Challenges for Collective Management of Copyright and Related Rights in the EU

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Challenges for Collective Rights Management Organisations in the EU
By
Alejandro Cubillos-Kepes
ID 21113907
Project for the degree of LLM International Business and Commercial Law
Supervisor: Prof. C Coors

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Table of Contents
Table of Contents................................................................................................................................................................2
Abstract...................................................................................................................................................................................3
CHAPTER 1............................................................................................................................................................................4
Introduction..........................................................................................................................................................................4
Chapter 2 ................................................................................................................................................................................6
Literature Review...............................................................................................................................................................6
Chapter 3 ..............................................................................................................................................................................15
Research Methodology...................................................................................................................................................15
CHAPTER 4..........................................................................................................................................................................17
DISCUSSION.........................................................................................................................................................................17
COLLECTIVE RIGHTS MANAGEMENT IN THE EU..............................................................................................17
The 2014 Directive on Collective Rights Management ....................................................................................18
1. Background................................................................................................................................................................19
2. Legal Framework ....................................................................................................................................................22
3. Implementation in the UK...................................................................................................................................23
4. Implementation in Germany ..............................................................................................................................26
5. The Role of Collective Management Societies (CMOs) ...........................................................................29
5.1. Cross-border rights management and Competition................................................................................31
5.2. The Right of the Author to Grant Licenses for Non-Commercial Use ..............................................38
5.3. Supervision and Monitoring of CMOs in order to avoid monopolies...............................................42
6 Summary.....................................................................................................................................................................46
7 Conclusions................................................................................................................................................................50

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Abstract
This research seeks evaluation of Directive 2014/26/EU on collective rights management and multi-territorial
licensing of rights in musical works for online uses (herein the Directive). The aim of this paper is to provide a
critical examination of the role of the European Union (EU) regarding the protection of right holders in order to
determine whether the Directive will in fact facilitate the functioning of a single digital market. In order to do
this, the UK and Germany, given their different and unique legal systems, will serve as comparators to evaluate
and asses the implementation process. By using a qualitative method, the analysis of the data relating to the
functioning and monitoring of CMOs in the EU will be assessed while allowing an evaluation to determinate
whether the Directive will be able to help achieve a truly single digital market in the EU.

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CHAPTER 1
Introduction
Undoubtedly, the evolution of the internet over the recent years has helped artists gain worldwide recognition.
However,this has also facilitated the increased unauthorised usage of the artist’s protected workby others. This
is the reason why it is crucial to develop copyright laws for the protection of intellectual property rights in the
digital era. A number of attempts to deal withthis issue havebeen put forwardby the European Parliament with
the aim of building a single digital market by the harmonisation of copyrightlaw in the EU.Certainly, this area of
law is of great importanceto today’sdigital society,given thefact that protectionof creators’workisfundamental
to promote cultural diversity, and to achieve a real single digital market.
Unfortunately,the international harmonisation of copyright,especially in Europe, continues to be far frombeing
a reality. Despite overa century of international harmonisation, copyright law remains essentially at the national
level, even though some fundamental copyright norms are gradually converging1. Today, copyright is highly
regulated by a number of treaties and conventions that provide its fundamental legal grounds and principles.
As follows,the rights conceded under copyrightlaws in the EU vary from one jurisdiction to another, depending
mainly on legal traditions and national laws. At present, seven EC directives specific to the field of copyright and
related rights are in place2. The main EU instrument providing a legal framework for copyright is the 2001
1 I Katsarova, The challenges of copyright in the EU, European Parliament, Briefing June 2015, page1,
http://www.europarl.europa.eu/RegData/etudes/BRIE/2015/564380/EPRS_BRI(2015)564380_EN.pdf
2 P Benert Hugenholtz, Harmonizing European Copyright Law, institute for information law University of Amsterdam,
2009, page
18,http://poseidon01.ssrn.com/delivery.php?ID=57802412602511400510107201700210610503000803204804901707
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1120790821111050200780480020171030921211180010291200800840890741050990931220250060780300060240
86125020&EXT=pdf

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Copyright Directive.However,inMay 2015, the European Commission unveiled its plans tocreate aDigital Single
Market, aiming in this respect to reduce the differences between national copyright regimes and allowing for
wider online access, including through further harmonisation measures3.
This research aims to analyse and evaluate the legislative measures regulating Collective Management Societies
(CMOs) in the UK and Germany after the 2014 Directive.Although this research does not cover all provisions of
the Directive, this study focuses on three very important features of it with regards to the assessments. The
reason for it relies on the fact that the implementation of these provisions seeks to tackle some of the major
challenges for the operation of EU CMOs in recent years.
1. Firstly, its approach to cross-border rights management and competition law under article 32
2. Secondly, the right of the author to grant licences for non-commercial use under article 5 paragraph 3.
3. And finally thelegal frameworkforthesupervision andmonitoring of CMOs under articles 36–38in order
to avoid territorial monopolies.
Since the UK and Germany are EU Member States, they had to transpose the Directive. Thus, the central focus of
this paper is on the topical issues connected to transposition of the Directive into UK legislation in comparison
with Germany. In dealing with the above mentioned provisions, the author relies on traditional legal methods
such as analytical and comparative approaches.
3 Ibid , page 25

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The initial part of this paper examines the general features of the Directive and its aims; it also includes an
evaluation of its implementation in the UK and Germany to allow evaluation of the effectives of the provisions
above. Itis then followedby an examination of the practicaland theoreticalchallenges that CMOs have to faceon
the digital era before making any significant suggestions to the future of collective management in the EU.
Chapter 2
Literature Review
The chapter reviews some of the literature on different aspects of the dissertation topic. Some of the literature
deals exclusively with harmonisation of copyrighttitle in the EU,some exclusively with the 2014 Directive, and
some concurrently with the implementation of the Directive in the UK and Germany. This literature will be
reviewed below.
Although, there is currently a vast amount of materials online including reports, journals, case law,EU legislation
and International treaties. The focusof the collectionof data and relevant information was done mainly by using
officially recognised search engines such as EUR-Lex, Westlaw, LexisNexis and legislation.gov.uk among other.

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L Bently and B Sherman, Intellectual Property Law, Oxford University Press, 2014
It’s clear and detailed approach to the law in relation to copyright provides a wide range of opinions and key
issues that help gathering a greater understanding on the topic. The authors take into account the most recent
developments in the area of copyright, not only in the UK but also at an international level. Chapter twoprovides
a general, yet, very condensed introduction to copyright law. In this chapter all the relevant EU Directives,
conventions and international treaties are explained and analysed, and put into the UK’s legal framework, thus,
allowing the discussion of the developments in relation to the approximation of the laws in the EU.
This literature, which adopts a descriptive, explanatory, and evaluative approach, was utilised by this research
in explaining and evaluating the significance of some of the elements of copyright in a European context, which
served topoint out theimportance of the harmonisation of titleand theeffortsof the EU toachievea single digital
market. It helped to evoke the benefits of a substantial reform in the law of copyright, especially regarding
collecting societies’ practices in the EU.
G Mazziotti, EU Digital Copyright Law and the End-User, European University Institute February 19, 2008
By adopting a similar approach in regards to the description of key issues in the area of EU copyright law; the
bookoffersa comprehensive exploration of the legal frameworkof EU digital copyrightlaw from the perspective
of the ‘end-user’. Chapter fiveprovides a rich and detailed discussion on certain inconsistencies that created the
2001 Directive. The argument explaining the fact that Directive missed the objective of the market integration
is of great importance to support the findings of present research. The clear analysis of the lackof harmonisation
after the 2001 Directive allows elaborating on the need to reform the current EU legal framework of copyright
and on the importance of the implementation the 2014 Directive as discussed on part II of the present research.

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This literature assists in further detail in evaluating the need to reform the clear discrepancy between the
national legal systems relating tocopyrightlaw inEurope that represent obstaclesto achievea truly single digital
market.
K Purnhagen, Studies inEuropeanEconomicLaw and Regulation,Volume 3, Wageningen and Rotterdam, the
Netherlands, 2014
By adopting asimilar approach in regard to the description of key issues in the area of EU copyrightlaw,the book
offers a comprehensive exploration of the legal framework of the EU digital copyright law from the perspective
of the ‘end-user’. Chapter fiveprovides a rich and detailed discussion on certain inconsistencies that created the
2001 Directive.The argument explaining the factthat Directivemissed the objective of the market integration is
of great importance to support the findings of the present research. The clear analysis of the lack of
harmonisation after the 2001 Directiveallowselaborating on the need toreform the current EU legal framework
of copyright, and on the importance of the implementation of the 2014 Directive as discussed in part II of the
present research.
This literature assists in providing further detail in evaluating the need to reform the clear discrepancy between
the national legal systems relating to copyrightlaw in Europe that represent obstacles toachieving a truly single
digital market4.
Articles
4 K Purnhagen, Studies in European Economic Law and Regulation, Volume 3, Wageningen and Rotterdam, The Netherlands,
2014, pag. 486

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D Gervais, Collective Managementof Copyrightand Related Rights, second edition, published by Kluwer Law
International, 2010
This article examines, first, the basic features of ‘collective management’ of copyright and related rights. This
useful approach first delineates the scope of collectivemanagement and provides the theoretical foundations of
collective societies before discussing the paradox of copyright, and the fragmentation of rights.
By putting collective societies in a historical perspective, the author illustrates their developments in more
systematic way. While his use of different jurisdictions to compare their functioning structures allows a better
understanding of the need to improve CMOs’ efficiency.
This article highlights the need to reform the existing CMO structure – prior to the introduction of the Directive
– to justify theircontinued existence onone leveland toalleviate the problems stemming from thefragmentation
of copyrightrights. The rich and detailed evaluation of the CMOs’ structures demonstrates the factthat they are
constantly changing and that the legislators must adapt the laws accordingly.
A Dietz, The EuropeanCommission's Proposalfora Directiveon Collecting Societies and Cultural Diversity
– a Missed Opportunity, International Journal of Music Business Research, April 2014, vol. 3 no. 1
This literature elaborates, in further detail, the need for collective societies, and their cultural purposes for the
correctfunctioning of the internal market. It attempts to demonstrate why the European Commission’s Proposal
for a Directive on Collecting Societies has not properly addressed the protection of cultural diversity through
copyright law. It challenges the Commission’s Proposal ‘Explanatory Memorandum’ on the role of collecting

