(2019) 6 GNLU L. Rev. 141 Analytical Study I B C S C L I: A A S

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(2019) 6 GNLU L. Rev. 141
Interface Between Copyright Societies and Competition Laws in India: An

Analytical Study
INTERFACE BETWEEN COPYRIGHT SOCIETIES AND COMPETITION LAWS IN INDIA: AN

ANALYTICAL STUDY
by
Avishek Chakraborty1
Collective rights management constitutes a very specific sector of competition law
application with regard to copyright. Competition law problems arise due to the
market-dominant position of Collective Management Organisations or in the two
markets of rights management services provided to right-holders and licensing to
users. Copyright Act, 1957 in India has accorded monopoly status to the functioning of
copyright societies. Section 33 of the Act provides that the business of issuing or
granting the license in case of the cinematographic film shall be carried out only by a
registered collecting society. It is also provided that the government shall register only
one copyright society in respect of each class of work. In India, the monopoly thus
conferred on copyright societies makes their activities suspicious of having an effect on
competition in the market of collective administration of copyright. Copyright societies
are in a dominant position as they are only allowed to issue a license for the use of the
work of the creator. Copyright societies in India have the potential to affect the
competition in the relevant market. The present study seeks to understand how the
principles of competition law are applied to the functioning of collective management
organizations and how the copyright societies in India may abuse their dominant
position in the market.
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Keywords: abuse of dominant position, collective management of copyright,

competition law, copyright societies.
I. I NTRODUCTION
The law of copyright provides fair remuneration to the author of original works for
his or her creative work. However, it is not the exclusive rights in itself that produce
such income but the willingness of the consumers to pay. Copyright law depends on
the functioning of the distribution channels and of copyright-related markets on
different levels of distribution. If these markets for authorized users do not work
properly, consumers will be inclined to switch from legal to infringing copies.
Competition law plays a crucial role in creating and maintaining competitive and
efficient distribution markets. Therefore, copyright and competition law have to be
understood in the sense of promoting complementary goals.
Collective rights management constitutes a very specific sector of competition law
application with regard to copyright. Competition law problems arise due to the
market-dominant position of Collective Management Organisations or CMOs (also
known as Collecting Societies or Copyright Societies) in the two markets of rights
management services provided to right-holders and licensing to users. Competition
law needs to be applied with regard to the service they provide to right-holders and
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their licensing practices regarding users. Competition law protects the freedom of right
-holders to assign parts of his or her rights to different CMOs or to license rights
directly to users. Moreover, the internet has increased the ability of individual authors
to make autonomous decisions on how their rights should be licensed to users and
also enables them to organize direct licensing to users. For similar reasons, in many
jurisdictions, competition law prohibits CMOs from requiring right-holders to assign
rights on an exclusive basis. This principle conflicts with the objectives of collective
rights management to protect authors and performers from a buy-out of their rights
on
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the part of large users and undertakings of the copyright industry with superior
bargaining power.
Application of competition law to CMOs presents particular challenges to

competition law enforcers. CMOs are necessary for licensing markets yet to emerge,
especially for mass uses of copyrights and related rights. At the same time, due to the
economics of collective rights management, CMOs typically hold dominant positions in
the respective markets. To a certain degree, CMOs may also harm competition among
right-holders and users by discriminatory practices and engaging in exclusionary
practices. Consequently, the right-holders can withdraw their rights, which can be
licensed directly to users or to other CMOs. In applying competition law, competition
law enforcers are confronted with the challenge to consider and respect the needs for
collective rights management, which requires a deep understanding of both the
economics and the system of collective rights management.
In this context, the present study seeks to understand how the principles of
competition law are applied to the functioning of collective management organizations
and how the copyright societies in India may abuse their dominant position in the
market. The article begins with a detailed understanding of the concept of collective
management of copyright. The next segment deals with a detailed explanation of the
economic rationale behind the functioning of collective management organizations,
with special reference to the concepts of transaction cost, price discrimination, and
economies of scale. Then the regulation of copyright societies under Copyright Act,
1957 along with the changes brought in respect of the functioning of copyright
societies by the amendment of 2012 has been discussed. Thereafter the interface
between the functioning of copyright societies and competition law has been
elaborated with special reference to the abuse of dominant position by the copyright
societies towards copyright owners and copyright holders. The concluding part of the
article points out how the system of collective administration of copyright in India still
suffers from lack of transparency and has resulted in many unfair results and the
requirement of better regulatory models of copyright societies in India.
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II. COLLECTIVE MANAGEMENT OF COPYRIGHT

