The Copyright Tribunal has determined that the increase in rates charged by the Phonographic Performance Limited ("PPL") for licences that permitted licensees, such as pubs, shops, factories and offices, to be able to play music in their public spaces, were disproportionate. The PPL had implemented a new pricing structure to reflect changes in the law and sought to put a greater emphasis on the size of the establishment when determining the rates payable. This resulted in some increases in rates for the largest shops/supermarkets of almost 200% and for the largest pubs and restaurants it was over 400%. The Copyright Tribunal held that the new pricing structure was inappropriate and, therefore, ordered a return to the previous tariff scheme and imposed a 10% limit on the increase in rates from the previous rates that had been used.
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The Copyright Tribunal has determined that the increase in rates charged by the Phonographic Performance Limited ("PPL") for licences that permitted licensees, such as pubs, shops, factories and offices, to be able to play music in their public spaces, were disproportionate. The PPL had implemented a new pricing structure to reflect changes in the law and sought to put a greater emphasis on the size of the establishment when determining the rates payable. This resulted in some increases in rates for the largest shops/supermarkets of almost 200% and for the largest pubs and restaurants it was over 400%. The Copyright Tribunal held that the new pricing structure was inappropriate and, therefore, ordered a return to the previous tariff scheme and imposed a 10% limit on the increase in rates from the previous rates that had been used.
Role of the Tribunal
The Copyright Tribunal is responsible for deciding issues where parties cannot agree between themselves the terms and conditions of licences offered by a collective licensing body. A licence is required to be permitted to play music in a public space such as in shops, offices, factories, restaurants, leisure facilities and hotels. The PPL, a non-profit making collecting society, whose members include the majority of record companies, is responsible for issuing such licences in return for a fee. Following the implementation of a new tariff scheme at the beginning of 2006, which resulted in a large upward increase in the level of rates charged to licensees, a referral was made to the Copyright Tribunal by the Secretary of State to review the terms of the scheme that had been implemented. Representations were made by Interested Parties (including the British Hospitality Association, the British Beer and Pub Association and the British Retail Consortium) who opposed the increases. The Tribunal's role was to form its own judgement as to whether the referred scheme was reasonable in all the circumstances.
Changes to the existing scheme
The PPL's new scheme involved substantial changes to the way that the existing rates were calculated. The PPL's reasons for the changes were to reflect changes in the law, bring the level of the fees up-to-date and to create a more accurate correlation between the size of the establishment and the rates charged to an establishment. The increase for the largest establishments in particular was significant, for example, the highest increase, which was in relation to the largest pubs and restaurants, was 419%.
The Interested Parties challenged the new scheme on the basis that it constituted an enormous and unjustified rise in the rates. They argued that compared with the previous tariff (which had been negotiated and agreed) the increases were excessive.
Key points
The main arguments put forward by the PPL as to the reasons for the changes to the rates are summarised below, as are the Tribunal's response to these arguments:
- a change in the law, which meant that the public performance of sound recordings, such as on the radio, was now an act restricted by copyright. This meant that the PPL should legitimately be permitted to charge higher rates to licensees. The Tribunal accepted that this justified some increase in rates, but not the very substantial increases that the new tariffs represented.
- the PPL's new scheme was not unreasonable when compared with other licence collecting bodies, such as the Performing Rights Society ("PRS"), which collects royalties in relation to public performances and recording or distribution to the public of their members' music. The PPL contended that the PRS charged higher rates than both the old and new PPL system. The Tribunal dismissed the relevance of these higher fees as the PRS's fees had been available as a comparable at the time of previous negotiations between the parties and yet they had not affected the rates on those occasions.
- playing background music is very important for the licensees and adds value to their business. The Tribunal dismissed this argument because the value added to the business would already have been taken into account in previous licence negotiations, therefore, since there was no discernible evidence of a dramatic increase in the value of the PPL's repertoire of music since the last set of negotiations, it did not need to be taken into account this time.
- the total amounts that the licensees' pay under the licences is not very large. The Tribunal determined that this was also an irrelevant consideration.
Basis for new rates
In rejecting the new scheme adopted by the PPL, the Tribunal explained that it had reached 10% as the permitted increase in rates as result of a value judgement rather than a precise mathematical calculation: it had taken into account that due to the change in law an increase of some kind was appropriate; the case for a modest increase when compared with the PRS Tariff; and the alternative proposal put forward by the Interested Parties.
Additional Issues
Two further points are worth noting. First, licensees will be pleased to learn that the new definition of "audible area" under the scheme, which included the total area in which music can be heard on the premises and was not restricted to the areas to which customers have access, was rejected and the original definition in the previous tariff re-instated. Secondly, it was determined that for the first year of the licence the PPL is allowed to impose a 50% surcharge on the rates if the licensee had been playing music without first obtaining a licence. This is intended to provide an incentive for licensees to pay in a timely manner.
Comment
This decision shows that in certain circumstances it is worth making a complaint about the level of licence fee increases that are being made by a collecting society, as the Tribunal is willing to take a firm stance against disproportionate increases. It is also interesting to note that the complaint was made by industry bodies rather than individual licensees. This is indicative of how strongly licensees objected to the increases in rates and the widespread nature of the concern.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 03/11/2009.