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societies5 , centring its discussion on the grounds that it appears unconvincing, given the regulatory content of
the Proposal, that the statement fulfils its implicit promise. In other words it does not protect the cultural
diversity through copyright law.
This literature was utilised toenable an ample understanding of the culturalfunction of copyrightlaw in general
terms as well as the importance of digitalisation for collecting societies and their development.
A Metzger and T Heinemann, The Right of the Author to Grant Licenses for Non-Commercial Use: Creative
Commons Licenses and the Directive on Collective Management, (2015) JIPITEC 11, para 1
This article elaborates on the several difficulties that lie within the implementation of Article 5, paragraph 3 of
the Directive in national law. Moreover, it also examined the current status quo of CMOs, and the legislative
procedures of the provision have been dealt with as well as the inhered legal difficulties that CMOs face under
the current framework.
The main focus of this article is related to the right of right holders to grant licences for non-commercial uses of
any rights, categories of rights or types of works and other subject-matter that they may choose. The author
explains thedifficultiesthat arise fromthe interpretation of theterm non-commercialand the possible challenges
that its interpretation can cause to national legislators when introducing Article 5 paragraph 3 of the Directive.
The article allows an evaluation of the implementation of the Directive’s provision related to right of the author
to grant licences for non-commercial use in the UK as compared to Germany. It encouraged the researcher to
further explore the term ‘non-commercial’ and its legislative importance. The explanatory discussion provided
5 "also play a key role in the protection and promotion of the diversity of cultural ex-See Doc. 2012/0180 (COD), p. 2; in thesame
senserecital 2 (at theend) of theProposal seeDoc. 2012/0180 (COD), p. 13

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by the author on Article 5 para 3 served as an excellent argument to demonstrate and support the effectiveness
of the current copyright legal frameworkin placein the UK regarding protection of right holders and monitoring
CMOs’ activities.
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT, Proposal
for a Directive of the European Parliament and of the Council on the collective management of copyright
and related rights and multi-territoriallicensingofrights inmusicalworks for onlineuses in the internal
market, Brussels, 11.7.2012 SWD(2012) 205 final
It provides a detailed explanatory narrative of the Directive’s provisions covering important legal definitions in
order to facilitate the implementation and avoid confusion to member states when implementing the Directive
into national law.It providesthe manner in whichthe measures shall be introduced and it clarifiesany ambiguity
in relation to previous Directives.
This article offers a necessary assessment of the impact of Directive prior to its implementation in the EU.
Although, this document is mostly an explanatory note of the Directive’s provisions, its relevance to the present
research is fundamental to the assessment of the provisions related to cross-bordering licensing, authors’ rights
and supervisions of CMOs in the EU
K Nemvalts and A Kelli, The Estonian Perspective on the Transposition of the Directive on Collective
Management of Copyright and Related Rights, pp. 33-42, 2015
It empathizes on the role of collective societies and their importance in the modern digital world; it elaborates
on the fact that CMOs are an essential mechanism in facilitating licensing of rights, notably when direct licensing
by right holders is not feasible or even practical. Most importantly, by underlining that collective rights

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management has a single market dimension it was possible to determine that licences granted normally cover
the rights of both domestic right holders and right holders from other member states, even if they are limited to
one territory only.
Although, the article provides a comprehensive evaluation of the topical issues linked to transposition of the
Directive into Estonian legislation, its analysis on the provisions relating to cross-border management and
competition law allows to elaborate a critical understanding of the challenges that member states have faced
when implementing the Directive
International Publishers Association, Collective Rights Management, an IPA Special Report, 21st November
2014
This literature offers a comparative analysis of the different approaches to licensing agreements that currently
operate under the EU. By introducing the different models and evaluating their efficiency, it is possible
understand the need for the evolution of the UK’s approach to collective licensing.
The recommendations from the former Chief Executive of the UK Publishers Licensing society and publisher
representative on the IFRROboard are a valuable addition to support the relevance of CMOs’ activities in terms
of cross-border licensing for the proper development of a single digital market within the EU.

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Daniel J. Gervais, Collective Managementof Copyrightand NeighbouringRights inCanada:AnInternational
Perspective, 2001
This article offers a comparison of the Canadian legal framework and the monitoring of CMOs with a number of
other major countries, including the UK. It proposes a number of valuable possible improvements to way CMOs
operate in not only in Canada but in general. Thecomparison focused, firstly,on the general legal background for
collective management, and, secondly, on issues specific to the digital age.
The detailed analysis of several aspects of the operations of CMOs accompanied by specific suggestions was a
remarkable addition to the present research in terms of making further suggestions about ways in which
collective management of rights could be improved for the benefit of the single digital market.
Ruth Towse, Economics of collective management organisations in the creative industries, WINIR
conference 04 April 2016.
It outlines the functioning and the operations of CMOs, drawing attention to the economicsof collecting societies
and its effects. It concentrates on the management of copyright and related rights in music, in particular by the
Performing Rights Society in the UK. Moreover, it questions whether the pressures of the digitalisation would
affect the operation of CMOs.

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The analytical approach used to describe the role of CMOs in EU, and the critical evaluation of their use of
collectiverights management, contributes to the discussion on the issue of monopoly and competition of CMOs
in relation to the provisions of the Directive.This literature wasutilised to discuss the impact of multi-territorial
licensing in the EU.
GEMA (Society for Musical Performance and Mechanical Reproduction Rights), GEMA's position on the EU
Commission’s Proposal for a Directive of the European Parliament and of the Council on collective
managementof copyrightand related rights, and multi-territoriallicensingofrights in musicalworks for
online uses in the internal market, 07 December 2012
It offers the position of the major Collective Society in Germany regarding the implementation of the Directive
into national law. It places great emphasis on the proposed provisions, although clarifying that given the high
regulation standards applicable in Germany, the current legal framework fulfils the draft Directive’s major
requirements. The article was used to illustrate the key points on the provisions and their implementation in
more detail in Germany while comparing and assessing the effectiveness of the implementation of the same
provisions in the UK.
EU Directive
Directive 2014/26/EU on collective rights management and multi-territorial licensing of rights in
musical works for online uses
The aim of the Directiveis to ensure the correctadministration of the rights of copyrighted worksby focusingon
the better functioning of collective management organisations to achieve a truly digital single market. Its wide
number of new rules introduced will also ease the multi-territorial licensing by collective management
organisations of authors’ rights in musical works for online use.

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The Directive’s clear new provisions on collectivemanagement organisations in the EU allowed a coherent and
straight forwardevaluation of their practices in the digital era. This permitted the assessment of its effectiveness
in terms of monitoring them more in accordance to the new developments of the technology. An evaluation of
the recent implantation process of the Directivein the UK compared to the implementation process in Germany
is provided.
Chapter 3
Research Methodology
Preparation of this paper began with a consolidation of existing reports and articles for the identification of the
background of copyright in a general context with a view to understand EU copyrightlaw. The next step was an
exhaustive review of the resources available on Westlaw,LexisNexis and EUR-Lex;a vast resource of intellectual
property articles and statutes through rigorous legal research, including online and database searches to
supplement the findings and establishing a coherent analysis of the effectiveness of the 2014 Directive. Indeed,
after following these research steps, the sources were further checked by visiting the website of the copyright
offices from the UK and Germany. In general, the preference has been to cite to a legal source available on the
official websites, but if a different source became available, it was constantly double checked. The research
objective has been to find a reliable and current source for the implementation of the 2014 Directive in both
jurisdictions.
The research used an epistemological and qualitativeapproach, using black letter sources suchas journals, cases,
newspapers, articles etc. thereby allowing a detailed analysis and evaluation of the central aspects of the
research. The reason for using a qualitative methodology in this part lied within its reliance on the systematic

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analysis of existing body of knowledge that enabled to objectively evaluatethe effectivenessof the EU legislation
at harmonising copyright law and monitoring Collective Management Organisations on the following section.
Having in mind the vast range of Directives in the area of copyright, this research mainly focused on the EU
Directives in the field of copyright and related rights as it is an important part of the general research.
Furthermore, as this research evaluated and analysed the implementation of the 2014 Directive, and the extent
of the protection to right holders principally in the UK, a qualitative approach here further allowed a coherent
evaluation of the collectedfacts onthe firstpart. By exploring and comparing the artists’ rights in particular with
regards to collectivemanagement administration in both jurisdictions, it was possible to determine whether the
UK has effectively protected artists’ rights in accordance with the EU legislation.
Dueto thenature of the research, apositivist paradigm was adopted toestablish rather than rejectthe superiority
of EU Law for an effective functioning of the internal market. The expectation was that this would facilitate an
effective evaluation the different aspects relating to Directives implementation in both jurisdictions and would
also facilitate the evaluation of the measures implemented to protectartists’ works and to harmonise the laws of
copy right within the EU.
This study will further advance Directive’s implementation research by allowing future researchers to
investigate on the effectand importance of licensing practices across the EU with a view to standardise licensing
and the absence of contract laws regulating copyright contracts for the protection of disadvantaged artists.

