

On November 25, 2020, the Court of Justice (“ECJ”) rendered its judgment in Case C-327/19, stating that the fee structure for music played at festivals adopted by the Belgian collecting society SABAM is not necessarily abusive under Article 102 TFEU.

The case originated with a request for a preliminary ruling from the Antwerp Business Court (Ondermingsrechtbank Antwerpi) in two disputes — the first between Belgische Vereniging van Auteurs, Componisten en Uitgevers CVBA (“SABAM”) and the company Weareone World BVBA (“W.W”) and the second between SABAM and the company Wecandance NV (“WCD”) — concerning royalties collected by SABAM for the use of musical works in its repertoire at festivals organized by W.W and WCD and over unpaid royalties for music used at the Tomorrowland and Wecandance festivals during the period from 2013 to 2016. The organizers claimed that the royalty fees charged by SABAM were abusive, since they were not proportionate to the economic value of the licensing services provided for the work from SABAM’s repertoire used during the festival, which amounted to less than one third, or at least less than two thirds, of all festival music. Consequently, the flat rate and discount formulas did not reflect SABAM’s contribution in a sufficiently precise manner and were based in part on elements unrelated to those services. In response to the request for a preliminary ruling, the Antwerp court asked whether according to Article 102 TFEU there is abuse of a dominant position if a copyright management company that has a de facto monopoly in a Member State applies a remuneration model based, among other things, on turnover and using a flat-rate tariff in tranches, rather than a tariff that takes into account the precise share of the music repertoire protected by the management company played during the event and establishes license fees based on external elements, such as, inter alia, the admission price, the price of refreshments, the artistic budget for the performers, and the budget for other elements.

In its judgment the ECJ ruled that using total revenues as a tariff base does not raise specific concerns under Article 102. The ECJ stated that there is no single suitable method for identifying the contribution made by the music to the overall attractiveness of a live music festival, thereby confirming the arguments already expressed in the opinion of Advocate General Pitruzzella. Pitruzzella stated that the examination of possible unfairness of the rates charged by collective management organizations for musical works should be carried out by identifying the most relevant method on a case-by-case basis. Requiring a collecting society to make such a calculation would constitute an unreasonable administrative burden. It follows that when a collecting society charges a tariff in which royalties owed are calculated by taking into consideration a tariff based on the gross revenues deriving from the sale of entrance tickets, without the opportunity to deduct all expenses relating to the organization of such events from said revenues, that does not, in itself, constitute abusive behavior under Article 102 TFEU. On the other hand, it also stated that, even if the tariff structure is lawful, it may still be considered too high and therefore excessive. However, it is for the referring court to decide whether this is the case.

As for SABAM’s incremental tariffs and reasonable remuneration of the performance of the collecting society based on the share of the music repertoire of the collecting society actually performed, the ECJ ruled that these substantial increases could be considered a violation of Article 102 if there exists a better method to determine with greater precision the actual share of SABAM’s repertoire and where this method is suitable for achieving the same legitimate purpose. That purpose is the protection of the interests of authors, composers, and music publishers, without, however, instituting a disproportionate increase in the costs incurred for the management of contracts and oversight of the use of musical works protected by copyright. According to the ECJ, various elements attest to the potential for SABAM to have recourse to such an alternative method in the circumstances. The ECJ indeed emphasized that there are software-based solutions that seem to make it possible to determine precisely the proportion of SABAM’s repertoire performed during a festival and conversely states that the one third to two thirds rule provides only a very rough estimate of the quantity of musical works from the SABAM repertoire actually performed. However, in this case this remains for the referring court to verify in light of the specific instance in question and taking into account all relevant circumstances, including the availability and reliability of the data provided, as well as the existing technological tools.

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