Lindgren, Justice Kevin --- "Market Power, Collecting Societies and the Role of the Copyright Tribunal" (FCA) [2005] FedJSchol 16

Competition Law Conference

Sydney – 2005

Market Power, Collecting Societies
and the Role of the Copyright Tribunal

Justice K E Lindgren
A Judge of the Federal Court of Australia
President of the Copyright Tribunal

Market Power, Collecting Societies
and the Role of the Copyright Tribunal

1. Introduction 1

2. The Copyright Tribunal and two forms of licensing 2

2.1 Voluntary licences 3

2.2 Statutory licences 4

3. Historical background to the creation of the Tribunal 8

3.1 The Owen Royal Commission 8
3.2 The ‘Spicer’ Committee and the Copyright Act 1968 12

4. The Australian collecting societies and the scope of
their activities 15

4.1 APRA 15

4.2 AMCOS 16

4.3 CAL 16

4.4 AVCS (‘Screenrights’) 17

4.5 PPCA 18

4.6 Vi$opy 18

4.7 General features 19

5. Some decisions of the Tribunal 19

5.1 Report of the Inquiry by the Copyright Tribunal into the
Royalty Payable in Respect of Records Generally, published
on 24 September 1979 19

5.2 WEA Records Pty Ltd v Stereo FM Pty Ltd (1983) 48 ALR 91
(Full Tribunal) (‘WEA Records’) 21

5.3 Copyright Agency Ltd v Department of Education of New South
Wales (1985) 4 IPR 5 (Sheppard P) (‘First Schools Case’) 22

5.4 Re Applications by MCM Networking Pty Ltd and Others (1989) 25 IPR 597 (Full Tribunal) 23

5.5 Copyright Agency Ltd v University of Adelaide [1999] ACopyT 1; (1998) 42 IPR 529
(Burchett P) 24

5.6 Copyright Agency Ltd v Queensland Department of Education
[2002] ACopyT 1; (2002) 54 IPR 19 (Finkelstein DP) (‘Second Schools Case’) 25

6. Some approaches to quantification 26

7. Related considerations of competition policy in relation to collecting societies 27

7.1 Reference by Australasian Performing Right Association Ltd; Re Australian Broadcasting Corporation (1985) 5 IPR 449 28

7.2 APRA’s applications for authorisation under s 88(1) of the TP Act 29

8. Recent recommendations for reform 33

8.1 Shane Simpson, 1995 33
8.2 Copyright Law Review Committee, December 2000 34
8.3 Ergas Committee, December 2000 and the Government’s response 35

9. Adducing evidence of market power before the Tribunal 38

10. Conclusion 39

Market Power, Collecting Societies
and the Role of the Copyright Tribunal [*]

Justice K E Lindgren
A Judge of the Federal Court of Australia
President of the Copyright Tribunal

1. Introduction

The question which I wish to raise is one of the relationship between the market power possessed by collecting societies and copyright owners, and the role of the Copyright Tribunal (‘the Tribunal’) of determining amounts payable to copyright owners, often through their collecting societies, under various provisions of the Copyright Act 1968 (Cth) (‘the Act’).

Those provisions confer jurisdiction on the Tribunal to determine amounts, variously described, payable to copyright owners by would-be users of copyright material, failing agreement between them.

In many cases, the amounts are described as amounts of ‘equitable remuneration’, see:

ss 47(3), 70(3) and 149;

ss 47A(8) and 149A;

ss 107(3) and 150;

ss 108(1) and 151;

ss 135H, 135J(1),(1A), 135JA(1),(2) and 153A;

ss 135ZU(1), 135ZW(1), 135ZWA(1) and 153C;

ss 135ZZM(1), and 153M

ss 183A and 153K

Section 109 creates a licence in favour of those who make broadcasts in certain circumstances of published sound recordings, and the amount payable by the broadcaster to the owner of the copyright in the sound recording is described simply as ‘such amounts (if any) as may be specified in, or determined in accordance with, an order of the Tribunal made under [s 152] ...’. (Section 152 governs the application to the Tribunal.)

Under ss 55 and 152A (pursuant to the statutory licence created in favour of manufacturers of records of copyright musical works), the amount which the Tribunal may be called upon to determine is an ‘equitable amount of royalty’.

Section 183 creates a licence in favour of the Commonwealth and the States in respect of the doing of any acts comprised in copyright if done for the services of the Commonwealth or a State, and it is ‘the terms for the doing of the act ‘which the Tribunal is empowered by ss 183(5) and 153E to ‘fix’. But if there is a declared collecting society, there is substituted an obligation to pay ‘equitable remuneration’ to that collecting society: s 183A.

The Tribunal is given jurisdiction to determine amounts of charges that are ‘reasonable in the circumstances’ by s 157, which provides for applications to the Tribunal in relation to voluntary licences.

Enough has been said to show that there is not a single statutory formula under which the Tribunal arrives at an amount, although the most common one is ‘equitable remuneration’. In the determinations which the Tribunal has made to date, there has not been any difference of approach according to the statutory description applicable.

2. The Copyright Tribunal and two forms of licensing

Part VI of the Act is headed ‘THE COPYRIGHT TRIBUNAL’, and within that Part, Div 3 (ss 148–162) deals with the various applications and references that may be made to the Tribunal.
Licence schemes may be ‘referred’ to the Tribunal (ss 154–156); otherwise, the Tribunal’s jurisdiction is invoked by an ‘application’ (applications may, however, be made under s 157(1) and (2) in cases to which a licence scheme applies).

There are two forms of licensing for present purposes: statutory and voluntary. Statutory licences are created by the Act when specified conditions are satisfied. Other licences are voluntary. The terms of a voluntary licence are, at least in principle, a matter for negotiation between the copyright owner or its representative, such as a collecting society, and the intending licensee. In practice, however, the collecting societies offer licences on the terms of their standard printed forms.

2.1 Voluntary licences

Many of the Act’s provisions relevant to voluntary licences depend on the notion of a ‘licence scheme’ ( exceptionally, subss 157(3) and (4) do not). A ‘licence scheme’ is defined in s 136 of the Act as follows:

‘licence scheme means a scheme (including anything in the nature of a scheme, whether called a scheme or tariff or called by any other name) formulated by a licensor or licensors and setting out the classes of cases in which the licensor or each of the licensors is willing, or the persons on whose behalf the licensor or each of the licensors acts are willing, to grant licences and the charges (if any) subject to payment of which, and the conditions subject to which, licences would be granted in those classes of cases.’

The licences granted under licence schemes are often referred to as ‘blanket licences’. They cover all the works in the particular collecting society’s repertoire. This may go beyond the would-be user’s needs, but the collecting societies do not grant licences in respect of individual works. If, for example, a hotel or fitness centre wishes to be able to play recorded music, it will find that the only licence on offer from the Australian Performing Right Association Ltd (‘APRA’) is a licence to play all and any of the music in APRA’s repertoire. The Copyright Law Review Committee (‘CLRC’) has described blanket licences as ‘standard licences for a particular industry or other collectively identifiable group which require the payment of a standard fee regardless of the level of use’: see the CLRC’s report to the Attorney-General, Jurisdiction and Procedures of the Copyright Tribunal, December 2000, at 28.

Sections 154–156 contain provisions for reference to the Tribunal by the ‘licensor’ (defined in s 136 to include an owner or prospective owner of copyright, and, for example, a collecting society acting as agent for such a person), and by would–be licensees and organisations representing them, of existing and proposed licence schemes.

Section 157 provides for various kinds of application to the Tribunal by licensors and would-be licensees and organisations representing them, where there has been a failure to agree on the grant of a licence. The Tribunal is given jurisdiction to confirm or vary a licence scheme or proposed licence scheme. It is also given jurisdiction to make orders as to the charges and conditions the Tribunal considers ‘reasonable in the circumstances’, in relation to the granting of a particular licence, whether under a licence scheme or not. For example, subss 157(3) and (4) provide for the making of applications to the Tribunal where a licence is required in a case to which a licence scheme does not apply.

2.2 Statutory licences

Generally speaking, the various statutory licences are characterised by provisions:

• that ‘copyright is not infringed’ if the conditions specified in the particular section are satisfied;
• for a declared collecting society to administer the statutory licence;
• that both the user of the copyright material and the purpose of its use must satisfy the relevant statutory description;
• that the user must notify the declared collecting society of the use being made of the copyright material, and, except where the user is the Commonwealth or State Government, must undertake to pay to the declared collecting society for the use of the copyright material, an amount described (such as, ‘equitable remuneration’), either as agreed, or, failing agreement, as determined by the Tribunal; and
• for determining the extent of copying that takes place under the statutory licence.

I will deal with four forms of statutory licence (as noted in [1] and [5.1], there are others). I will briefly describe the régimes under Part VA and Part VII Div 2 of the Act: the régimes under Parts VB and VC are generally similar to that under Part VA.

