1. Supervision of Collective Management Organizations in the EU Victoriano Darias

2. Supervision of CMOs in the Eurpean Union  Supervision of CMOs may come in different forms and be undertaken by different operators:  Public Authorities;  Rightholders (actual and potential members and sister CMOs);  International Umbrella Organizations of CMOs (e.g. CISAC).

3. Supervision by the ECJ and the European Commission  At EU level, the ECJ and the European Commission have developed certain general principles through case-law in the application of Competition rules;  They are generally based on the existence of the abuse by CMOs of their dominant position and concerted practices in relation to reciprocal representation agreements;  In the case of the ECJ, the case-law has focused on:  Non-discrimination between members on the basis of nationality, place of residence or establishment;  Obligations on members imposed by CMOs;  Licences and tariffs (non-discrimination, calculation, subdivision of repertoire).

4. Supervision by the ECJ and the European Commission  The case-law of the European Commission has focused on the following topics:  Membership and participation in the decision-making process (GEMA I, GVL);  Conflict of interests between members and users of repertoire (GEMA I and GEMA Statutes)  Entrustment of rights (categories, territories, etc.) to CMOs (GEMA I & II, Daft Punk);  Distribution rules (GEMA I);  Concerted practices in reciprocal representation agreements (IFPI Simulcasting, Cannes Agreement, CISAC*).

5. Supervision by the national authorities of the MS  At national level, there tend to be two types of authorities supervising CMOs:  Competition authorities:  Tend to focus on tariffs and licensing terms;  Sometimes undertake inquiries or publish reports (e.g.: the 1996 Report by the British Competition Authority (MMC at the time), the 2008 Report of the Spanish Competition Authority (CNC) on Collective Management);  Public authorities with supervisory powers over CMOs:  This is currently being harmonised by the Draft Directive on Collective Management of Copyright and Related Rights.

6. Supervision by Public Authorities in the Draft Directive  Annex II of the Draft Directive : “The directive remains a "minimum harmonisation" legal instrument and Member States may impose stricter and/or more detailed requirements on collecting societies than those foreseen in the Directive.”  The approach of the Draft Directive on transparency and control of CMOs is of codification of existing principles established by the ECJ, DG COMP or the 2005 Recommendation on the Management of Online Rights in Musical Works, providing a more elaborate framework rules on Governance and Transparency ;  Therefore, although the Directive is still a draft, many of the provisions it includes are based on already applicable principles.

7. Supervision by Public Authorities in the Draft Directive  The Draft Directive introduces the obligation that MS have a “competent authority” in charge of:  Hearing complaints by members of CMOs, rightholders, users and other interested parties with regards to activities of CMOs (Art. 37);  Taking appropriate sanctions and measures in cases of non- compliance by CMOs (Art. 38);  Supervising the requirements of multi-territorial licensing of online rights in musical works by CMOs (Art. 21);  Monitoring the development of multi-territorial licensing of online rights in musical works by CMOs (Art. 40).

8. Supervision by Rightholders in the Draft Directive  The Draft Directive provides two ways in which rightholders can exercise control over a CMO:  Indirect way:  Increased flexibility in the entrustment and withdrawal of rights and increased transparency of CMOs operations push CMOs to be as efficient as possible to attract (or not lose) rightholders;  Direct way:  Participation in the decision-making process;  Availability of dispute resolution mechanisms.

9. Supervision by Rightholders in the Draft Directive: Indirect Mechanisms  Increased flexibility in the entrustment and withdrawal of rights:  Right to authorise a collecting society of their choice to manage the rights, categories of rights or types of works and other subject matter of their choice, for the Member States of their choice, irrespective of the Member State of residence or of establishment or the nationality of either the collecting society or the rightholder (Art. 5.2);  Right to terminate the authorisation to manage rights, categories of rights or types of works and other subject matter granted to a collecting society or to withdraw from a collecting society any of the rights or categories of rights or types of works and other subject matter of their choice, for the Member States of their choice, upon serving reasonable notice not exceeding six months (Art. 5.3).

10. Supervision by Rightholders in the Draft Directive: Indirect Mechanisms  Note on these provisions:  These provisions codify i.a. the GEMA I & II Decisions;  GEMA categories (there are also 12 more detailed utilisation categories):  1. The general performing right;  2. The broadcasting right, including rights of transmission;  3. The right of cinematographic representation;  4. The right for mechanical reproduction and diffusion, including transmission rights;  5. The right of cinematographic production;  6. The right to produce, reproduce, diffuse and transmit on bases for optical sound;  7. The right of exploitation resulting from technical development or a change in the law in the future.

11. Supervision by Rightholders in the Draft Directive: Indirect Mechanisms  The GEMA categories are complemented by self-regulation (the GESAC-ICMP Common Declaration), which adds:  Interactive online exploitations;  Non-interactive online exploitations.  The European approach differs from the US approach:  In the EU rightholders can make entrustment for categories of rights on an exclusive basis (a rightholders approach);  In the US (at least for ASCAP and BMI), rightholders entrust all their rights but on a non-exclusive basis (a users approach).  Note that the possibility of introducing non-exclusive mandates was considered in the Impact Assessment, but rejected.  Exception: When rights entrusted to a CMO are not available for multi-territorial licensing, the rightholder may license himself or through another CMO (Art. 30).