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CHAPTER 4
DISCUSSION
COLLECTIVE RIGHTS MANAGEMENT IN THE EU
The term copyright refers to the rights granted to those authors of protected work to ensure that they can
determine how theircan beused. Permissions are usually obtained directly fromthe ownerbut theusual practice
is toobtain it forma CMO. Inthis context aCMO is a body that administer and mandates the rights of its members,
the right holders, to license their rights and collect and distribute their royalties in return for a fee.
Collecting societies are organisations in charge of managing copyrights via collective rights management. They
license, gather and distribute royalties on behalf of the copyright owners they represent6. Although up until the
rise of the internet their function has been reasonably acceptable, it is clear that digital technology has added an
extra level of difficulty to their activities in terms of demand for cross-border uses, and the apparition of new
services for the licensing of products.
Unfortunately,in order to unleash the full potential of these protected works,licences for worksshould not only
be limited by national barriers. The inherent difficulty attached to this comes from the fact that, until now, the
CMOs in the EU havebeen nationally-based monopolies7. This means that in order to obtain a licence that covers
Europe, 28 different licences are required, thus, clashing with the EU’s ambition tocreate a Digital Single Market
making the current regulatory regime become a concern of the EU legislators.
6BOP Consulting in collaboration with B Atkinson and B Fitzgerald, Collecting Societies Codes of Conduct, December 2012,
page 3 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/310172/ipresearch -collecting-
071212.pdf
7 M Hviid, S Schroff and J Street, Regulating CMOs by competition: an incomplete answer to the licensing problem?, 2015,
page 4, https://zenodo.org/record/47703/files/CREATe-Working-Paper-2016-03.pdf

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Undoubtedly, the proper functioning of CMOs is crucial for development of a single digital market. After all, the
inability of the current copyright system to issue cross-border licences means EU citizens cannot access all the
material what they want to8. This results in a geo-blocking situation where licences are limited to one territory
only, and, even if the licence is paid, this will not automatically work on other member states9.
In reality, rather than having a single market the EU continues to operate through multiple, separate markets10.
The EU’s response to this issue has been the Directive that introduces competition between CMOs and places
obligations upon them to serve the interests of users and right holders better.
As follows,CMOscurrently facemajor challenges stemming from:the reconfiguration of existing and emergence
of new powerful players, the necessity of cross-territorial licensing options and the fragmentation of
copyrights11. The followingpaper presents an overview of the technical and policy developments in this area of
the law in Europe.
The 2014 Directive on Collective Rights Management
In response to aheavily recommended review of the copyrightrules in theEU;the Councilof the EuropeanUnion,
on the 20th of February 2014, adopted the new Directive on Collective Rights Management in order to address
the needs of improvement of the futurecopyrightin Europe. TheDirectiveentered intoforceon the 10th of April,
2014, and had to be transposed into national law by 10th April 2016. This legal review emphasises the
8 CMOs can provide services only on a member state by member state basis, due to the threat of copyright infringement
9 European Commission, Proposals to address unjustified geo-blocking and other discrimination
based on consumers' place of residence or nationality, 2016, page 3, http://ec.europa.eu/smart-
regulation/roadmaps/docs/2016_cnect_002_geo-blocking_en.pdf
10 Supra note 4, page 4
11 S Haunss, The changing role of collecting societies in the internet, volume3, issue 3, 30 Sep 2013.
http://policyreview.info/articles/analysis/changing-role-collecting-societies-internet

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importance to maintain the legitimacy and robustness of the system in Europe12, and it clearly evidences the fact
that in order to have an effective and uniform development of copyright law within the EU, a reform needed to
take place not at a national but at a European level.
1. Background
The Draft Directive, whichwas proposed by the Commission in 2012, is intended to facilitate legal online music
services by improving the management of all collecting societies and setting minimum standards for the multi-
territorial licensing of rights in musical works for the provision of online services13.
This new Directive in general terms lays down the basic requirements necessary to all collecting societies in the
EU, in order to ensure the correct functioning of the management of copyright and related rights. The Directive
addresses areas including membership and organisation, management of revenue, transparency and reporting.
More specifically, it sets out the requirements that collecting societies established in the EU must fulfil,
specifically when granting multi-territorial licences of authors' rights in musical works to online services
providers.
The introduction of this Directivemeans that service providers will be able to deal with the collectingsociety of
their choice, from a number who will operate across EU borders, rather than having to deal with a different
collecting society in each jurisdiction thereby addressing the evident need for an effective multi-territorial
12 Maria Martin-Prat, THE FUTURE OF COPYRIGHT IN EUROPE, 38 COLUM. J.L. & ARTS 29 (2014),
http://lawandarts.org/wp-content/uploads/sites/4/2015/01/2-38.1-Martin-Prat.pdf
13 Intellectual Property Office, Collective rights management in the digital single Consultation on the implementation
of the EU Directive on the collective management of copyright and multi-territorial licensing of online music rights in
the internal market, 2015,
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/401225/collective_rights.pdf

20
licensing system that provides protection for online copyright infringement throughout the European territory
in a single action.
A perhaps more dramatic change in the context of issue of licences is that collecting societies will be obliged to
issue licences in respect of smaller/less popular repertoires to ensure they have access to the market. The
problem, however, is that because the Directive does not deal directly with multi-territorial licensing of other
rights, suchas rights of music performers and recordlabels in sound recordings, whichare also necessary forthe
use and exploitation of music online. It is questionable whetherthis would,given the factthat digital services are
less comprehensive in terms of repertoire than the traditional physical product market, alleviate the problems
with copyright licensing14. Moreover, even though the Directive was drafted, supposedly to, in some degree,
facilitate the licensing of music foronline services, it is still too soon and unclear to determine how useful it will
be to achieve a single European licensing market.
What it is clear now, is that these new set of rules for the collective management of authors’ musical rights
introduced in the EU will bring together a significant number of changes and improvements in the current rules
that govern the environment in whichCMOs operate in the EU15. . Although the Directivehas raised a number of
concerns regarding its ambitious approach and application, to the date, it is not conclusive what would be the
real impact of its implementation on CMOs’ activities across Europe. However, it is evident that it has the
potential to benefit countries with absence of state supervision of CMOs, thus, improving the current EU-
regulatory framework controlling CMOs’ activities.
14 Intellectual Property Office, Digital Copyright Exchange Feasibility Study, 2010, page 27,
http://www.copyrighthub.co.uk/Documents/dce-report-phase1.aspx
15 Collective Management Organisations play a significant role in the management of online rights for musical works in
contrast to the situation where online rights are licensed directly by right holders such as film or record producers or by
newspaper or book publishers. CISAC Reply to thePublic Consultation of the European Commission on theReview of the
EU Copyright Rules, 05/03/2014, www.cisac.org/CisacPortal/cisacDownloadFile.do?docId=26177

21
Arguably, the introduction of a new system forcross-border online licensing of musical rights could theoretically
be detrimental to the small and medium-sized CMOs16and to the cultural diversity in the EU. Even though the
Directive seems to deal with these issues in a systematic way on some of its provisions, it is still unfortunately
too soon to determine whether they would provide sufficient or even an effective protection for small and
medium-sized CMOs across the EU. Nevertheless, it is apparent that CMOs and right holders will benefit
enormously not only from the introduction of high standards of transparency and accountability and the
voluntary framework for the aggregation of repertoire for online multi-territory licensing but also from the
promotion of a greater integration between them17. Something, which in the eyes of the EU Commission will
ultimately promote a more efficient single digital market forlicensing within the EU18. Moreover, this new high
standards of transparency willbe equally important notjust fordigital online markets butfornational licensing19.
Lastly, ensuring that CMOs actin the best interests of the right holders they represent is the main objectiveof the
Directive20, and this is meant to be achieved by modernising and improving standards of governance, financial
management and transparency of all EU CMOs, thus, allowing right holders to have a more active role in the
decision making process and receive accurate royalty payments, as well as the promotion of a unified field for
the multi-territorial licensing of online music.
Clearly, the standards set out by the Directive on CMOs intend to establish fundamental protections for right
holders including how rights revenues are collectedand paid, how the monies are handled, and how deductions
16 Digitisation is considered to be a threat to smaller CMOs and an opportunity for the larger ones. The increasing in returns
for the management of rights makes CMOs natural monopolies that are strengthened by the territorial nature of copyright.
Digitisation enables transactional licensing to be feasible; however, it also requires significant investment in IT, which may
be too great for smaller CMOs in smaller markets. Regulation to promote multi-territorial licensing within the EU is likely to
exacerbate the gap between the big and the smaller CMOs. Ruth Towse, Economics of collective management
organisations in the creative industries, WINIR conference 4-6 April 2016.
http://eprints.bournemouth.ac.uk/23385/3/WINIRconference-1.pdf page 1
17 PRS for Music , Proposal for a Directive on Collective Management of Copyright and Related Rights and Multi-
Territorial Licensing of Rights in Musical Works for Online Uses in the Internal Market (“CRM Directive”), 2013,
www.prsformusic.com/SiteCollectionDocuments/CRM%20Directive%20PRS%20for%20Music%20Mar%202013%20Eng
lish%20FINAL.pdf
18 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52015SC0100
19 Supra note 16
20 TITLE II, COLLECTIVE MANAGEMENT ORGANISATIONS, CHAPTER 1, Representation of right holders and membership
and organisation of collective management organisations, Article 4, General principles, http://eur-lex.europa.eu/legal-
content/en/TXT/?uri=CELEX%3A32014L0026