Part VA provides for a statutory licence in favour of educational institutions and institutions assisting persons with an intellectual disability, in respect of the copying of broadcasts and the communicating of copies of broadcasts. The key provision is s 135E, which is to the effect that if the body administering the institution gives a ‘remuneration notice’ to the collecting society which is declared under s 135P by the Attorney-General to be the collecting society for the purposes of Pt VA, undertaking to pay to that collecting society equitable remuneration for copies of broadcasts made by the administering body or on its behalf, or for communications by it or on its behalf of such copies,

• the copyright in the broadcast, or in any work, sound recording or cinematograph film included in the broadcast, is not infringed by the copying or communication; but
• the administering body is obliged to pay to the declared collecting society equitable remuneration, as agreed between the administering body and the collecting society, or failing agreement, as determined by the Tribunal.

Sections 135P and 135Q, respectively, empower the Attorney-General, by notice in the Gazette, to declare a body named in the notice to be the collecting society (for the purposes of Pt VA), and to revoke such a declaration. By a ‘remuneration notice’, the administering body undertakes to pay equitable remuneration to the collecting society for the copies of broadcasts or communications of copies: s 135G. Part VA contains detailed provisions directed to enabling a figure to be assigned to the number of copies that are made or the number of communications that take place. Finally, there is provision for the declared collecting society to recover the amount of equitable remuneration in the Federal Court of Australia or in any other court of competent jurisdiction, as a debt due to the collecting society.

Audiovisual Copyright Society Ltd (‘AVCS’), trading as ‘Screenrights’, has been declared by the Attorney-General under s 135P as the collecting society for the purposes of Pt VA.

Part VB concerns the statutorily licensed reproduction and communication of works in hard copy and electronic form by educational institutions, institutions assisting persons with an intellectual disability, and institutions assisting persons with a print disability. AVCS and Copyright Agency Ltd (‘CAL’) are the collecting societies declared by the Attorney-General under s 135ZZB for the purposes of Part VB.

Part VC provides for a statutory licence to retransmit free-to-air broadcasts by, in practice, ‘pay’ or ‘subscription’ television companies. The collecting society declared by the Attorney-General under s 135ZZT for the purposes of Part VC is AVCS. AVCS has applied to the Tribunal for a determination of the amount of equitable remuneration payable by Foxtel Management Pty Ltd, Optus Vision Media Pty Ltd and Austar Entertainment Pty Ltd, under the Pt VC statutory licence (Application by Audio-Visual Copyright Society Ltd, CT 3 of 2002). At the time of the writing of this paper, the evidence in that proceeding is completed and the parties are yet to make their submissions.

Part VII Div 2 provides for a statutory licence relating to the use of ‘copyright material’ (defined widely in s 182B) for the Commonwealth or a State ‘for the services of the Commonwealth or a State’. Section 183 provides, in wide terms, that copyright is not infringed by the doing by the Commonwealth or a State for the services of the Commonwealth or of the State, of any act comprised in copyright. The Commonwealth or State must notify the copyright owner that the act comprised in the copyright has been done, and the terms for the doing of the act are those agreed between the Commonwealth or the State and the copyright owner, or, in default of agreement, as fixed by the Tribunal. Where a ‘government copy’ is made, and there is a relevant collecting society currently declared in relation to the copy, the Commonwealth or State is, instead, made liable to pay to it ‘equitable remuneration’ as agreed or as determined by the Tribunal: s 183A.

The régime under Pt VII Div 2 differs from those in Pts VA, VB and VC. First, it is not the Attorney-General but the Tribunal which is empowered to declare, and to revoke declarations of, collecting societies: see ss 153F and 153J respectively, both within Pt VI of the Act.

Second, s 153F(5) allows for the declaration of different collecting societies in relation to different classes of government copies (s 135ZZT(1) allows for the declaration of different societies for different classes of copyright owners for the purposes of the Pt VC licence).

Third, non-infringement is not triggered by the giving of a notice, let alone a ‘remuneration notice’ containing an undertaking to pay equitable remuneration. Rather, and more simply, the doing of the act is simply declared not to be an infringement (s 183(1)), but the Commonwealth or State must give notice of the doing of it, either to the copyright owner or, if one exists, to the relevant declared collecting society. In the former case, the Commonwealth or State must observe terms agreed with the copyright owner. In the latter case, it must pay equitable remuneration to the collecting society as agreed with the collecting society. In either case, failing agreement, the terms or the equitable remuneration are as fixed by the Tribunal.

Fourth, the statutory licence is in respect of any of the acts comprised in the copyright in all classes of works and of subject matter other than works.

Two collecting societies have been declared under s 153F for the purposes of Div 2 of Pt VII: CAL and AVCS. On 18 December 1998 the Tribunal declared CAL to be the collecting society for the purposes of Pt VII Div 2 ‘in relation to Government copies of works and published editions of works, other than works that are included in a sound recording, cinematograph film or a television or sound broadcast’. On 4 May 2000 the Tribunal declared AVCS to be the collecting society for the purposes of Pt VII Div 2 in relation to:

‘the relevant copyright owners of the following classes of copyright material:
(i) a sound recording; or
(ii) a cinematograph film; or
(iii) a television or sound broadcast; or
(iv) a work that is included in a sound recording, a cinematograph film or a television or sound transmission.’

in respect of the application of the copyright to the making of a copy of a transmission of a sound broadcast or a television broadcast including (to avoid doubt) a sound broadcast, or a television broadcast transmitted for a fee and a television transmission to subscribers to a diffusion service.’

3. Historical background to the creation of the Tribunal

3.1 The Owen Royal Commission

It was a concern over what was perceived to be the excessive market power of Australia’s oldest collecting society, APRA, that gave rise to the establishment of the Tribunal.

In late 1932, the Commonwealth Government appointed Justice William Francis Langer Owen of the Supreme Court of New South Wales, to inquire into and report upon:

‘(a) any questions that have arisen or may arise between persons interested in [the] performing right in copyright works and persons interested or concerned in the performance of such works whether as performers or as persons authorizing or controlling the performance, or as persons on whose premises the work is performed, or otherwise; and

(b) the rates, methods and conditions of payment to the owners of the copyright in musical and other works by the persons aforesaid for the right to perform such works in public; and

(c) any questions that have arisen or may arise between persons interested in the manufacture, use or sale of any mechanical contrivances by means of which any musical or other work may be mechanically performed, whether so interested under or by virtue of the Copyright Act 1912 or otherwise, and persons interested or concerned in using such contrivances for the purpose of mechanically performing such musical or other works in public, whether as persons authorizing or controlling such performance, or as persons on whose premises such performance takes place, or otherwise; and

(d) the rates, methods and conditions of payment (if any) to the persons interested as aforesaid in the manufacture, use or sale of such contrivances by the persons interested or concerned as aforesaid in using such contrivances for the purpose of mechanically performing such musical or other works in public; ...’

Justice Owen reported on 24 April 1933. The following account of the role of APRA, as it was at the time, is based on his report. Although much has changed since 1933, the discussion in Justice Owen’s report remains important in explaining the raison d’être of the Tribunal, and I will deal with it at some length.

APRA’s original members comprised eight companies or firms which carried on business as music importers or publishers. Not long after APRA’s incorporation, the Performing Right Society Ltd of England (‘the English Society’) became a member – indeed, APRA’s most important member.

By an agreement dated 11 January 1926 the English Society and APRA agreed that one director of APRA would be its nominee while it remained a member of APRA; that APRA would pay to it 40 percent of APRA’s net revenue after expenses; that APRA would send to it details of the works in respect of which payment was made and the number of performances of each work, as far as circumstances permitted; and that it would assign to APRA the right of public performance in Australasia of all musical works vested or to be vested in it. The agreement was implemented.

The remaining 60 percent of APRA’s revenue was distributed to other owners of copyright, either directly or through their agents in Australasia.

APRA used a standard form of assignment by which its Australian members were required to assign to it the right of performance in Australasia belonging to or afterwards acquired by the member, and APRA undertook to collect and pay to the assignor, the assignor’s share of monies collected by APRA for public performance.

In the United States of America, there was a society similar to the English Society, called the American Society of Composers, Authors and Publishers (‘ASCAP’). ASCAP was not affiliated with APRA, but many of ASCAP’s members had assigned their rights to, or appointed as agents, publishers in Australia who were members of APRA. ASCAP had approached APRA with a view to becoming affiliated with it, in which event, Justice Owen observed, the repertoire of musical works claimed by APRA would be ‘enormously increased’ (at 8).

In addition to the repertoire of copyright music vested in the English Society by its own members, the English Society also represented in British territory, under contracts of affiliation, the repertoires of similar societies established by composers, authors and publishers in numerous other countries. Justice Owen observed that ‘[the] aggregate number of foreign composers, authors and music publishers, members of these affiliated societies, who [were] represented by the ... [English] Society, [was] very large and represent[ed] an incalculable number of musical works’ (at 7). Under the contracts of affiliation, the members of the English Society had their rights protected in the territories of the respective foreign societies, and the fees collected there were remitted to the English Society and distributed amongst its members according to accounts furnished by the affiliated societies. Similarly, the fees collected by the English society in British territory for foreign works were remitted to the foreign societies for distribution among their members.

APRA claimed to represent an enormous number of authors, composers and copyright owners throughout the world, and copyright musical works numbering some 2 million, while the English Society had a membership of, or represented, over 29,000 authors, composers and publishers.