12. Supervision by Rightholders in the Draft Directive: Indirect Mechanisms  Increased flexibility in the entrustment and withdrawal of rights(cont’d):  Prohibition to require that the management of rights or categories of rights or type of works and other subject matter which are subject to the termination or the withdrawal be entrusted to another collecting (Art. 5.3);  Obligation to accept rightholders as members if they fulfil membership requirements. Refusal can only be based on objective criteria included in the statute or membership terms and shall be public (Art. 6.2);

13. Supervision by Rightholders in the Draft Directive: Indirect Mechanisms  Rights of rightholders, whose rights are managed under representation agreements:  No discrimination between a CMO’s members and any rightholders whose rights it manages under a representation agreement, in particular with respect to applicable tariffs, management fees, and the conditions for the collection of the rights revenue and distribution of the amounts due to rightholders (Art. 13);  No deductions, other than management fees, to be applied, unless the other collecting society expressly consents to such deductions (Art. 14.1);  Obligation to represent other CMOs for multi-territorial licensing of online rights in musical works(Art. 29).

14. Supervision by Rightholders in the Draft Directive: Indirect Mechanisms  Increased transparency:  Annual individual statements of managers and directors (Art. 9.2);  Information provided to rightholders and other CMOs on management of their rights (Art. 16 and 17);  Information provided to rightholders, members, other CMOs and users on request (Art. 18);  Information provided to the general public (which includes prospective members) (Art. 19);  Annual transparency report, including a special report, available in the CMOs website for five years (Art. 20.3);  Auditor’s report on accounting information, including qualifications, reproduced in the transparency report (Art. 20.4);  Additional information obligations for CMOs offering multi-territorial licenses of online rights in musical works (Arts. 23, 28 and 29).

15. Supervision by Rightholders in the Draft Directive: Direct Mechanisms  Participation of members in the decision-making process of CMOs:  CMO statute to provide appropriate and effective mechanisms of participation in decision-making process (Art. 6.2);  Includes exercising members’ rights by electronic means (Art. 6.3);  Participation and exercise of voting rights at the General Meeting can only be restricted if fair and proportionate, and based on duration of membership or amounts due or due in that financial period (Art. 7.7);  Possibility of representation (and vote) through proxy holder (Art. 7.8);  Fair and balanced representation of members in the body exercising the supervisory function (Art. 8.1).

16. Supervision by Rightholders in the Draft Directive: Direct Mechanisms  The role of the General Meeting:  General Meeting to be convened at least once a year (Art. 7.2);  Shall approve amendments to the statute and membership terms (Art. 7.3);  Appointment or dismissal of directors (and approval of their their compensation), and of members of the management board and the managing director, unless done by the supervisory board (Art. 7.4);

17. Supervision by Rightholders in the Draft Directive: Direct Mechanisms  The role of the General Meeting (cont’d):  Decide on:  Distribution policy;  Use of amounts that cannot be distributed;  Deductions;  General investment policy (Art. 7.5);  Appointment and removal of the auditor (Art. 7.6);  Approve the annual transparency report and the auditor’s report (Art. 7.6).

18. Supervision by Rightholders in the Draft Directive: Direct Mechanisms  The role of the Supervisory Function:  Continued monitoring of the activities and the performance of the duties of persons with managerial responsibilities (Art. 8.1);  Approval of any acquisition of immovable property;  Approval of the setting-up of subsidiaries, acquisition of other entities or shares in other entities, mergers and alliances;  Approval of the taking-out and granting of loans and provision of security or guarantee for loans (Art. 8.2);  Small societies not obliged to establish a Supervisory Function (Art. 8.3);

19. Supervision by Rightholders in the Draft Directive: Direct Mechanisms  Dispute resolution mechanisms:  Obligation for CMOs to make available procedures for dealing with complaints and for resolving disputes, without prejudice of bringing an action before a court (Art. 34);  Possibility of submit disputes related to the management of online rights in musical works to an independent and impartial dispute resolution body, without prejudice of bringing an action before a court (Art. 36);  Possibility to submit complaints before the competent authority (Art. 37).

20. Supervision by International Umbrella Organizations of CMOs  Certain international associations of CMOs establish rules to be complied with by their members;  CISAC and GESAC have extensive experience in self- regulation activities of authors’ societies, notably of those dealing with musical works:  2006 GESAC-ICMP Common Declaration;  CISAC Professional Rules for Musical Societies;  CISAC Professional Rules for Dramatic, Literary and Audiovisual Societies;  CISAC Professional Rules for Graphic, Plastic and Photographic Arts Societies;  IFRRO Code of Conduct for Reproduction Rights Organizations.

21. Supervision by International Umbrella Organizations of CMOs  Include provisions on a variety of issues  Participation by music publishers in the decision-making process of CMOs (2006 GESAC-ICMP Common Declaration);  Transparency towards sister CMOs and Umbrella Organizations (CISAC Professional Rules);  Acceptance of rightsholders as members by CMOs (CISAC Professional Rules);  Resolution mechanism for disputes between sister CMOs (CISAC Professional Rules);  Supervision by the umbrella organizations of the correct implementation of the rules.