22
are collected21.Thequestion remains as towhether this guidance wouldbeeffectively followedby memberstates
in the long run or whether these measures are underpinned by detailed requirements to ensure effective
monitoring and compliance, overseen by a national competent authority (NCA) would just be simply ignored22.
2. Legal Framework
Title I contains general provisions on subject matter23, scope24 and definitions25 including on who is a right
holder and a member and what is a CMO. Title II establishes rules regarding the representation of right holders,
membership and organisation of collective management organisations.
Under Chapter 1, CMOs must act in the best interest of the right holders they represent and do not impose any
obligations which are not objectively necessary26. It does this by setting out the provisions regarding inter alia
the withdrawal of rights27, membership rules including the participation of members in the decision-making
process28, minimum powers of the general meeting of the members including proxy voting29 and the creation of
a supervisory functionenabling members to monitor and exercise controloverthe management of the collective
management organisation30.
21 CHAPTER 2, Management of rights revenue, Article 11, Collection and use of rights revenue, Article 12, Deductions and
Article 13, Distribution of amounts due to right holders, http://eur-lex.europa.eu/legal-
content/en/TXT/?uri=CELEX%3A32014L0026
22 TITLE IV, ENFORCEMENT MEASURES, Article 36, Compliance, 3. Member States shall ensure that the competent
authorities designated for that purpose have the power to impose appropriate sanctions or to take appropriate measures
where the provisions of national law adopted in implementation of this Directive have not been complied with. Those
sanctions and measures shall be effective, proportionate and dissuasive.
23 Article 1
24 Article 2
25 Article 3
26 Article 4
27 Article 5
28 Article 6
29 Article 8
30Article 9

23
Chapter 2 sets out rules on the management of rights revenue. Including provisions stipulating on how the
income should be collected31 and the remuneration, for instance, must be distributed 9 months from the end of
the financial year32.
Chapter 3 deals with the management of rights on behalf of other CMOs. Chapter 4 sets outthe rules forrelations
with users.
Chapter 5 deals with transparency and reporting and requires CMOs to disclose inter alia information on
amounts collected and paid and deductions made33, on representation agreements34, on the organisation and
functioning of the organisation including statutes, membership terms35, and the annual publication of a
transparency report36.
The adoption of the Directive should therefore be seen as a tool forming part of the acquis communautaire37,
which, in time, would not only improve artists’ economic benefits all across Europe but also foster cultural
diversity. Moreover, because the Directive is silence on the needs of the different types of performers and the
complexity of the management of their rights, it can also be argued that it does provide the flexibility to do so to
the national legislator. This however, would only be assessed with time.
3. Implementation in the UK
31Article 11
32Article 13 “unless objective reasons related in particular to reporting by users, identification of rights, right holders or
matching of information on works and other subject matter with right holders prevent the collective management
organisation or, where applicable, its members from respecting this deadline”
33Article 18
34Article 19
35Article 20
36Article 22
37Supra note 42, page 101

24
Although in the UK the Copyright Regulations 2014 broadly covered some of the Directive’s provisions such as
the requirement to improve transparency and governance of CMOs, their re-appeal was nevertheless necessary
in order to transpose the Directives’ provisions into national law.
The truth is that the 2014 Regulations could not implement the Directive’s provisions in full as they were
developed prior to the adoption of the final Directive. For instance, the Regulations did not extend to those
organisations that also collectively manage rights but which have a different legal form to CMOs38. In addition,
the Directive introduces new provisions to ensure that the cross-border services meet certain standards,
including transparency of repertoire and accuracy of financial flowsrelated to the use of the rights, a provision
not provided by the 2014 Regulations.
The minimum requirements introduced into UKlegislation by the transportation of the Directiveaim at ensuring
adequate protection for right holders when their works are used across the EU. According to the Minister for
Intellectual Property in the UK, Baroness Neville-Rolfe39, its implementation wasdone in a way which minimised
burdens for UK businesses while maintaining some important protections in the existing domestic regulations.
As mentioned, one of the fundamental objectives of the Directive is to ensure that the CMOs act in the best
interests of the rights holders they represent, and to achieve it, minimum standards of governance, financial
management and transparency are provided for all European CMOs. However,as mentioned, because prior to its
implementation there was already a piece of legislation underpinning the regulation of collectingsocieties in the
UK, by the time the Directivehad been approved in 2014, the Government had already begun development of a
38Supra note 12, they are referred in the Directive as Independent Management Entities (IME) and they are for-profit
commercial entities that are not owned or controlled by right holders. Under the Directive they will be obliged to provide
information to the rights holders they represent, and to CMOs, users and the public.
39 Intellectual Property Office, Collective rights management in the Digital Single Market, Implementation of the EU
Directive on the collective management of copyright and multi-territorial licensing of online music rights in the internal
market: technical review of draft Regulations, 2015,
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/467778/Collective_rights_managemen
t.pdf

25
domestic policy to ensure that licensees and rights holders were treated fairly by implementing minimum
standards and codes of practice40.
However, because 2014 Regulations did not address all the issues that the Directive intended to address in a
comprehensive way, they were repealed and all the provisions in the Directive, including those on multi-
territorial licensing, are now incorporated into the Collective Management of Copyright (EU Directive)
Regulations 201641. Notably, some elements of the 2014 Regulations that were not within the scope of the
Directive(such as a complaint procedure for users) have been integrated into the DirectiveRegulations in order
to maintain an equivalent level of protection42.
In simple terms, the new provisions in the Regulations seek to improve the system in a number of ways.Firstly,
it will allow right holders to have an explicit right to authorise any CMO in the EU to manage their rights.
Moreover,CMOs willneed togive their members proper representation in decision-making processes, including
on how royalties are distributed. But most importantly, CMOs are now required to publish more details about
their operations in order to uphold a more transparent system43. Undoubtedly, this has been a massive step
forwardnot only forthe protection of right holders fromthe UK across the EU but also to help and encourage the
development of new works and create new sources of revenue for artists in the UK.
These new set of rules that will govern CMOs in the UK, and that were published by the British government will
indicate how such organisations should operate from now on. They are designed to contribute to the
improvement of the licensing of digital rights in the UK and in the EU. They are meant to make it simpler for
music businesses tooperate across borders and ensure that right holders correctly remunerated. Moreover,they
40 G Pryor, S Edwards, S Premnath and A Rogers, Implementation of the CRM Directive – What does it mean for music
users? 17 March 2016, https://m.reedsmith.com/implementation-of-the-crm-directive--what-does-it-mean-for-music-
users-03-17-2016/
41 http://www.legislation.gov.uk/uksi/2016/221/contents/made
42 Supra note 12, page 4 although the 2014 Regulations were repealed, CMOs maintain voluntary codes of practice that
reflect their obligations to right holders, users and others.
43

26
will supersede the 2014 policy regarding collective licensing, and to aid CMOs, the Intellectual Property Office
has produced guidance on the implementation of the Directive44.
As follows, the 2016 Copyright Regulations require UK’s CMOs to adhere to codes of practice that comply with
minimum standards of governance and transparency as provided by the Directive45. There is also a provisionfor
regular, independent reviews of compliance, and access to an ombudsman who acts as the final arbiter in
disputes with a CMO46. Moreover, UK’s CMOs must self-regulate in the first instance, but the Government has a
reserve power to remedy any problems in self-regulation and to impose sanctions where appropriate.
Although, the UK legislators introduced new regulations to implement the Directive, there are still some
important changes to the law in this area whichhave a commercial impact on companies that license music on a
commercial scale47.
4. Implementation in Germany
On 24 May 2016 the Verwertungsgesellschaftengesetz (Collecting Societies Act - VGG) was adopted. Thus,
transposing the Directive and replacing the previous Urheberrechtswahrnehmungsgesetz (Copyright
Administration Act).
Notably, as its Act aim is to simplify the fixing of tariff rates and the EU-widegrant of usage rights. The new Act
replaces previous obligation, to conduct negotiations on an inclusive contract for fixing tariff rates to
44 Intellectual Property Officce, Guidance on the UK Regulations implementing theCollective Rights Management (CRM)
Directive, February 2016
45 Supra note 12, page
46 In Germany Collecting Societies Codes of Conduct DPMA operates an arbitration board in case of disputes. It is notable
that only the UK and Germany have public bodies to handle disputes between right holders and users. However, even after
these efforts there are reports of a lack of resources, especially for complex cases that require not only legal expertise but
also an understanding of a rapidly changing business environment.
47 G Pryor, S Edwards, S Premnath, and A Rogers, Implementation of the CRM Directive – What does it mean for music
users?, 17 march 2016, publications by Red Smith, https://www.reedsmith.com/Implementation-of-the-CRM-Directive--
What-does-it-mean-for-music-users-03-17-2016/

27
independent arbitration procedures aimed at reaching agreements on the level of remuneration for the uses
required are to be carried out between the industries and collecting societies48.
The introduction of the Directiveinto German law is a further important step for the assertion of EU rights and
forthe workof CMOs in its territory49.The implementation of parameters onthe collectiveassertion of copyright
and the allocation of multiple regional licences for works on the domestic market is a clear example of how the
Government welcomes the European Commission's initiative for the creation of a joint legal framework for the
collective management of rights in the EU50.
As expressed by the President of the German Music Publishers' Association (DMV),Prof.Dr.Rolf Budde, the new
VGG Actwillgive greater legal certainty in international collaborationoperative ventures and willsupport GEMA
in the field of multinational cooperative ventures51. With this in mind, what the introduction of this Directive
means to German copyright law, is that the system is now part of a standard legal framework established
throughout Europe for cross-border licensing52.
48 KEA European Affairs, The Collective Management of Rights in Europe The Quest for Efficiency, 2006, page 120,
http://www.europarl.europa.eu/meetdocs/2004_2009/documents/dv/study-collective-management-rights-/study-
collective-management-rights-en.pdf. Disputes between users and collecting societies on tariffs and framework contracts
are dealt with by the Arbitration Board at the German Patent and Trademarks Office (14 UrhWG). Court proceedings are in
principle not admissible in such cases until the arbitration procedure has been terminated (Sec. 16(1) UrhWG). The
Arbitration Board will make a recommendation for conciliation. If a party does not want to accept the recommendation,
opposition must be made within a month. A recommendation which was accepted by the parties is enforceable (Sec. 14a (4)
UrhWG).
49 GEMA (Society for Musical Performance and Mechanical Reproduction Rights), GEMA's position on the EU Commission’s
Proposal for a Directive of the European Parliament and of the Council on collective management of copyright and related
rights, and multi-territorial licensing of rights in musical works for online uses in the internal market, 07 December 2012,
page 3, https://ameliaandersdotter.eu/sites/default/files/gema_position_paper_en.pdf
50 Ibid
51http://www.google.co.uk/url?q=http://www.billboard.com/articles/business/7350391/germany-collective-
management-societies&sa=U&ved=0ahUKEwiJpMn9-tzOAhUqJMAKHXz7B-
QQFggZMAE&sig2=jV1j_0jfPg3Lm0ibQQvK_A&usg=AFQjCNHp6PzDy8nZaUh_shB3plGYkq7fDw
52 GEMA's CEO, Dr. Harald Heker, 2016