Justice Owen’s report stated (at 9) that the necessity of the existence of such bodies as APRA and the English Society had been recognised by the courts, and the objects and purposes of such bodies held to be legitimate. His Honour observed that it was impossible for individual copyright owners to protect adequately their rights and interests throughout the world, and that it was in the interests of those who used or desired to hear musical works in public, that collecting societies such as APRA should be established and be accessible to them, ‘so long as their business and their powers are wisely and fairly conducted and exercised’ (at 9).

Today, as in 1933, the Australian collecting societies derive much of their market power in Australia from the reciprocal arrangements they have with foreign collecting societies.

Justice Owen noted that the claim that some form of tribunal should be established to determine disputes between APRA and those desiring to use, for public performance, music within APRA’s repertoire, was ‘supported by every class of user and [was] based on clearly established facts’ (at 42). His Honour said of the users:

‘They cannot carry on their business and cater for the public without music; practically all music required is, or is claimed to be, under the control of [APRA]; [APRA] can demand any terms and conditions it chooses and the user must comply or close down his business.’ (at 42)

That is to say, would-be users were in thrall to APRA’s market power.

Those supporting the establishment of a tribunal urged that APRA and the Associated Record Manufacturers (Gramophone Company Ltd, Parlophone Company Ltd and Columbia Gramophone (Australia) Ltd, which manufactured records in Australia and dominated the market for ‘good quality’ records here) were, or appeared to be, acting to the detriment of the public. However, Justice Owen noted that it could never be in the consumer interest that any article of consumption should cease to be produced and distributed, as might well happen, he said, unless producers and distributors obtained fair remuneration for the capital employed and labour expended.

Justice Owen’s first three conclusions as to what the evidence established were:

‘(a) That [APRA] is, to all intents and purposes, a super-monopoly controlling or claiming to control most of the music which users in public must use and is able to dictate its own terms;

(b) That disputes have arisen and are likely to arise and continue between [APRA] and practically all classes of users of musical works on public;

(c) That at the present time and under present conditions the Associated Record Manufacturers practically control the Australian market for high class records incorporating the best music and can impose such conditions as they think fit on records to be made available to users in public; ...’ (at 44)

For its part, APRA contended that a tribunal was unnecessary because it (APRA) had always been reasonable and was unlikely to change. His Honour expressed no definite opinion as to the reasonableness of the charges and conditions imposed by APRA and the Associated Record Manufacturers (at 44).
In the event, his Honour recommended the establishment of a tribunal to determine disputes arising out of the performance in public of musical works or the use of records in public, or both (at 49).
APRA and other performing rights societies throughout the world and many eminent composers protested against the recommendation. In the event, it was not implemented because the government doubted whether a provision for compulsory arbitration of disputes would be consistent with the Berne Convention for the Protection of Literary and Artistic Works. However, s 13A was inserted in the Copyright Act 1912 (Cth), (by the Copyright Act 1933 (No 68 of 1933) s 3). This section provided for voluntary arbitration of disputes between the owners of copyright in ‘literary, dramatic, musical or other works’ and would-be users of such works or records, regarding the rates and methods of payment for the right to perform such works in public or to use such records for public performance, or ‘the terms and conditions under which such works and records may be so performed’. Section 13A provided that any party to the dispute might apply in writing to the Attorney General ‘for the determination of the dispute by voluntary arbitration by an arbitrator mutually selected, or, failing such selection, appointed by the Governor-General.’ The section provided that copyright in the work would not be infringed by the performance or use in public of the work or record, if payment was made in accordance with the arbitrator’s award.
Apparently this facility of ‘voluntary arbitration’ afforded by s 13A was little used, although, from 1963, the terms of agreements between APRA and television operators were governed by an award made by the Hon Mr Justice Spicer, Chief Judge of the Commonwealth Arbitration Court, pursuant to an arbitration under the section. The desire for a system of compulsory arbitration continued to be expressed.

3.2 The ‘Spicer’ Committee and the Copyright Act 1968

Implementing a recommendation made in the Report of the Copyright Committee 1951 of the United Kingdom (‘the Gregory committee’) (Cmd 8662), the United Kingdom Parliament, by ss 23–30 of the Copyright Act 1956 (UK), established a tribunal (the Performing Right Tribunal, now the Copyright Tribunal) to decide disputes between performing rights organisations and would-be users of copyright works controlled by them.

On 15 September 1958, the Commonwealth Attorney-General appointed a committee chaired by the Honourable Sir John Spicer, Chief Judge of the Commonwealth Industrial Court:
‘to examine the copyright law of Australia, and to advise which of the amendments recently made in the law of copyright in the United Kingdom should be incorporated into Australian copyright law and what other alterations or additions, if any, should be made to the copyright law of Australia.’

The Spicer Committee reported to the Attorney-General in December 1959: Report of the Copyright Law Review Committee (Commonwealth Government Printer, Canberra). On the question of a tribunal, the Committee agreed generally with Justice Owen. It noted that the United Kingdom and Canada had established tribunals for the purpose of reviewing tariffs and determining disputes between collecting societies and music users. The Committee observed that, by now, APRA was affiliated with ASCAP, as well as with other organisations, in addition to the English Society, and claimed to own the performing right to over 80 percent of all copyright music performed in Australia. The Spicer Committee observed (at par 343):

‘Although APRA has proved useful both from the point of view of the copyright owners and the music users, the amount of music it controls is so large that it might fairly be described, we think, as having monopolistic control over the performance of copyright music in Australia. Over a period of years, concern has been expressed in many quarters, particularly in the early days of the Association, regarding actual or potential abuse of this monopolistic power.’ (my emphasis)

The Committee observed that whatever its attitude may have been in the past, APRA itself also now strongly supported the establishment of a permanent copyright tribunal, as did the Associated Record Manufacturers.
What is of present interest is that it was the concern over APRA’s market power that continued to be the driving force for the creation of a tribunal.
The Spicer Committee noted (at par 356) that the Gregory Committee had recommended that the tribunal proposed by it should deal only with cases where conditions of monopoly or quasi-monopoly might exist, for example, disputes with the English Society, or in respect of rights owned by a limited number of companies, such as the performing right in records and broadcasts. The Gregory Committee thought that fees charged by individual authors for the performance of their work, or a refusal by them to grant a licence, either at all or except on conditions unacceptable to the would-be user, should not be reviewable. The Spicer Committee shared this view. However, the Government did not. Accordingly, while the Tribunal was established principally to counter the ‘actual or potential abuse of [the] monopolistic power [of APRA]’, it was also given jurisdiction to determine disputes between would-be users and individual copyright owners in respect of the use of even a single work or sound recording. (cf the present ss 157(3), (4) and (6)). Despite this, nearly all disputes that have come to the Tribunal have been with collecting societies on the copyright owners’ side.
The Attorney General, the Hon Nigel Bowen QC, in his Second Reading Speech on the Copyright Bill 1968, stated in relation to the market power of APRA (Parl Debs, HR, 16 May 1968, p 1527):
‘... it is also necessary to have regard to those who use copyright material. The broadcasting and television industry, the record industry and much of the entertainment industry depend on being able to use copyright material on reasonable terms. Especially in the musical field, owners of copyright have so organised, through licensing organisations, that they are in a strong bargaining position. For example, [APRA] claims to control the performing right in virtually all copyright music in Australia. It is thus in a position to dictate the terms on which music may be performed in public. Honourable members will therefore appreciate that any alteration in the existing copyright law will affect substantial economic interests which have been built up on the basis of that law. The interests affected will be the interests of both producers and users of material protected by copyright. The present Bill recognises that there are changes in the use of copyright material which have been brought about by changes in technology and the Government has been concerned to see that authors receive due payment for the use of their material. At the same time the Government recognises that existing practices and existing relationships in industries which depend upon copyright material cannot be ignored. In framing this Bill, the Government has had due regard to interests which are often conflicting interests. In many cases, it has not been possible to satisfy completely all parties.’ (my emphasis)
The Tribunal was established by Pt VI (ss 136-175) of the Act with effect from 1 May 1969. At that time it was given jurisdiction by s 47 (making of sound recordings or cinematograph films of literary, dramatic or musical works or adaptations of them, solely for purpose of the broadcasting of them); ss 55-59 (manufacture of records of musical works); s 70 (making of cinematograph film of artistic work solely for purpose of including the work in a television broadcast); s 107 (making of a record embodying a sound recording in association with other matter, solely for the purpose of broadcasting); s 108 (public performance of sound recording); and s 109 (broadcasting of sound recording). In the cases of ss 47, 70, 107 and 108, the expression ‘equitable remuneration to the owner [of the copyright]’ was used. In the case of ss 55-59 and 109, there was no description in the Act of the amount which the Tribunal might be called upon to determine.
Importantly, for present purposes, in the light of the background to the establishment of the Tribunal outlined above, it is clear beyond question that the Parliament intended that the creation of, and conferral of jurisdiction on, the Tribunal, be an antidote to the market power of the only collecting society then in existence, APRA. It follows that the legislature must have understood the formula of ‘equitable remuneration to the [copyright] owner’ to provide an adequate safeguard against the exploitation by APRA of its market power.

