UK: Collecting Societies In The UK – Cracking The Code

In October 2012, the UK government introduced certain minimum standards for collecting societies. This, in turn, led a number of societies to introduce voluntary codes of conduct. However, in December 2012, the UK Intellectual Property Office (UK IPO) published a report which casts doubt on whether this voluntary approach will actually benefit members and users.

Background

Collecting societies are specialist bodies, who license particular rights in copyright works on behalf of member owners. They collect the revenues received from licensing copyright-protected works to users, and distribute them back to copyright-owning members (minus deductions).

Various collecting societies exist in the UK, and are broadly grouped by sector. For example, the Authors' Licensing and Collecting Society (ALCS) works with writers, whilst artists can use the Design and Artists Copyright Society (DACS) and the Artists' Collecting Society (ACS). Collecting societies have two aims:

1. to enable members who own copyright to administer their rights portfolio effectively and cheaply; and

2. to provide a service for users of copyright works, making it simpler for them to comply with legal requirements.

Collecting societies offer benefits. They make it possible for copyright owners to manage a portfolio of rights with users across the globe in a way which would not otherwise be possible. In addition, they change the relative bargaining position between rights holders and licensees. An individual artist is less likely to be pressured into unfavourable terms by a powerful licensee where a collecting society acts as intermediary.

However, collecting societies also bring disadvantages, which mostly arise from the powerful monopoly they hold. Currently, rights holders are required by statute to become members, as certain rights can only be administered by the collecting society.

In entrusting the management of their copyright to the collecting society, members must accept the collecting society's terms and relinquish control of their rights. Whilst in some countries this powerful position has led to direct government supervision of collecting societies through, for example, the Department for Culture, no such supervision exists in the UK. Instead, UK collecting societies are run as companies, subject to company rules, which can lead to accusations from members of a lack of external transparency and accountability.

Though most collecting societies have internal procedures to deal with complaints from members, the UK government's involvement is limited to the work of the Copyright Tribunal. The Tribunal is established by statute and is a resource for copyright users where they are in dispute with a collecting society over the terms of a commercial copyright licence. The Tribunal is intended to adjudicate in situations where users are asked to choose between the licence terms set by the collecting society and non-use of the copyright material. However, the Tribunal adjudicates only in relation to specific licences referred to it, and is not involved in general governance of collecting societies.

The limited ability of copyright users to negotiate licence terms with collecting societies has attracted attention on a wides cale. In addition to studies by member states, the EU is also monitoring the compliance of collecting societies with competition law, which is directly applicable across all 27 member states. Competition law prohibits abuse of a dominant position, as anti-competitive behaviour can distort the market, resulting in higher prices, unfavourable contract terms and a lower quality of service and choice for end users.

It has been suggested that anti-competitive behaviour is a significant risk in relation to collecting societies due to their powerful role, lack of accountability and limited number. For example, the Spanish Competition Authority fined the Sociedad General de Autores y Editores de España (a collecting society for editors and authors) for its abuse of dominant position in 2010. Competition considerations are therefore also likely to influence future regulation of these entities.

Minimum standards: the UK government's response

To mitigate the potential disadvantages outlined above, the UK government issued a set of minimum standards for collecting societies in October 2012. These standards are intended to underpin the self-regulatory framework for collecting societies and include rules in relation to the following areas:

  • obligations to rights holders;
  • obligations to licensees and potential licensees;
  • conduct of employees, agents and representatives;
  • information and transparency;
  • reporting requirements;
  • complaints handling; and
  • ombudsman scheme

The minimum standards have already been adopted by certain societies. For example, in November 2012, the CLA and DACS both published codes of conduct, but with uncertain effect.

What is the likely impact of a voluntary code?

The UK IPO report questions the value of voluntary codes of conduct. The report contains a number of conclusions:

1. There is insufficient evidence to assert a determining link between the degree or type of regulation and the performance of collecting societies - viewed through the lens of their returns to members.

2. The most numerous and fierce criticisms of collecting societies stem from users, not members. Any consideration of how regulation can improve collecting societies' performance thus needs to focus far more on addressing users' concerns rather than members'.

3. Codes of conduct have little effect on improving the weak bargaining power of the majority of users - bargaining power is determined instead by the external regulatory regime in each jurisdiction and not by collecting societies per se.

The most positive aspect of a code in the UK, the report suggests, is that it will increase transparency, and 'this is likely to have some small benefits for members and users'. However, unless a code is 'unambiguous, independent and enforceable', it will struggle to be effective.

Conclusion

At present, collecting societies in the UK are unregulated and there are question marks over the value of codes which are not underpinned by statute and, accordingly, may not have the desired effect of improving the 'transparency, accountability, governance and dispute resolution' of the societies. In November 2013, an independent review of the minimum standards will be published, a year after their first introduction. It is possible that this review will lead to further recommendations for their governance and will improve upon the present situation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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