28
In essence the new VGG Act compels the societies to ensure a number of requirements including increased
transparency. Therefore, CMOs must now publish their accounts and the annual report in the OfficialGazette53,
and also they are obliged to give information on the rights and works it administers to any interested party54.
According to German law, the purpose of a collecting society is to collectively manage the rights for the benefit
of its rights holders. The German Patent and Trademark Office(DPMA) is the authority in charge of monitoring
their activities, and it has the power to refuse any application to operate a collecting society if: (i) the statutes of
the collecting society do not comply with the provisions of the UrhWahrnG; (ii) there is a reason to believe that
a person entitled by law or the statutes to represent the collecting society does not possess the trustworthiness
needed for the exercise of his activity,or (iii)it is unlikely,in view of the collectingsocieties’ business structure,
that the rights and claims entrusted to it will be effectively administered.
In the context of collectiverights management, Germany possesses the most comprehensive legal frameworkfor
the regulation of CMOs within its ownterritory.Passed in 1965, the Urheberrechtswahrnehmungsgesetz (orLaw
of the Administration of Copyright and Neighbouring Rights, the so-called UrhWahrnG or LACNR)55 regulates
collecting societies to ensure oversight of the ‘trustee relationship’ and to prevent misuses of a monopoly
position.
53 § 9 UrhWG.
54 § 10 UrhWG.
55 Repealed The Verwertungsgesellschaftengesetz 2016 (Collecting Societies Act - VGG) was introduced to regulate
German CMOs and its aim is to simplify the fixing of tariff rates, the EU-wide grant of usage rights and the participation in
general meetings of members and the introduction of independent arbitration procedures intended at reaching agreements
on the level of remuneration for the uses required are to be carried out between collecting societies and other users. The
Act also continues to promote a simplified EU-wide granting of usage rights by means of joint licensing and processing hubs,
which are to be given the possibility of licensing rights in music items for online offerings.

29
5. The Role of Collective Management Societies (CMOs)
CMOs are private, non-profit, cooperativemembership organisations set up by authors and publishers. They are
a spontaneous response to the problem faced by authors (composers, dramatists, artists et al.) and publishers
(of books, sound recordings etc.) of collecting royalties due to them from use of their work in a variety of
situations which they cannot control – in secondary markets, and, increasingly, from compulsory licences.
Clearly, the evolution of the internet has contributed deeply to the break of the territorial system for the
reproduction rights and authorisations of protectedworks.The reality is that because of the intangible character
of the many of the protected works, multiple individuals can access it and use it at the same time without solid
restrictions. Moreover,the factthat the usage of protected works is simultaneously possible withouttaking into
account any territorial limits means that the protection to right holders can only be provided by MOCs.
In principle these types of societies were created as a way to guarantee the exercise and control of the rights of
the authors in their works,but the truth is that today this view is biased56. The role of CMOs is vitalfor the proper
exercise of the rights of the copyright owners in terms of exploiting their rights by way of collective
administration. They are intermediaries for the licensing of copyright and related rights between right holders
and users. They not only reduce transactional cost related issues concerning mass usage of rights but also help
right holders clear obstacles when promoting their work. CMOs’ work provides that end-users do not have to
negotiate a licence with the right holder individually prior to using their work. In fact, without CMOs, right
holders would not be able to monitor the market, to detect potential infringers, and to request them to pay for
the use of their rights. Hence, CMOs serve the interest of both right holders and users57.
56 Jorge Luis Ordelin Font, el futuro de la gestión colectiva: un análisis desde la concesión de licencias multiterritoriales
de derechos sobre obras musicales para su utilización en línea, REVISTA LA PROPIEDAD INMATERIAL n.º 20 - Diciembre
de 2015 - page. 2
57 K Purnhagen Wageningen and Rotterdam, Studies in European Economic Law and Regulation Volume 3,

30
As follows,CMOs grant licences limited to their ownterritory and their licences normally covertherights of both
domestic right holders and right holders from other member states; this is the case in the EU58. Facilitating the
licensing of such rights allows collecting societies to play a major role in the protection and promotion of the
diversity of cultural expressions. This in part also enables the smallest and less popular repertoires to access the
market.
At present, exclusive rights, whichare those rights granted to creators fororiginal works,encompass the rights
to reproduce, distribute, rent, lend, or communicate a workto the public, and all these rights can be transferred
and/or collectively managed by specialist intermediaries59. For online uses, collecting societies are increasingly
requested to grant licences that coverseveral or all member states. The degree to which different right holders
and sectors rely on collective management varies, depending largely on the preference of right holders and on
the needs and practices of different industries. This is the fundamental reason why their monitoring is highly
important in present times60.
The collectivemanagement of rights, therefore, is no more than a collectiveexercise by an organisation with the
aim to administrate the proprietary rights of the authors and its related rights in connection to the works.
However,whilecollectivelicensingcan be highly beneficialto right-holders and end-users, the existence of single
bodies solely responsible for the management of rights may also cause a number of different problems. Among
some of the problems are that copyright holders have little alternative to joining a collective society, and this
means that they can impose restrictive terms on the licence agreements, and, because they usually tend to
monopolise certain areas of the market, this also means that right holders are in a disadvantageous position to
negotiate any terms fortheir benefit. Fortunately,as is now clear, they occupy adominant position in the market
58 L Guibault and S van Gompel, Collective Management of Copyright and Related Rights, second edition (Alphen aan den
Rijn: Kluwer Law International, 2010), pp. 135-167. Chapter 5 Collective Management in the European Union,
http://www.ivir.nl/publicaties/download/296.pdf
60 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52012SC0205

31
in terms of the supply of services of administering rights. Their activities will be better scrutinised with the
introduction of the Directive in order to ensure that there is no abuse.
If well, the Directive provides for multiple proposals in the context of collectivemanagement; the following will
focus on multi-territorial licencing, completion law and supervision of CMOs, which currently represent the
principal challenges that the implementation of the Directive supposes to the model already in place in member
states but most particularly in the UK, thus, illustrating the problems that CMOs currently face and how the
legislators are trying to regulate all the aspects of their establishment and their operation in the EU.
5.1. Cross-border rights management and Competition
Although, the introduction of the Directive was made with the view to clarify issues of cross-border rights
management, including the confusion as to whether rights management constitutes a service that is subject to
the Directive on Services61 the debate continues even after its recent adoption62. This is in part due to the recent
European Court of Justice (ECJ) decision on the so-called OSA63 judgement.
In this case, the ECJ rejected the European Commission’s arguments forthe applicability of the Services Directive
to CMOs’ activities. The ECJ acknowledged that CMOs provide a ‘service’ within the meaning of the Services
Directive but then excluded the applicability of the Services Directive to intellectual property by making a
referenceto Article17 (11)of the ServicesDirective64. Arguing, that the legislation that grants aCMO amonopoly
61 Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on Services in the Internal
Market (OJ L, 27.12.2006, 376/36).
62 K Nemvalts & A Kelli, The Estonian Perspective on the Transposition of the Directive on Collective Management of
Copyright and Related Rights,pp. 33-42. JURIDICA INTERNATIONAL 23/2015,
http://www.juridicainternational.eu/public/pdf/ji_2015_1_33.pdf
63 Case C-351/12, Ochranný svaz autorský pro práva k dílům hudebním o.s. (OSA) vs Léčebné lázně Mariánské Lázně a.s.,
paragraph 65. Available at http://curia.europa.eu/juris/documents.jsf?num=C-351/12 (accessed on 5.7.2016).
64 Supra note 62 , Article 16 (‘Freedom to provide services’) shall not apply to copyright, neighbouring rights, and industrial
property rights, according to Article 17 of the Services Directive

32
overthe management of copyrightin the territory of the Member State concerned should be considered suitable
for protecting intellectual property rights, as it is its liability to allow an effective management of rights65.
This judgement further supports the approach of countries that have a high level of control over CMOs in their
territory66. In the UK, for example, that control is exercised through a well-established set of requirements that
CMOs are expected to meet, and their activities are closely linked to their organisational form. Having said this,
the Directivesets clear details regarding the definition of CMOs, and narrows the category of organisations that
canbe considered to becollectivemanagement organisations. Nevertheless, in comparison withwhatis specified
in the UK and in Germany67, its definition is still broader.
Currently, the issue is that strict regulations requiring a specific legal formfora CMO already exist, and this could
lead without any doubt to a situation in which CMOs established in other member states with different legal
forms might not be eligible to provide services across the EU68. However, in the light of the adoption of the
Directive,there seems to not be any conflictbetweenlocal legal form requirements and Article 16 of the Services
Directive for the formation of a CMO.
Accordingly, a CMO in the light of the Directive is ‘any organisation which is authorised by law or by way of
assignment, licence or any other contractualarrangement to manage copyrightor rights related to copyrighton
behalf of more than one right holder for the collectivebenefit of those right holders as its sole or main purpose,
and which fulfils one or both of the following criteria: (i) it is owned or controlled by its members; (ii) it is
organised on a not-for-profitbasis; […]’69.In addition, Recital 14 further facilitates its interpretation by clarifying
that there is no requirement for CMOs to adopt a specific legal form, thus, effectively tackling the issue of cross
border right management and provision of services in the EU in an effective and clear way.
65 Ibid
66 Supra note 62, page 4, Recital 3 of the proposal for a CRM directive
67 See below for the definitions of Collective Societies on both jurisdictions
68 Supra note 46
69 Supra note 62, page 4, CRM Directive, Article 3 (a)