4. The Australian collecting societies and the scope of their activities

The following account of the main Australian collecting societies is based largely on their annual reports for 2003-2004. Quoted material is from those reports and page citations refer to them.

4.1 APRA

APRA, an association of original music composers or lyricists, or their heirs or assignees, such as music publishers, was founded in 1926. In its annual report for 2003-2004, APRA describes itself as ‘a service organisation administering the rights of the world’s composers, songwriters and publishers in Australia and New Zealand’ (at 1). Members of APRA assign to it the copyright in the right to perform their musical works in public and the right to communicate those works to the public (including the right to broadcast their works). APRA represents its members for the purpose of administering licences in respect of those rights.

‘APRA represents over 38,000 Australasian writers and publishers through direct membership, and nearly 2 million writers and publishers throughout the world under reciprocal, bilateral contracts with their service organisations’ (at 1).

Since 1997, APRA has also managed the reproduction rights licensing business of AMCOS (see below). According to APRA, ‘[t]he reasoning behind the arrangement is straightforward: enormous transactional efficiencies are available to copyright owners seeking a one-stop registration and data management facility and to users seeking fast, efficient access to the widest array of licences necessary in an increasingly technology-complex commercial environment’ (at 6). The integrated business is now responsible for the collection of $146 million and the distribution of $127 million annually. (See further the APRA website at http://www.apra.com.au.)
4.2 AMCOS

AMCOS (Australian Mechanical Copyright Owners Society Ltd) operates as a licensing office for the ‘mechanical rights’ comprised in the copyright in musical works. Those rights are the rights to reproduce those works (and accompanying lyrics) in such forms as discs, tapes, video recordings and cinematograph films. (See further under APRA above, including the APRA website.)
4.3 CAL
CAL was established by the Australian Book Publishers Association and the Australian Society of Authors to collect and distribute royalties for multiple copying or reproduction of works by reprographic reproduction. CAL represents the owners of copyright in published literary works. Its operations began in earnest in 1985–86. CAL is one of two declared collecting societies for the purposes of each of Pt VB and Pt VII Div 2 of the Act.

At 30 June 2004, CAL had 5,228 author members and 2,742 publisher members – a total of 7,970, an increase of 15 percent over the previous year. Some members themselves represent other copyright owners. At June 2004, CAL represented the works of 23,082 copyright owners, an increase of 11 percent over the previous year.

In addition, through bilateral agreements with foreign collecting societies and agencies, CAL represents hundreds of thousands of overseas copyright owners.

Since 1986, when CAL began operations ‘in earnest’, CAL has declared close to $280 million in distributions.

Revenue from licensing in the financial year 2003–2004 was approximately $67 million, representing a 20 percent increase over the previous year. Net income was $61.3 million – 21 percent higher than that year. CAL’s declared distribution was $45.4 million, an increase of 42 percent above the previous year’s figure of $32 million. CAL made distribution payments of $42.8 million, with over $5.3 million to members – an increase of 52 percent on payments made in 2002–2003.

CAL’s total revenue, including interest, for 2003–2004 was $72.3 million, an increase of 19.7% over the 2002–2003 figure of $60.4 million. (See further the CAL website at http://www.copyright.com.au)
4.4 AVCS (‘Screenrights’)
AVCS was incorporated on 8 January 1990. It was established to be:

• the collecting society for the purpose of the statutory licence for the copying and communication of broadcasts by educational and other institutions under Pt VA of the Act; and
• a collecting society for the purpose of the statutory licence for the reproduction and communication of works in hard copy and electronic form (relevantly to AVCS, works included in sound recordings and cinematograph films) by such institutions under Pt VB of the Act.

As noted earlier, AVCS is also the declared collecting society under Pt VC and one of two declared collecting societies under Pt VII Div 2. It represents the owners of copyright in cinematograph films, sound recordings and works included in audio visual products. AVCS does not administer voluntary licences: its role is exclusively that of a declared collecting society.

AVCS has 1,979 members in 47 countries, a membership increase of 11 percent over the year 2002–2003.

AVCS calls its administration of the Pt VA and Pt VB licences its ‘Australian Educational Service’. The statutory retransmission of free-to-air broadcasts licence (Pt VC) and the government copying licence (Pt VII Div 2) do not currently generate income for AVCS. AVCS derives its income from its Australian and New Zealand Educational Services, and its ‘International Collections Service’.

Total trust operations for 2003–2004 resulted in an overall Distributable Amount of $16.0 million. Total collections, including interest, was $19.6 million.

The Australian Educational Service accounted for most of this revenue – in fact, including interest, for $17.29 million of it. AVCS declared $16.2 million for distribution to members, of which $14.2 million was the Distributable Amount payable to copyright owners under the Australian Educational Service. (See further the AVCS website at http://www.screen.org)

4.5 PPCA
PPCA (Phonographic Performance Co of Australia Ltd) is an association of record companies and music publishers, closely associated with the Australian Record Industry Association, (‘ARIA’). It was formed in 1969 to issue licences and to collect and distribute fees, for the broadcast and public performance of sound recordings and music videos.

As at 30 June 2004, public performance licences (all voluntary) administered by PPCA totalled 36,469, exceeding the previous year’s figure by 2.7 percent. PPCA distributed $8,826,957 to licensors, registered Australian artists and the PPCA Trust, an increase of 8.6% on the previous year’s amount of $8,127,028. Income from all sources grew by 6.7 percent to $11,934,005.

PPCA made distributions to members in December 2004, issuing just under 1,000 cheques to members. (See further the PPCA website at http://www.ppca.com.au)

4.6 Vi$copy
Vi$copy Ltd, established in 1995 as the collecting society for the visual arts, licenses the reproduction of visual or graphic artistic works on behalf of painters, sculptors and photographers, for example. ‘Vi$copy, operates internationally through a business network of visual arts collecting societies to protect and license Australian artists’ work throughout the world. Vi$copy offers a reciprocal service to this network, collecting on behalf of artist members overseas. Vi$copy is the specialist in the international protection and licensing of Aboriginal and Torres Strait Islander artists’ copyright’ (at 5).

As at June 2004, Vi$copy had 4,544 artist members. During the year, it increased its membership by a total of 1,565 artists.

Its primary rights income through its online licensing system was $437,610 and its statutory rights income was $172,384. (See further the Vi$copy website at http://www.viscopy.com.au)
4.7 General features

Except for PPCA, which is an Australian company limited by shares, the collecting societies are incorporated as Australian public companies limited by guarantee.

Since APRA’s members are required to assign to APRA the right to perform their musical works in public and the right to communicate those works to the public (including the right to broadcast them), a person wishing to obtain a licence to do either of those things in relation to a member’s works must deal with APRA as owner of those rights comprised in the copyright. In the case of the other collecting societies, the members appoint the collecting society as their agent to grant licences.

5. Some decisions of the Tribunal

Some of the Tribunal’s determinations of amounts payable to copyright owners in various contexts provided for in the Act are found in the cases discussed below.

5.1 Report of the Inquiry by the Copyright Tribunal into the Royalty Payable in Respect of Records Generally, published on 24 September 1979 (‘Records Generally’)

This case, the first decided by the Tribunal, concerned the licence given by s 55, subject to the conditions set out in that section, to manufacture for retail sale a record of a musical work once a recording of it had been made in, or imported into, Australia, or into any of the countries adhering to the Berne Convention or the Universal Copyright Convention.

Conditions of the existence of the licence were that the manufacturer notified the copyright owner of the fact of the manufacture, and paid the statutory royalty provided for in s 56. But s 58 provided that the Attorney-General might request the Tribunal to hold an inquiry into the matter of whether the royalty or minimum royalty payable under s 56 in respect of records generally or in respect of records included in a particular class of records, was ‘not equitable’, and to report the result of the inquiry to the Attorney-General. (Section 148 of the Act obliged the Tribunal to hold the inquiry, governed the conduct of it, and required the Tribunal to make a report). Section 58 provided for the making of regulations varying the royalty or minimum royalty payable, after the Tribunal’s report had been taken into account.

The existing statutory royalty was 5 percent of the retail selling price of the record. The Australian Copyright Owners submitted that the rate should be increased to 8 percent, and the Australian Society of Authors also supported an increase. ARIA submitted that the existing rate of 5 percent should be retained, but should be expressed as a percentage of the retail selling price less sales tax. After 42 sitting days, the Tribunal recommended that the existing statutory royalty payable was not equitable and should be increased to 6.75 percent of the retail selling price (subject to a qualification concerning sales tax).

The Tribunal noted (at 4.4 (pxix) and 4.23 (p24)) that the Act did not define ‘equitable’. It expressed the opinion (at 4.4 (pxix) and 4.24 (p25)) that an ‘equitable’ royalty for the purposes of s 58 was one that represented fair and just remuneration to the copyright owner for the rights acquired by means of the compulsory licence. The Tribunal noted that this view was consistent with the use of the expression ‘equitable remuneration to the copyright owner’ in ss 47(3), 107(3) and 108(1)(a) of the Act. The Tribunal said (at 4.7 (pxix)) that ‘[w]hile it may be relevant to have regard to the interest of the public as consumers, the basic question was which rate of royalty would provide equitable remuneration to the copyright owner’, and that it was ‘not relevant to ask whether the rate is equitable to the public, although it is relevant to consider whether any price increase which might flow from a royalty increase could adversely affect the market as a result of consumer resistance.’ At 4.8 (pxix) and 4.35 (p27), the Tribunal said that it considered the following factors to be relevant to the determination of an equitable rate:

‘(a) the extent to which the fall in the value of money, at least since 1968, has affected the value of the royalty per record;

(b) the extent to which any such fall in the value of money has been compensated by rises in the retail selling price of records;

(c) technological and other changes in music publishing and record manufacturing which may have affected the extent of use by the public of works of composers and authors;

(d) the financial position and performance of composers and authors, publishers, artists, record manufacturers and retailers; and

(e) the consequences of any variation in the statutory royalty including the effect on the price payable by the consumer.’ (my emphasis)

The present régime relating to the manufacture of records of musical works is found in ss 55, 152A and 152B of the Act, and the relevant description is ‘an equitable amount of royalty’: s 152A(5). I suggest that this criterion is on all fours with that which the Tribunal was required to apply in Records Generally in 1979, so that the Tribunal’s observations in Records Generally are, so far as the statutory formula goes, applicable to the current provision.

5.2 WEA Records Pty Ltd v Stereo FM Pty Ltd (1983) 48 ALR 91 (Full Tribunal) (‘WEA Records’)

Record companies, the owners of copyright in published sound recordings, applied under s 152 of the Act for a determination of amounts payable to them by the holders of commercial FM broadcasting licences. PPCA, which was the agent and attorney of WEA Records Pty Ltd and a number of other copyright owners, was joined as a party applicant.

Section 109 creates the relevant licence to broadcast published sound recordings in which copyright subsists. In order to enjoy the statutory licence, the maker of the broadcast must undertake in writing to pay to the copyright owner, ‘such amounts (if any) as may be specified in, or determined in accordance with, an order of the Tribunal made under [s 152]’.

Otherwise, and subject to two qualifications, ss 109 and 152 give no guidance as to how the relevant amount is to be arrived at by the Tribunal. One qualification is that s 152 imposes a ‘ceiling’ in certain cases. That ceiling is, and was when WEA Records was decided, one percent of the amount determined by the Tribunal to be the gross earnings of the broadcaster during a specified period (where the broadcaster is the Australian Broadcasting Corporation, the ceiling is differently expressed and is population-based).

The second qualification is that s 152(7) requires that the Tribunal ‘take into account all relevant matters, including the extent to which the broadcaster uses, for the purposes of broadcasting, records embodying sound recordings (...) in which copyrights subsist, being copyrights owned by persons who are, or are represented by, parties to the application’.

Both parties agreed that the amount to be determined should be an amount which was the value to the broadcaster of the right to broadcast protected recordings.

The Tribunal said that the amount ‘should represent equitable or fair and reasonable remuneration to the copyright owner for the broadcaster’s use of protected recordings’ (at 112–3). The Tribunal further said that, for this purpose, s 152 assumed a collective bargain by the broadcaster on the one hand and all identifiable copyright owners on the other, each exercising their actual bargaining power [, each being] willing to negotiate and conclude an agreement’ (at 113).

The Tribunal determined the amount payable at 0.45 percent of the gross earnings of the broadcaster.

5.3 Copyright Agency Ltd v Department of Education of New South Wales (1985) 4 IPR 5 (Sheppard P) (‘First Schools Case’)

This important case concerned 15 applications by CAL pursuant to the then s 53B, and s 149A in its then form. The relevant licence was that conferred on educational institutions to make copies of material for the educational purposes of the institution. The amount payable by the institution to the copyright owner was identified as ‘equitable remuneration’. Part VB, Div 2 now contains the régime governing the statutory licence given to educational institutions to reproduce copyright works for their educational purposes, but the amount payable by them is still identified as ‘equitable remuneration’.

Sheppard P paraphrased ‘equitable remuneration’ as ‘fair remuneration’ (at 27). His Honour, the President, did not accept either CAL’s suggestion of a ‘most common charge’ approach, or the respondent’s ‘royalty tabulations’.

His Honour confessed to having found the exercise of determining an amount of equitable remuneration ‘extremely difficult’ (at 34). He said that what was involved was ‘judicial estimation’ (at 34), and fixed on an amount of 2 cents for each page copied.

5.4 Re Applications by MCM Networking Pty Ltd and Others (1989) 25 IPR 597 (Full Tribunal) (‘MCM’)

Before the Tribunal were applications under s 157(3). The applicant (‘MCM’), in cases to which a licence scheme did not apply, claimed that it required a licence from ARIA which represented most of the record companies in Australia, including the respondents to MCM’s applications.

MCM produced and syndicated radio programs for broadcasting by radio stations, consisting mainly of music, interspersed with commentary or interviews. The music was available on records owned by the respondent record companies, which had the exclusive right to control the copying or reproduction of the sound recordings.

In negotiations, MCM had contended that it should not have to pay any royalty at all, or that if it should, the amount should not exceed 1% of its net income, or, alternatively, gross income, derived from its programs.

ARIA, on the other hand, proposed a rate of 10% to 15% of MCM’s gross revenue.

The Tribunal held:

• that it had jurisdiction under s 157(3)(b) to determine a royalty rate only if MCM established that the royalty rate being demanded by ARIA was unreasonable:
• that in order to resolve that issue, the Tribunal must first decide what was a reasonable royalty rate:
• that in making that decision, the Tribunal must first determine if there was a going rate, and if not, it must attempt to identify the rate which would be arrived at between hypothetical willing but not anxious parties, and, failing this, it must engage in an exercise of ‘judicial estimation’.
• the Tribunal decided that a reasonable rate of royalty was 6% percent of MCM’s gross revenue, subject to a qualification that where less than 75% of a given program consisted of music, the rate was 4.5% of its gross revenue.

The Tribunal stated (at 613):

‘The first question which we consider is whether there is a going rate. If there is, it will probably be determinative of what the outcome of these applications should be.’

and at (619), after concluding that there was not a going rate:

‘We emphasise that before it could be said that there was such a rate, one would need to be satisfied that the use made of the sound recordings was closely similar to that made by others who had entered into arrangements with the record companies.’

5.5 Copyright Agency Ltd v University of Adelaide [1999] ACopyT 1; (1998) 42 IPR 529
(Burchett P)

CAL sought a determination of the ‘equitable remuneration’ payable by the respondent universities in relation to their statutory licence to make copies of literary, dramatic, musical and artistic works. Examples are articles appearing in periodical publications, and literary and dramatic works appearing in anthologies.

CAL claimed that the amount of 2 cents per page fixed in the First Schools Case, should be raised from its indexed equivalent of 3.562 cents per page, to 10 cents per page. The universities submitted that it should be reduced to 2.75 cents per page.

Many issues were addressed by Burchett P. His Honour agreed with Sheppard P that ‘judicial estimation’ was required. He increased the general rate to 4 cents per page, with a higher rate of 5 cents per page for ‘coursepacks’, and a rate of 15 cents per page for artistic works and print music, except where an artwork was copied onto a slide, when the rate was fixed at $1.00 per slide. Each figure was to be indexed in accordance with the Consumer Price Index.

5.6 Copyright Agency Ltd v Queensland Department of Education [2002] ACopyT 1; (2002) 54 IPR 19 (Finkelstein DP) (‘Second Schools Case’)

CAL applied under Pt VB for a determination of the amount of equitable remuneration payable by schools. CAL sought to have the rate which had been fixed in 1985 in the First Schools Case increased to the present, and further increased in view of changes in teaching methods and other considerations, which, CAL contended, increased the value of the works.

Finkelstein DP said (at [14]–[16]:

‘[14] It is notorious that ascertaining equitable remuneration is a difficult task in almost all cases. The cases I have mentioned suggest various inquiries that can be undertaken, the result of which may be of assistance to the tribunal in carrying out its statutory task. One inquiry is to see whether there is a normal rate of royalty charged by the copyright owner in relatively similar circumstances. The theory is that where there is a market for goods or services, rational people will not sell or provide a thing for less than its worth to them, nor buy it for more than its worth. Obviously one would need to be careful before adopting a so-called “market rate”. First, it would need to be shown that the market in which the rate was struck was a competitive market, and that there were sufficient transactions in that market to provide a reliable indicator of value. Second, it must be shown that the circumstances in which the market operates are the same as, or at least comparable with, those in which the equitable remuneration is to be fixed. If these conditions are satisfied, the market rate (if there is one) will provide the best guide to equitable remuneration.

[15] Usually there will be no market rate, given the nature of the statutory licence. Another possible line of inquiry is to determine whether there is evidence which would enable the tribunal objectively to determine the notional remuneration that would be agreed in a hypothetical bargain. In many cases, and this case is no exception, there will be some evidence that will be of assistance in that regard. In a moment I will come to that evidence. Before doing so I should mention that, strictly speaking, a notional bargain approach would require separate examination of the notional bargain that would be reached between CAL and each respondent, or perhaps between CAL and each educational institution that is administered by a respondent, because there will be differences between the institutions that may result in a different rate. It is not suggested, however, that there should be such a detailed examination of the respondents, and the schools they represent are content to have a uniform rate applied to them. In any event, the evidence does not descend to the required level of detail.