33
This obvious remark by the legislators is explained by the fact that these types of organisations operate under
various legal forms within the EU, including forms such as associations, co-operatives, or limited-liability
companies, and in some exceptional cases, foundations70. Clearly, this recognition of different legal forms means
that Member States are now not prevented from stipulating their ownformalities for establishment of a CMOin
their ownterritory. This is undoubtedly a dynamic way tolegislate more accordingly withthe need of the market
while protecting the rights of rights holders across the EU. Moreover, this also allows member states to impose
monitoring measures more reasonable with the needs of their markets.
Lastly, although it is questionable whether in the drafting of the relevant provisions the Directive obliges them
to follow thewording in providing a requirement of a specific legal formfor CMOs, or whether it may be possible
or even preferable to retain the existing definition71.A sound approach, such as the one adopted by the UK, will
be to add specific requirements where needed. This could, however, potentially impede the development of an
equal play-ground forCMOs and right holders as well as contribute to the detriment of a single digital market as
member states will undoubtedly introduce different requirements. In the light of the recent discussion, support
to the adoption of broad definitions as provided in the Directiveis recommended to those member states where
there is absence of state supervision of CMOs.
Although, competition law as always been a complex legal issue in relation to its applicability to the activities of
CMOs across the EU,the Directive makes it clear that they are not exempt from the competition rules provided
by the TFEU72.This,in practice,means that their activities should now comply with the antitrust rules stipulated
in Article 101 of the TFEU and they should not abuse their dominant position73.
72 Recital 1 1 of the CRM Directiv e em phasises the need for com pliance w ith the com petition ru les.
73 TFEU, Article 102

34
Even after its adoption, it is still questionable whether the provisions in the Directive will in fact, in the light of
the numerous complains relating to CMOs transparency, governance,and distribution of royalties, wouldindeed
offer better protection for the interests of the right holders, or even promote a higher standard of practice for
CMOs across Europe. This unfortunately is yet to be discovered.
Clearly, the efforts of the European Commission in terms of carefully scrutinised activities of CMOs74 together
with recent decisions75 have helped to create more adequate norms for licensing rights and competition policy
in the digital area76. This is reflected by the desire to achieveone of the main aims of the Directiveregarding the
change in copyright licensing schemes on account of the development of a single digital market for cultural
content online, notably, by adequately licensing the rights of authors in musical works as online music service
providers facedifficulties in acquiring licences with an aggregated repertoire for the territory of more than one
Member State.77.
The Directive clearly distinguishes the principle of territoriality of intellectual property rights and the principle
of an efficient internal market, which is proposed to be overcome by the concept of multi-territorial licensing.
This new approach in simple terms does not allow member states to restrict the allocation of multi territory
licences for musical works, referring to the territoriality principle. Effectively,TitleIIIis aimed at improving the
conditions of licensing practices of CMOs while making them more attractive in an increasingly cross-border
context while reducing competition.
74 Commission Recommendation 2005/737/EC of 18 May 2005 on the collective cross-border management of copyright and
related rights for legitimate online music services (OJ L, 21.10.2005, 276).
75 Supra note 61, The European Commission in the 2008 CISAC *39 On 16 July 2008 adopted a decision prohibiting 24
European CMOs from restricting competition with respect to the conditions for the management and licensing of authors’
public performance rights in musical works. The European Commission took the view that a series of measures taken,
including membership and territorial restrictions incorporated into the reciprocal representation agreements concluded
between the collective management organisations, constituted infringements of Article 81 *40 of the EC Treaty and Article
53 of the EEA Agreement
76 The explanatory memorandum on the proposal of the CRM Directive,
http://ec.europa.eu/internal_market/copyright/docs/management/com-2012-3722_en.pdf
77 Supra note 62, See the proposal for a directive of the European Parliament and of the Council on collective management
of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal
market, p. 3

35
Moreover, under Article 29, member states shall ensure that any representation agreement between CMOs
whereby a CMO mandates another CMO to grant multi-territorial licences for the online rights in musical works
in its own music repertoire is of a non-exclusive nature, and that it should manage those online rights on a non-
discriminatory basis78. This is provided in order to not restrict the choices available to users seeking multi-
territorial licences and also not to restrict the choices available to CMOs seeking administration of services on a
multi-territorial basis79.
In the UK for instance, the competitions’ authorities as prescribed by the Competition Act 1998 are the ones in
charge of controlling society-members’ relations. Some of the provisions in the 1998 Act prohibit agreements
and concerted practices that restrict competition as well as abuse of a dominant position. A more general form
of control offer by the EU over societies is found in Article 102 TFEU that prohibits by one or more undertakings
of a dominant position. In this context, CMOs constitute undertakings when that provides certain services to
authors, as they also hold a dominant position in provision of their services. However, the critical issue regarding
the extent to which their conductconstitutes an abuse is not defined with clarity under any of the provisions of
the Directive.
As explained, the Directive obliges member states to regulate the substantive content of society-member and
society-user relations something that might seem irrelevant to some jurisdictions with strict regulations
governing CMOs activities (such as the UK and Germany). Nevertheless, the Directive provides that member
states must ensure that collecting societies act in the best interests of their members80, and that various rights
are conferredon right holders and members, and that there are various obligations onsocieties related toannual
meetings81, collection and use of revenue82 and so on. Clearly, these provisions seek to ensure the correct
regulation of CMOs in the EU for the benefit of right holders and end-users. As the absence of proper regulatory
78 Supra note 62, page 6, Under German law, the collecting society is under an obligation to administer the rights for which
it is competent for every author (“Wahrnehmungszwang” - § 6 UrhWG). Hence a collecting society is cannot refuse the
administration of rights for a certain work or author.
79 Recital 44 of the CMR Directive
80 CRM Dir. Art. 4
81 CRM Dir. Art 5(2)
82 CRM Dir. Art 11

36
control, especially over the licensing, might allow societies to charge exorbitant fees and even discriminate
unfairly between different kinds of users. Thus, in order to ensure that this monopoly poweris not abused, there
should be absolute collaboration between all member states in order to uphold the European regulatory
controls83 .
In the UK,for example, the 2014 Copyright Regulations specify the criteria related to licensing. The code requires
the licensing body totreat licensees fairly and to ‘consult and negotiate fairly,reasonably and proportionately in
relation to the terms and conditions of a new licensing scheme84 .Furthermore, the codeintroduces a mandatory
requirement to respect the rights of creators and right holders including their right toreceive fairpayment when
their workis used85 . This latter provision seems to allow collecting societies to require contractual payment for
uses that perhaps fall within the scope of exceptions, thus potentially conflicting with the principle that
contractual variation of exceptions should not prejudice users. Like the provisions of the Directive, the
Regulations also provide for a complaint procedure for licensees, but unlike the Directive, it does not require
disputes to be submitted to a court, instead, if appropriate, disputes are to be referred to an independent and
impartial dispute resolution body86. Moreover, the Copyright Tribunal has a wide range of powers to review
licenses and licensing schemes offered by CMOs in the UK.
Currently, the UK Copyright Act 1988 does restrict the freedom of contract such that reciprocal agreements
among CMOs should only be of a non-exclusive nature87. As all representation agreements between CMOs
providing formulti-territorial licensing are concluded on a non-exclusive basis there was no need to update the
present legal framework.
83 Supra note 1 page 336
84 SI 2014/898, Sch. Para. 2(h), (j)
85 Ibid, Sch, para. 3
86 Regulation 31 makes provision for this, and section 31 (2) provides a non-exhaustive listof the types of matters that
such a complaints procedure will be required to cover. It is intended that guidance will give further details on the matters
to be covered by such a procedure, and the features of a compliant procedure.
87 Supra note 12, CM0 administers the rights of its members either under a mandate or as the owner of the rights. This means
that the society is entrusted with the administration of the rights on a contractual basis. A collecting society can set standard
conditions in a licensing scheme which sets out the classes of case in which the operator of the scheme is willing to grant
copyright licences and the terms of this licensing (Sec. 116(1) CDPA)

37
In this context, it is also appropriate to make reference to the German Competition Act 2010 that serves the
purpose of protecting competitors, consumers and other market participants against unfair commercial
practices88. At the same time, it will protect the interests of the public as commercial practices towards
consumers will be illegal in any case where they do not conform to the professional diligence required of the
concerned entrepreneur89. Since Recital 11 of the Directive leaves the competition law intact, this regulation
represents an additional possibility for weighing the appropriateness of the activities of a CMO90.
In addition to competition-policy issues, cultural diversity considerations play an important role in the
development of the framework of copyright91. The TFEU, for instance, requires the EU to ‘contribute to the
flowering of the cultures of the member states, while respecting their national and regional diversity and at the
same time bringing the commonculturalheritage to the fore’.The Directiveemphasises that thefunctionof CMOs
should support cultural diversity, and it clearly articulates a framework to assure the dissemination of small
repertoires, and thereby enhance cultural diversity92.
Despite some criticism in legal literature, the view supported by this paper is that the Directive represents a
positive development for the future of copyright in the EU. Placing restrictions on the activities of CMOs is not
only important to avoidmonopolies, but also to justify that in order toprotect rights of right holders a wellset of
rules must beestablished in all member states. Moreover,even though some of the provisions, as discussed, were
already in place in the UK under the Copyright 2014 Regulations, and relatively little workneeded to be done to
transport the Directive, the provisions on the Directive, nevertheless, provide a fair balance in the context of
cross-border licensing of musicalworks,thus, introducing a greater legislation fortheprotectionof artists’ works
not only in the UK territory but also outside its borders.
88 Germany Act Against Unfair Competition (version published on March 3, 2010),
http://www.wipo.int/wipolex/en/text.jsp?file_id=229700
89 Section 3(2) Prohibition of unfair commercial practices
92 Article 30 of the CRM Directive

38
5.2. The Right of the Author to Grant Licenses for Non-Commercial Use
Article 5 paragraph 3 reserves the right holders’ right to grant licences for non-commercial uses of any rights,
categories of rights, or types of works and other subject-matter that they may choose93. This means that every
right holder in the EU shall havethe optionto license parts of their ownworkrepertoire fornon-commercial use
autonomously, and at the same time, let CMOs collectmoney for the commercial use of these works94. Its effect
is that now right holders can enjoy both the use of ‘non-commercial licenses’ and participation in a collective
rights management system95 .
Unfortunately, Art. 5 para. 3 does not clarify the technicalities of the author's right to grant non-commercial
licenses96. This opens numerous debates regarding its interpretation, including whether it entitles right holders
to enforce the right or not? Most importantly, the fact that the Directive fails to specified the exact meaning of
‘’non-commercial” means that Member States are required to provide an adequate distinction between non-
commercial and commercial uses.
93 Prof. Dr. Axel Metzger & T Heinemann, The Right of the Author to Grant Licenses for Non-Commercial Use: Creative
Commons Licenses and the Directive on Collective Management, 2015, page 11 http://www.jipitec.eu/issues/jipitec-6-
1-2015/4172/metzger.pdf
94 Ibid

39
One of the difficulties with the current practice in the EU is that CMOs do not usually grant non-commercial
licenses tothe worksof their members. Simply because sometimes licences containcopyrightlimitations fornon-
commercial uses on the terms and conditions lay down in their contracts.
In Germany, licensing works fornon-commercial use depends on the type of the created work. While the CMOs
assuming rights in the literary sector tend to be more liberal, giving the authors flexibility concerning the non-
commercial use for their works, CMOs working in the musical sector are much more imperious97.
Even though, the Directive tries to make clear that CMOs should allow flexibility to all right holders, and,
therefore, the Member States have to ‘provide that CMOs take the necessary steps to ensure that their right
holders can exercise the right to grant licences’98 for non-commercial uses99. The problem, however, lies in the
factthat CMOs are the ones that should decide ‘on the conditions attached to the exercise of that right as wellas
the provision to their members of information on those conditions’. Although it is debatable what this exactly
means, one canargue that itpotentially allowsCMOs to decide how farthe scope of the meaning of the term ‘non-
commercial’ actually extends to. In other words, collectingsocieties have the prerogative of interpretation over
the term ‘non-commercial’100.
This is supported by the factthatthe Directivedoes not allow member states todefine the term ‘non-commercial’
and its scope as it does not concede a leeway for the member states to define it. In fact, the term must be
interpreted as a European legal term that finally has to be specifiedby theECJ based upon autonomous European
criteria101.
98 Recital 19 subpara. 3 sentence 2
99Supra note 93, page 10, see, Stellungnahmen der Deutschen Vereinigung für gewerblichen Rechtsschutz und Urheberrecht
e.V. (GRUR), GEMA und VG Bild-Kunst gegenüber dem Bundesministerium der Justiz und für Verbraucherschutz zur
Umsetzung der Richtlinie 2014/26/EU des Europäischen Parlaments und des Rates vom 26. Februar 2014 über die
kollektive Wahrnehmung von Urheber- und verwandten Schutzrechten und die Vergabe von Mehrgebietslizenzen für
Rechte an Musikwerken für die Online-Nutzung im Binnenmarkt („VG-Richtlinie“) sowie zu weiteren Änderungen des
Urheberwahrnehmungsgesetzes
101Supra note 94, page 8

40
Keeping in mind the importance of the meaning of the term in legal practice and the notion that it has to be
defined by courts, it is nevertheless important to allow CMOs to implement Article 5 paragraph 3 through
individual and tailor-made terms and conditions as expressed by Recital 19. However, because member states
must exercise control of those terms and conditions, they must be compatible with the legal standards defined
by the Directive and the implementation of national provisions102.
Both the legislators in the UK and in Germany when incorporating this provision considered various aspects in
their proceedings. Clearly, forthem, the term ‘non-commercial use’ is not completely new.In Germany there are
regulations about the limitations of the copyright law103. The Bundesgerichtshof, for example, ruled that acts of
exploitation are always non-commercial when they are not intended to realize profit104.
The meaning of ‘non-commercial’ with regard to the Creative Commons non-commercial licences has been
litigated in German courts. The LG Köln ruled that commercial use can happen where a public broadcaster uses
an imagine from the internet, because only the private use of a work should be considered non-commercial105 .
This narrow and strict decision contradicted the case law of the Bundesgerichtshof about the non-commercial
use in § 52a UrhG, and was, therefore, corrected in the appeals procedure by the OLG Köln. In the appeal it was
held that it was sufficient that the public broadcaster made no direct profit from the picture and for that reason
it could be argued that “non-commercial” in a wide sense does include public broadcasters 106.
This decision served as a pointof reference forthe collectingsocieties whenthey havetocommunicate whatuses
shall be non-commercial107. With this in mind, acts of exploitation should always be non-commercial when they
are not intended to realise profit.
103 § 52a UrhG
104 BGH GRUR 2014, 549 – Meilensteine der Psychologie.
105 LG Köln MMR 2014, 478.
106 Supra note 94, page 18,

41
Enforcement of Article 5 paragraph 3 CM directive against a CMO, although problematic, in theory, must be
interpreted by member states in a wider sense and not just as a mere guideline108. As follows,member states are
obliged to provide enforcement mechanisms, so that right holders have an effective tool against the collecting
society responsible for the management of this type of works109. The UK, for instance, provides this right to be
enforceable before the courts110.
Certainly, Article5 paragraph 3 CMdirectiveopens awindow of opportunity foralternative license schemes. This
is done by enabling authors and other right holders to license works to a CMO, and at the same time allow third
parties to use their works under the terms of a ‘non-commercial’ licence. Undoubtedly, the UK has managed to
strike its efficient implementation, as the CMOs are in the first place to take the necessary steps to ensure that
right holders can exercise their rights under Article 5 paragraph 3. Although the definition of ‘non-commercial’
has not been properly clarified, it is fornational courts and the Court of Justice of the European Union to define
what a non-commercial licence is, what rights must remain with or be transferred back to the author or other
right holder, how the provision can be enforced etc111.Having said this, the current practice in the UK, where
CMOs and right holders negotiate standard terms to be used in their licence agreements, is perhaps the most
effective approach for the implementation of this new provision.
108 As the regulation’s aim is to provide authors the chance to distinguish between commercial and non-commercial uses
and to provide them with a more flexible way of rights management
109 See, The Collective Management of Copyright (EU Directive) Regulations 2016 , Collective management organisations
: supervisory function 8.(1) A collective management organisation must ensure that it has in place a supervisory function
for continuously monitoring the activities and the performance of the duties of the persons who manage the business of the
organisation which satisfies the requirements of this regulation
110 In order to comply with Article 36 of the Directive, the 2016 Regulations designated the Secretary of State as the
National Competent Authority. In practice, the IPO carries out the monitoring role. The 2014 Regulations established a
process to deal with failure to adopt or comply with a suitable Code of Practice. Under this system, the Government had the
power to impose a suitable code on a licensing body that failed to introduce one itself. Continued breach of such a code
could then result in sanctions including a financial penalty.

42
5.3. Supervision and Monitoring of CMOs in order to avoid monopolies
The issue of supervision of CMOs is one of the most challenging topics for most of the member states in the
context of the transposition of the CRM Directive into their legal systems112. According to articles 36–38 of the
CRM Directive,a Member State should guarantee the compliance of CMOs established in their territory with the
provisions of the Directive. As follows, CMOs will be monitored by competent authorities designated as having
that responsibility.
The UK is one of only three countries in Europe which does not have statutory supervision and minimum
standards for collecting societies. Instead, collecting societies are required by law to adopt codes of practice,
approved by the IPO and the UK competition authorities, to ensure that they operate in a way that is consistent
with the further development of efficient, open markets. In other words, in the UK, the establishment of CMOs is
not subjecttoprevious approvaland oversightby a public authority. Instead, the Governmentprovides minimum
standards for CMOs as a guide to support a self-regulatory framework for such organisations including the
implementation of individual codes of practice113.
Although CMOs are still under some kind of government control, this clearly contradicts the provisions of the
Directivein terms of the designation of an institution supervising CMOs’ activities, whichis necessary to choose
a suitable form of control. Moreover, it is questionable whether this self-regulation approach would to allow
flexibility or would simply allow CMOs to take advantage of the system and indeed adopt bad practices.
To answer this, is important to look at the Directive’s provisions which prescribe that competent authorities
should have the power to impose appropriate sanctions or take appropriate measures where the provisions of
112 Supra note 67 , page 8
113 International Confederation of Societies of Author and Composers, The Supervision of Collective Management
Organisations, www.cisac.org/.../CISACUniversity_The_Supervision_of_CMOs_FINAL.pdf