[16] Sometimes there will be no market rate and no, or very few, signposts to guide the tribunal to the appropriate rate of remuneration. What does the tribunal then do? The answer is that the tribunal must do the best it can. The nature of the task may be such that the determination will really be a matter of guesswork ...’ (my emphasis)

His Honour determined on a general basic rate of 4 cents per page for 1997, increased after that year in accordance with the Consumer Price Index. Other rates were fixed for ‘special’ classes of work.

6. Some approaches to quantification

In the Second Schools Case, Finkelstein DP helpfully reviewed approaches which had previously been said by the Tribunal to be potentially relevant to quantification.

References can be found in decisions of the Tribunal to:

(a) a comparable ‘normal’ or ‘market’ or ‘going’ rate of licence fees being charged in an industry (see, for example, the First Schools Case at 15-16; Fair Fitness Music Association v Australasian Performing Right Association Ltd (1998) 43 IPR 67);
(b) a ‘notional’ or ‘hypothetical’ bargain between willing but not anxious parties (see, for example, the First Schools Case at 15-16; WEA Records at 112-113); and
(c) ‘judicial estimation’ (see, for example, the First Schools Case at 15-16; University of Newcastle v Audio-Visual Copyright Society Ltd [1999] ACopyT 2; (1999) 43 IPR 505 at [30]).

Perhaps the better view is that the expression ‘judicial estimation’ is a way of describing the Tribunal’s approach in all cases to its statutory task, and that the ‘going rate’ and ‘notional bargain’ approaches are but two particular forms of judicial estimation which have been found useful, according to the facts of particular cases.

In its report, Jurisdiction and Procedures of the Copyright Tribunal (December 2000) at 115, the Copyright Law Review Committee summarised the factors which it says the Tribunal has taken into account in the process of ‘judicial estimation’ as follows:

• previous agreements and negotiations between the parties;
• determinations under ‘comparable’ regimes in other countries;
• royalties set by other licensors or collecting societies;
• the licensee’s capacity to pay;
• the value of which the copyright material has for the licensee;
• the general public interest and the interests of consumers; and
• the administrative costs of the licensing body.

The Tribunal has not adopted any single approach as having universal application or as being universally determinative. In particular, in relation to the ‘going rate’ approach, the Tribunal has taken into account:

• whether the relevant market is competitive;
• whether there are sufficient transactions in the market to provide a reliable indicator; and
• whether the circumstances are the same as, or at least comparable to, those in which the copyright material is to be used and the amount in question is to be determined;

(see MCM at 619; the Second Schools Case at [14] (set out above)).

There may be no going rate, as is often the case with statutory licences.

A statement by the Full Tribunal in MCM (at 613) that if there was a ‘going rate’, it would probably be determinative of the outcome of the applications before the Tribunal in that case, should be understood as assuming that the conditions mentioned above, including the existence of a competitive market, were satisfied.

7. Related considerations of competition policy in relation to collecting societies

Both the Tribunal and the Australian Competition Tribunal (‘the Competition Tribunal’) have considered the application of various provisions of Pt IV of the Trade Practices Act 1974 (Cth) (‘the TP Act’) to collecting societies. The Tribunal did so in Reference by Australian Performing Right Association Ltd; Re Australian Broadcasting Corporation (1985) 5 IPR 449 (‘APRA; Re ABC’). The Competition Tribunal did so in connection with applications by APRA for authorisations under s 88(1) of the TP Act, in Re Applications by Australasian Performing Right Association Ltd [1999] ACompT 3; (1999) 45 IPR 53.

7.1 Reference by Australian Performing Right Association Ltd; Re Australian Broadcasting Corporation (1985) 5 IPR 449

In APRA; Re ABC, the Australian Broadcasting Corporation (‘ABC’) ran television and radio stations which broadcast music, the performing rights in which were owned by APRA.

By agreement, ABC had been paying APRA an annual sum per head of population increased by a factor for inflation. APRA referred to the Tribunal under s 154 of the Act, a proposed licensing scheme which related to musical works, and, in so far as they were accompanied by words, to literary and dramatic works, under which the licence fee would be calculated as a percentage of ABC’s expenditure, less certain expenditure unrelated to musical broadcasting.

In his closing address, counsel for ABC raised, for the first time, a contention that APRA’s proposed scheme, if implemented, would contravene the TP Act. This was unsatisfactory. The raising of the matter appears to have been an afterthought, and apparently ABC had not adduced evidence directed specifically to the issue. The Tribunal noted that it was not clear on what evidence, or on which particular provisions within ss 45 and 46 of the TP Act, ABC was relying (it emerged that the provisions were ss 45(2)(a)(ii) and 46(1)(b) or (c)). The issue was raised at a time when counsel for APRA’s final address was complete, although, of course, he was afforded a right of reply. If the contention had been articulated at the outset, APRA might have led evidence to meet it.

Notwithstanding all these difficulties, the Tribunal felt bound to address the issue. The reason was that, if implementation of the scheme would be unlawful, it would not be ‘either lawful or reasonable for [the Tribunal] to confirm APRA’s scheme unless it were varied to overcome the illegality’ (at 463).

The Tribunal (Sheppard P and Mr A Horton) simply ruled that there was insufficient evidence to establish essential elements of the contraventions alleged.

In relation to s 45(2)(a)(ii), the Tribunal said (at 464) there was no satisfactory evidence as to the relevant market, the nature of the competition in that market, or the likely effect of the provisions of the proposed contract upon that competition.

In relation to s 46(1)(b) and (c), the Tribunal similarly concluded (at 465) that there was not sufficient evidence on which it could possibly find that implementation of the scheme would prevent ABC or any other person from entering into any relevant market or would deter or prevent ABC or any other person from engaging in competitive conduct in any market.

Finally, the Tribunal stated (at 465) that there was not sufficient evidence that, by implementing the proposed scheme, APRA would have the purpose of preventing the entry of any person into any relevant market or of deterring or preventing any person from engaging in competitive conduct in any market.

The unsatisfactory manner in which the TP Act issue was raised, makes the Tribunal’s treatment of it less interesting than it would otherwise have been. However, the Tribunal’s observations at least indicate the evidentiary burden borne by a person who wishes to oppose confirmation of a proposed licence scheme on the ground of illegality under Pt IV of the TP Act.

The Tribunal remarked (at 461–2) that in cases which had come before it to date (it referred to Records Generally at 97–101, WEA Records at 110–113, and the First Schools Case at 13–16), it had sought guidance in relation to quantification from cases dealing with the measure of damages for infringement. It considered, however, that there was ‘some force’ in ABC’s submission that because of the difference between the task of determining an amount of ‘equitable remuneration’, and the question presently before the Tribunal of whether a particular licence scheme should be confirmed with or without variation, the measure of damages for infringement might provide little assistance.

7.2 APRA’s applications for authorisation under s 88(1) of the TP Act.

It remains to consider APRA’s eight applications to the Australian Competition and Consumer Commission (‘ACCC’) for authorisation under s 88(1) of the TP Act of APRA’s system, as it would be after certain proposed changes were made to its articles of association. (APRA had also given to the ACCC a notification of exclusive dealing under s 93(1) of the TP Act.)

APRA’s applications related to four aspects of its system, namely:

(1) the input arrangements, under which public performance and communication rights in musical works are assigned to APRA;

(2) the output arrangements, under which APRA licenses performance uses of musical works;

(3) the distribution arrangements under which APRA distributes licence fees collected; and

(4) the overseas arrangements between APRA and other collecting societies around the world.

On 14 January 1998, the ACCC issued a final determination denying authorisation in respect of all the arrangements except for the fourth. It also issued a notice to APRA under s 93(3) of the TP Act.

APRA sought a review of the ACCC’s determinations by the Competition Tribunal under ss 101 and 101A of the TP Act.

On 16 June 1999 the Competition Tribunal granted authorisation under s 88(1) until 30 June 2004 (only until then, because technological and other changes were, according to the Competition Tribunal, ‘constantly having an effect on aspects of the relevant market’) and set aside the ACCC’s notice to APRA under s 93(3): Re Application by Australasia Performing Right Association Ltd [1999] ACompT 3; (1999) 45 IPR 53.

The Competition Tribunal’s reasons are lengthy and address such matter as ‘Public benefits and anti-competitive detriments’. In relation to the role of the Tribunal, the Competition Tribunal stated (at [211]–[219]):

‘[211] The submissions of the parties disclose widely differing opinions on whether the jurisdiction of the Copyright Tribunal is sufficiently broad to enable it to effectively and sufficiently control the extent of APRA’s anti-competitive conduct.