43
national law adopted in implementation of the Directivehave not been complied with114. The Directivedoes not
restrict the choiceof member states as tocompetent authorities, norwithregard to thenature of the controlover
collectivemanagement organisations115. The Directive does, however, require sanctions and other measures to
be ‘effective, proportionate and dissuasive’’116.
These limitations notwithstanding, allowing some room for manoeuvring, and, in fact, self-regulation is one way
to supervise CMOs’ activities within the legal framework established117.However, due to their considerable
market power, a higher supervision standard is justified by the factthat CMOs issue multi-territorial licences. In
addition, a competent authority would normally have prior information on the scale of CMOs’ activities, thus the
supervision task can be fulfilled more efficiently.With this in mind, it is perhaps correctto suggest that all CMOs
in the UK should be subject toa more general and direct state supervision. Therole of this supervising institution
would be mainly to investigate and impose sanctions if necessary, but only after receiving relevant notification
from an interested party, thus, facilitating legal clarity and awareness among the stakeholders.
Having said this, within the EU the level of State controlover CMOs varies greatly, as in some jurisdictions prior
approval is necessary to begin operations as a CMO. For example, while some registration procedure is required
under Irish and Portuguese law, no controlexists in the UK. In Germany, the responsibility lies within the Patent
Office,thus, giving to a branch of the government the authority to monitor the operations of the CMOs operating
in their territory118.
At this point, the model in Germany is worth exploring as CMOs are governed by the Administration of Copyright
and Neighbouring Rights Act119 making it the most extensive model of State control of the operations in the
114 Article 36 (3) of the CRM Directive
115 Recital 50 of the CRM Directive
116 Article 36 of the CRM Directive
118 Daniel J. Gervais, Collective Management of Copyright and Neighbouring Rights in Canada: An International
Perspective, page 32, https://ojs.library.dal.ca/CJLT/article/viewFile/6129/5447
119 Last amended by the Law of June 23 1995

44
world120. One of its particularities is the fact that the Patent Officemust approve formation of any CMO, and can
also appoint board members as well as remove them on grounds of trustworthiness. Moreover, the Act imposes
a duty to administer rights upon request from a qualified right holder, and the information of its activities must
be provided. However,whileGerman legislation seems to tackletheissue of monitoring and supervision of CMOs
within its territory with efficiency121, the fact that there is only one society in each field means that German
Collective Management Organization is, therefore, in a de facto monopoly situation122, thus making it difficultto
find useful evaluations to determine whether the Directive can achieved its stated aims. Similarly, the fact that
the GEMA during the 70’s has faceda vast amount of competitions claims regarding abuse of dominant position
by imposing unreasonable membership terms suggests that the system does not necessarily prevent collecting
societies from abusing their monopoly position123.
Currently in Europethere are different models forthe regulation and supervision of CMOs and countries suchas
Germany, Austria and Portugal, employed strict supervision over their activities. Notably, the German has
regulatory framework is the most detail in the world. Under German law, anybody wanting to undertake
collective rights management must seek prior permission. Once authorisation is granted, the collecting society
remains under permanent supervision124.
120 Supra note 74, page 32, According to Daniel J Gervais (2010) ‘Germany has the most comprehensive legal framework of
collecting societies in the world’.
121 The supervision of collecting societies is generally carried out by the German Patent and Trademarks Office (DPMA -
§ 18(1) UrhWG). The DPMA acts in co-operation with the Federal Cartel Office in relation to the grant or revocation of the
authorisation to operate as a collecting society (Bundeskartellamt - § 18(3) UrhWG). The supervision consists in
controlling that the collecting societies comply with their legal obligation. In cases of mismanagement, the DPMA can issue
warnings and/or revoke the authorisation to operate as a collecting society
123 BOP Consulting in collaboration with Benedict Atkinson and Brian Fitzgerald, Collecting Societies Codes of Conduct ,
Intellectual Property Office is an operating name of the Patent Office, December 2012, page 38,
http://poseidon01.ssrn.com/delivery.php?ID=4810851241111031271050921230171160641040350900290010101100
0211209211910109609011911304100000806005105811011708509906910409112406008300500107409708811708
4000083001023047064085004121015028003030021085125126092102084083081070105009090124074113117117
007098&EXT=pdf
124 Hargreaves Review Copyright collecting societies: does the UK need minimum standards?, 2012, page 4,
http://www.pictfor.org.uk/wp-content/uploads/2011/11/Consumer-Focus-briefing-on-Hargreaves-minimum-
standards-for-collecting-societies.pdf

45
Clearly, the Directive provisions seek to respond to legal challenges that CMOs face from rights users claiming
some abuse of a dominant position contrary to the rules of competition law125 . Thus, supporting that public
oversight of the activitiesof CMOs is notonly necessary but appropriate in order todefuse the potential forabuse
of their dominant position. While it is evident that the degree of supervision varies from one jurisdiction to
another in the EU,conditionalcriteria forapprovalto the establishment of a CMOfroma public authority appears
to be an effective way to regulate and diminish the effects of monopolies. This, however, provided that the
oversight continues after the initial approval is given, involving on-going monitoring and surveillance of the
CMO’s activities126 .
In Germany, however, a CMO is intended to be a monopoly as they are expressly exempt from competition law,
but inorder to guard against any possible abuse of thismonopoly position by the CMO,a special arbitration board
(Schiedstelle) exists within the Patent Officeto regulate the activities of the CMOs and tosettle any conflictsthat
might arise. Furthermore, as a general rule, claims against a CMO may not be made in regular civil court
proceedings unless they have been preceded by proceedings before this specialised arbitration body127.
Fortunately, the Directive calls for greater openness and the freedom of right-holders to choose which CMO to
join. Therefore, the monopoly does not exclude potential members128. However, this somewhat raises costs to
the CMO as the repertoire reduces but on the other hand, it raises the value of the CMO’s licence as it includes
more works129.Thereality is that, it may well strengthen the power of big CMOs. As the Directiverequires every
national CMO in the EU to offer equivalent services of digital licensing, it means that small CMOs must buy-in
services fromCMOs that are able to provide them, therefore, effectively providing another barrier to small CMOs
with little resources, and yet another enhancement to the natural monopoly for big CMOs130.
125 Supra note 94, page 3 CISACU Doc
126 Ibid
127 Ibid
128 Supra note 18, page7, winir doc
129 Supra note 18, page 5, WINIR Conf doc
130 M Hviid, S Schroff and J Street, Regulating CMOs by competition: an incomplete
answer to the licensing problem?, page 22, https://zenodo.org/record/47703/files/CREATe-Working-Paper-2016-03.pdf

46
6 Summary
Inshort, CMOs manage the rights of its members collectively by providingblanketlicencestousers131. This allows
reducing the transaction costs as well as providing a stable licensing frameworkfor the benefit of right holders
and users. The current way in whichCMOs operate is based on a system of reciprocalagreements between them,
and in this way, they are able to licence a world-wide repertoire.
As explained, this resulted in CMOs establishing a system of national monopolies whichdonot competewitheach
other, but instead operate under a set of agreements which determine the cost of licences.132. However, while
this broad coveragein worksand the resulting monopoly status contributes to efficientlicensing in practice, itis
also a major EU concern133. This monopoly status has given rise to typical monopoly concerns, namely the
potential abuse of a dominant position134.
To tacklethese concerns according to the CJEU,the position is that restrictions on competition should be placed
in the way CMOs operate as they are undertakings which hold a dominant position. However, because of they
serve a public interest this mean that competition law is not strictly applies, meaning that the monopoly status
and reciprocal agreements is justifiable in the broader public interest135. In practice, CMOs should offer users
reasonable licensing terms, while giving their members freedom to administer their rights more independently.
131 International Confederation of Societies of Authors and Composers, The Role of Collective Management
Organisations, page 4,
http://www.cisac.org/content/download/1135/19647/file/CISACUniversity_The_Role_of_CMOs_FINAL.pdf
132 Ibid
134 Ibid

47
As digital technology has evolved, in particular the internet, the needs of users have changed accordingly.
Notably, the internet creates the possibility of easy access to protected works irrespective of tariff barriers or
broadcasting regulations. Thus, any legal service seeking to exploit these possibilities requires multi-territorial
licences136.
Unfortunately, difficulty arises because the Directive fails to take into account a crucial factor in the licensing
process. Performing a work in public, such as streaming or broadcasting requires a licence covering the
performance and the recording of the work. The lack of attention to deal with neighbouring rights which are
commonly administered by a distinct and separate set of CMOs137 illustrates the difficulties for users when
acquiring a license in a system that is highly complex and unable to meet the demands138.
Moreover, by allowing other organisations to administer rights, the Directive has effectively endorsed the
licensing hubs139. Clearly, the high demand for multi-territorial licences, have lead CMOs to cooperate with each
other in order toeffectively providemulti-territoriallicences. However,whatthis means in practice is that rather
than competing with each other to offer multi-territorial licences, CMOs are being hired by right holders to do
this via a clearing house system140. In other words, this fragmented system potentially impedes to determine
correctly what a license really covers141.
In addition, enabling cross-territorial licensing shows a side-effect of licence fragmentation, as allowing rights-
holders to withdraw specific rights for online use from the bundle of rights that has so far been handled by the
national collecting societies is yet another evidential gap in the Commissions’ regulation142. This licence
137 For example, in Germany a broadcaster needs a license from GEMA for the musical work and from GVL for the
performance and the sound recording. For streaming the situation is more complicated and more fragmented
139 Ibid
140 Ibid
142 Haunss S. The changing role of collecting societies in the internet. Internet Policy Review, 2013, page 4
http://policyreview.info/articles/analysis/changing-role-collecting-societies-internet

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