[212] The functions of the Copyright Tribunal relevant to these proceedings arise under ss 154 to 160 of the Copyright Act 1968. In particular, under s 154 a licensor who proposes to bring a licensing scheme into operation may refer the scheme to the Tribunal which is empowered either to confirm or vary the scheme. Under s 157 which enables a user or potential user to apply to the Tribunal, the Tribunal is empowered to determine reasonable charges and licence conditions. Pursuant to one or other of these sections all licences granted by APRA are subject to the jurisdiction of the Copyright Tribunal, and under s 157 a user seeking a form of licence which is outside of any of APRA’s existing licence schemes can also apply to the Tribunal.

[213] ACCC accepted criticisms made of the power and role of the Copyright Tribunal. Notwithstanding the powers of the Tribunal under ss 154 and 157, ACCC concluded (at paras 8.1.13, 8.1.14) that:

“In determining whether or not the scheme is unreasonable it is unclear whether and to what extent the Tribunal may consider competition issues. Even accepting that it may, the provisions of the Act are such that it is open to the Tribunal to decide that a scheme is reasonable, notwithstanding it is anti-competitive. Further, even if the Tribunal decides that the scheme is unreasonable, there is no requirement for the Tribunal to consider competition issues when imposing its own conditions and charges.

The Commission takes the view that the Tribunal does not have the power and is not such an accessible resource that it can regulate APRA’s activities so as to completely remove any ability APRA may have to abuse its monopoly position, particularly in respect of small users and matters such as the types of licensing schemes offered by APRA...”

[214] ACCC had before it advice from the Office of General Counsel in the Attorney-General’s Department as to the jurisdiction of the Copyright Tribunal. The advice was that in carrying out its functions under ss 154 and 157 the Tribunal could have regard to competition issues in considering what was reasonable. However, it was not bound to consider those issues as paramount when deciding what order to make. ACCC and FACTS urge similar views, and in addition contend that the capacity of the Copyright Tribunal to adequately take into account competition issues is further limited as on a proper construction of ss 154 and 157, it can only impose charges and conditions which it considers to be reasonable where it is satisfied that a licence scheme, where one applies, is not reasonable. In other words, if an existing licence scheme on offer from APRA contains reasonable charges and conditions, the Copyright Tribunal is not empowered to substitute other charges and conditions which it considers to be more reasonable: see Reference by APRA Ltd; re Australian Broadcasting Corporation (1985) 5 IPR 449 at 459.

[215] It is for the Copyright Tribunal in the first instance, and ultimately for the Federal Court or the High Court, to determine the limits, if any, on the powers of the Copyright Tribunal to take into account and reflect competition issues in its decisions. This Tribunal cannot do so. We consider that the approach which we should take is to note that the power of the Copyright Tribunal may be limited to some extent, and to take that into account. However, we think that any limitation on the power of the Copyright Tribunal in this respect is of very limited significance in the overall assessment which this Tribunal must make.

[216] The Copyright Tribunal plainly has very wide power, even if not wholly comprehensive power, to control the exertion of monopoly power by APRA. APRA is obliged to, and on the evidence does, act having regard to the undoubted power of the Copyright Tribunal to control charges and licence conditions. Whilst the Copyright Tribunal might not be obliged to treat competition issues as paramount, we cannot accept that it would not take them into account and strive to determine what constitutes reasonable charges and conditions having regard to the wider public interest, as well as to the interests of the immediate parties before it. We think the ACCC unduly discounted the constraining influence and powers of the Copyright Tribunal over the conduct of APRA.

[217] Subject to the complaint that the procedures, formalities, and expenses associated with an application to the Copyright Tribunal render access to it difficult, particularly for small users (an issue we address elsewhere in relation to an alternative dispute resolution precedent), the role and function of the Copyright Tribunal provides the answer to complaints which have been made before us by a number of users that the charges demanded by APRA are excessive.

[218] The jurisdiction of the Copyright Tribunal, however, only applies to licensors, that is to owners or prospective owners of the copyright in the work from whom a licence is sought or obtained: s 136(1) of the Copyright Act 1968. In other words, the jurisdiction operates in respect of the output arrangements of APRA. The Copyright Tribunal has no jurisdiction over APRA’s input arrangements. The existence of the Copyright Tribunal is therefore irrelevant to the arguments mounted by ACCC and FACTS that APRA’s input arrangements are unnecessarily anti-competitive, and require modification to remove restrictions on direct dealings for commissioned works, and to permit direct negotiation between a writer and a broadcaster on a work by work basis.

[219] Counsel were agreed before us that the Copyright Tribunal has no jurisdiction over APRA’s input arrangements. Counsel were agreed that it was for this Tribunal, and not the Copyright Tribunal to be concerned with the input arrangements, and to “determine the structure” under which the role of the Copyright Tribunal, envisaged by Part VI of the Copyright Act 1968, will function.’ (my emphasis)

The Competition Tribunal concluded, in relation to the Tribunal (at [311]):

‘The Copyright Tribunal provides an effective constraint against APRA abusing monopoly power in dealing with major users of music. Expense and complexity are intrinsic to the resolution of large disputes. However, a new dispute resolution procedure is needed for small disputes.’ (my emphasis)

In relation to ‘small disputes’, the Competition Tribunal made it a condition of the authorisation that APRA develop an acceptable proposal for a system of alternative dispute resolution.

APRA has applied to the ACCC for ‘re-authorisation’ of its arrangements (Applications A90918 – A90925). It is understood that submissions have been made to the ACCC and that the ACCC’s decision is awaited.

No doubt APRA has again submitted that the Tribunal provides an effective mechanism to prevent APRA from exploiting its monopoly, and therefore performs the role originally envisaged for it by the Owen Commission, the Spicer Committee and the Government of the day.

8. Recent recommendations for reform

I will address recent suggestions for reform specifically pertinent to collecting societies, being careful to omit reference to suggestions for reform of s 51(3) of the TP Act.

8.1 Shane Simpson, 1995

In 1995, Mr Shane Simpson produced a lengthy and detailed report to the Minister for Communications and the Arts and the Minister for Justice, Review of Australian Copyright Collecting Societies. Mr Simpson had no doubt that the collecting societies occupied a ‘dominant position in the market place with respect to the types of rights that each controls’. He thought there was ‘little Trade Practices significance’ in the fact that copyright owners grant exclusive licences to their collecting societies (as noted earlier, APRA is exceptional in this respect because it takes assignments). He raised the question, however, whether there was competition between collecting societies in respect of the same kinds of rights.

Mr Simpson recommended the introduction of a new concept: the ‘Qualified Society’. Qualified Societies would be collecting societies whose structures, procedures, functions and conduct were within certain guidelines to be issued. They would be subject to regular governmental scrutiny, and only they would enjoy the benefit of s 51(3) of the TP Act. This would place them ‘in the same position as they would have been in if they had received authorisations from the [ACCC]’ (par 33.6.2 at 260).

Mr Simpson’s recommendations, which concluded Ch 33 (‘Trade Practices Issues and Collecting Societies’) of his report, were as follows (at 261):

‘33.7 RECOMMENDATIONS

• That guidelines be drawn up and an approval mechanism instituted, by which those collecting societies which can demonstrate that their structures, procedures, functions and conduct is within those guidelines, are accorded the status of Qualified Societies.
  
• That such guidelines be drawn up in consultation with the [ACCC] and the societies.
  
• That Qualified Societies retain the protection of Section 51(3) of the Trade Practices Act.
  
• That a society’s input agreement should not be in breach of section 45 [of the TP Act] if the society is Qualified and the output agreement should not be in breach of section 45 if it is either (a) statutory or (b) approved by the Copyright Tribunal.
  
• That where there is a purported abuse of a Qualified Society’s monopoly power, the prior certificate of the Attorney General be a pre-condition to raising section 46(1) in legal proceedings.’

The Simpson recommendations have not been acted upon.

8.2 Copyright Law Review Committee, December 2000

On 20 April 1999, the Attorney-General asked the CLRC to inquire into and report on the need for change to the jurisdiction and procedures of the Tribunal under Pt VI of the Act. The CLRC produced its report, Jurisdiction and Procedures of the Copyright Tribunal, in December 2000.

Unlike the other reports noted here, the CLRC report was not a response to terms of reference which focused on competition objectives. Importantly, for present purposes, chapters 15 and 16 of the report recommended against any prescription of factors to which the Tribunal must refer when determining ‘equitable remuneration’ or an amount ‘reasonable in the circumstances’.

I am not aware of any proposal to legislate inconsistently with the CLRC’s recommendation or to alter the various statutory descriptions of amounts.

8.3 Ergas Committee, December 2000 and the Government’s response

In December 2000 the final report dated September 2000 of the Intellectual Property and Competition Review Committee (the Ergas Committee), ‘Review of intellectual property legislation under the Competition Principles Agreement’, was released by the Federal Government. (The Ergas Committee’s report took into account a draft of the CLRC report. For this reason, although it was dated September 2000, earlier than the date of the CLRC report, I am addressing it after the latter.)

In relation to collecting societies, the Executive Summary stated (at 8–9):

‘The activities of collecting societies under the Copyright Act are ... of concern. The Committee recognises the importance of collective rights administration to an efficient copyright system and, in that respect, strongly endorses the role of the collecting societies. However, there are potential effects on competition that can flow from the market position of collecting societies. Several of the Committee’s recommendations are aimed at making the collecting societies more open and accountable, and at achieving a more appropriate balance between public access to copyright material and producer incentives for innovation.

The Committee’s views are influenced by the fact that the coordinated nature of the collecting societies’ activities reduces competition between entities that would otherwise be competitors in some way. By eliminating that competition, the societies may significantly enhance efficiency; but the resulting balance needs to be tested – with continued attention to opportunities for encouraging more competition without reducing the efficiency gains of collective rights administration. With this end in mind, the Committee’s recommendations are aimed at providing for more effective scrutiny of the societies’ operations.

Specifically, the Committee recommends that the wider economic aspects of a collecting society’s conduct should be taken into account when reviewing a society’s declared status.

In particular, these wider aspects of a society’s conduct should be considered when determining whether the society is “functioning adequately” as a collecting society. Issues such as the adequacy of a society’s dispute resolution mechanism could play a part in this evaluation. The Committee also recommends that collecting societies be more fully exposed to the authorisation processes of the Trade Practices Act. Finally, the Committee sets out a process for allowing the referral of disputes that involve the societies, in their non-statutory activities, to the Copyright Tribunal.’ (emphasis in original)

The Ergas Committee’s actual recommendations (as distinct from the Executive Summary) relating to collecting societies included the following (at 15 and 127):

‘Assuming a continued role for the Copyright Tribunal over the output arrangements of statutory societies in respect of compulsory licences, there should be scope for the Tribunal to play a similar role in respect of other licences. The required mechanism should be for the ACCC to determine whether a reference should be made to the Copyright Tribunal, based either on the application by a collecting society, or from an actual or potential licensee, taking account of:

• any market power that can be exercised by the collecting society;
• whether there are alternative means of dispute resolution that could be used and that would impose less burden on the public; and
• the public interest in balancing public access to copyright material with the legitimate commercial interests of copyright owners.
  

If the Committee’s proposed changes to s 51(3) of the Trade Practices Act are accepted, then collecting societies would have to seek authorisation from the ACCC for those activities that fall within the scope of the prohibitions in Part IV of the Trade Practices Act. If the Committee’s proposed changes to s 51(3) of the Trade Practices Act are not accepted, the Government should ensure a requirement for such authorisation through specific legislative amendment. In the Committee’s view, the ACCC should ensure that such authorisations are reviewed periodically (for example, every three years).’

On 28 August 2001, the Government issued its response to the Ergas Committee’s recommendations. In relation to collecting societies, the Government’s document noted that the Government accepted in part the Committee’s recommendation (under ‘9. Collecting societies’), and included the following statement:

‘In relation to the proposed ACCC mechanism, it is agreed that:

• The ACCC be required by statute to issue guidelines on what matters it considers to be relevant to the determination of reasonable remuneration and other conditions of licenses that currently can or will be able to be the subject of determination by the Copyright Tribunal under Part VI of the Copyright Act; and
  
• the Copyright Act be amended to ensure that the Copyright Tribunal has the discretion to take account of the ACCC guidelines and admit the Commission as a party to Tribunal proceedings.
  

The ACCC will consult with interested parties in developing its guidelines. The main purpose of the guidelines would be to facilitate licence negotiations and minimise resort to the Tribunal for a determination. In the event that negotiations failed and one or other party applied to the Tribunal, recourse to the Tribunal would not be restricted in any way. The nature of ACCC’s guidelines would be advisory, not determinative.’

The suggestion that the ACCC issue guidelines may have been thought to raise a question whether there is a potential problem under Chapter III of the Constitution (as to which, of course, I express no opinion), having regard to the fact that the President and two Deputy Presidents of the Tribunal are Judges of the Federal Court of Australia: see s 140 of the Act, and the discussion of ‘persona designata’ and ‘constitutional incompatibility’ in such cases as R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd [1970] HCA 8; (1970) 123 CLR 361; Hilton v Wells [1985] HCA 16; (1985) 157 CLR 57; Grollo v Palmer [1995] HCA 26; (1995) 184 CLR 348 and Wilson v Minister for Aboriginal and Torres Strait Islander Affairs [1996] HCA 18; (1996) 189 CLR 1. It may be that an awareness of that question prompted the Government to incorporate safeguards in its response (the Tribunal to have a discretion to take the guidelines into account; guidelines’ main purpose to facilitate negotiations; recourse to the Tribunal not restricted; guidelines advisory, not determinative).

9. Adducing evidence of market power before the Tribunal

Guidelines of the kind referred to above would necessarily be expressed in general terms and would not relate to any particular market, much less to any particular proceeding before the Tribunal. No doubt the Tribunal would become familiar with them, but, depending on their terms, their relevance to the facts of a particular case may not be obvious.

The problem which arises is how evidence of the market power of a collecting society or copyright owner, and of the effect of that market power on existing market prices, can be put before the Tribunal in particular proceedings. Division 3 (ss 148–161) of Pt VI of the Act contains provisions relating to the various kinds of applications and references to the Tribunal for which the Act provides elsewhere. Many of those provisions follow a standard format. A typical example is s 149, which applies to an application pursuant to s 47(3) or s 70(3) for the determination of equitable remuneration to be paid to the owner of the copyright in a work for the making of a sound recording or cinematograph film of the work or of an adaptation of the work. Section 149 provides, in subss (2) and (3), as follows:

‘(2) The parties to an application in relation to which this section applies are:
(a) the owner of the copyright in the work; and
(b) the maker of the recording or film.

(3) Where an application in relation to which this section applies is made to the Tribunal, the Tribunal shall consider the application and, after giving to the parties to the application an opportunity of presenting their cases, shall make an order determining the amount that it considers to be equitable remuneration to the owner of the copyright for the making of the recording or film.’

Generally similar provisions are to be found in numerous sections in Div 3 (see, for example, ss 149A, 150, 151, 152, 152A, 152B, 153, 153A, 153B, 153BA, 153BB, 153C, 153D, 153DA, 153E, 153K, 153M, 153N).

Provisions of this kind make it clear that the proceedings to which they relate are inter parties, and that the Tribunal is required to allow ‘the parties’ to present their cases. .

While s 164 of the Act provides that the ‘procedure’ of the Tribunal is within its discretion, this would not permit it to allow the ACCC to intervene, particularly in view of the sections to which I have referred. Appearance by the ACCC as amicus curiae is a different matter, but this role does not, in the absence of the parties’ consent, allow for the adducing of evidence: cf Kabushiki Kaisha Sony Computer Entertainment v Stevens [2001] FCA 1379; (2001) 116 FCR 490; Wilson v Manna Hill Mining Co Pty Ltd [2004] FCA 1663; (2004) 51 ACSR 404 at [87]–[112].

If it is thought inappropriate that the present legislative régime leaves to the parties alone the matter of the gathering and presentation of evidence of market power and its effect on price, an alternative to the publication by the ACCC of general guidelines, which may merit consideration, is for the Act to be amended to provide for the ACCC to apply for and be granted leave to intervene and adduce evidence in proceedings before the Tribunal (cf Federal Court Rules O 6 r 17). The ACCC could publish information, still necessarily general, for the benefit of parties or prospective parties as to the circumstances in which it might be expected to seek leave to intervene and adduce evidence.

10. Conclusion

Such statutory expressions as ‘equitable remuneration’, ‘equitable amount of royalty’ and amount of charge ‘reasonable in the circumstances’:

• direct attention, at least immediately, to the position as between copyright owner and user;
• are not the language of economics, of markets or of the TP Act; and
• have not been treated as calling for a difference of approach, according to which expression is used.

As a matter of legislative history, the Act’s provisions giving the Tribunal jurisdiction to quantify amounts payable can be seen to have arisen from a concern in the 1920s to 1960s with APRA’s monopoly.

I am not aware of any suggestion that the existing statutory descriptions of the amounts payable to copyright owners or to collecting societies on their behalf be changed. Under those formulas the Tribunal must determine an amount which provides equitable or reasonable or just or fair remuneration to the copyright owner, but no more than that. The amount must be fair to the user of copyright material as well as to the copyright owner.

Any normal or market or going rate will be relevant, but will not be adopted without discount if it is unduly high because of the non-competitive nature of the market.

It may be considered appropriate that the Act be amended to allow the ACCC to seek leave to intervene and adduce evidence in proceedings before the Tribunal, in particular, evidence demonstrating any effect that market power is having on the normal or market or going rate.

And now, three questions:

(1) Is it agreed that the Tribunal is not at liberty, consistently with the various statutory descriptions of amounts referred to above, to determine an amount by reference to a normal or market or ‘going’ rate, which the evidence shows to be high, wholly or partly by reason of the market power enjoyed by a collecting society or copyright owner?

(2) If so, how might the Tribunal, in arriving at an amount, discount for that market power?

(3) Is there, or should there be, any difference between an amount of ‘equitable remuneration’ and an amount of charge which is ‘reasonable in the circumstances’?

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[*] This paper was written for the Competition Law Conference for 2005 which was originally to be on 21 May 2005. However, the Conference had to be postponed to 12 November 2005. With the consent and indeed the encouragement of the Conference organiser, Mr Chris Hodgekiss SC, for which I am thankful, the paper has been published: see (2005) 79 ALJ 561.