It is very important to devise an effective system of remuneration for the use of
original copyright protected works. It has been stated that “in the area of copyright
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and neighboring rights, the proper and fair participation of all concerned throughout
the chain of exploitation and the rapid, fair and professional acquisition of rights are
crucial for financial as well as cultural success.”2 Generally, the individual exercise of
copyright is agreed to be both difficult and expensive.3 It becomes highly problematic
for the authors to negotiate terms with every user who wants to put their works in
commercial use. The monitoring cost for the authors is also prohibitively high and the
enforcement cost becomes much higher than the royalty they receive. The individual
exercise of copyright fails to cover the costs of original creation because of a large
number of users and works involved. As a result, authors may lose motivation in the
creation of original works and therefore the supply of works decreases. In other words,
the author will not continue to produce more work only when the author cannot recoup
the cost of his creation, including a reasonable return on fixed-cost investment.4
In most of the jurisdictions, the copyright laws provide that copyrighted music can
be performed publicly only with the prior approval of the copyright owners. This
approval is obtained in exchange for the payment of royalties. In case of public
performance of broadcast of sound recordings, the user is required to secure
authorization from the producer of the sound recording and the performing artists in
addition to the license from the author of the lyrics and composers. In this
circumstance, the collective rights management, which offers a “one-stop shop for
rights clearance”5 is considered to be a significant
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solution to deal with licensing of copyrighted works. Collective management

organizations (CMOs), also known as copyright societies or copyright collectives, are
societies to which authors of creative works authorize their copyrights. Their function is
called as ‘collective rights management’. Generally, users of copyrighted works
negotiate with CMOs and make an agreement. Then license is given to the users and
they pay the royalties, which CMOs distribute amongst its members after deduction of
administrative costs. The CMOs administer the use of the work in their repertory and
pursue legal actions where necessary.6
III. E CONOMIC RATIONALE OF COLLECTIVE MANAGEMENT ORGANISATIONS

The economic rationale behind Collective management organizations (hereinafter
referred to as CMOs) explains the scope of collective rights management of
copyrighted works. A glance through different economic literature discussing the
rationale of CMOs from the perspectives mainly of transaction costs, monopoly,
competition, and social welfare reveals that primarily CMOs are considered as an
efficient way of overcoming the issue of increasing transaction costs for administering
copyright in some markets.7 High transaction costs, economies of scales and collective
action by right holders that accumulates costs can make some markets for copyright
works more efficient to establish new markets for their use8 . Hollander suggests that
the formation of a collective organization results in an increase in the number of works
produced.9 Moreover, an enactment on collectives can ensure access to the society and
distribution of revenue. In addition to this Besen, Kirby and Salop proposed that a
closed collective generates lesser than the economically efficient number of songs,
whereas efficient negotiation between the monopoly collective and user groups may
eliminate any incentive for
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competitive entry.10 It was argued that when administrative costs are small
competition among collectives may result. At the same time, some commentators also
contended that sometimes collective management organization fails to live up to their
potential while managing the rights since they share the characteristics of furthering
their own interests at the expense of artists and the public.11
Conceptually, the services provided by the collective management organizations are

beneficial both to the authors or right holders as well as users. In respect of authors or
right holders, CMOs are considered to be crucial because they play the role of trustees
and on behalf of the right holders; they administer, monitor, collect and distribute the
payment of royalties. Besides the economic roles, CMOs also perform significant
cultural and social roles. The trade-union like the spirit of solidarity is very crucial in
this regard and the organized power of a CMO promises its members an important
bargaining position in respect of protecting old rights or to strive for the
acknowledgment of new ones. On the other hand, users get advantage from CMOs
since a centralized rights-clearance facility which will help to reduce the transaction
costs.
The market of copyright in the field of musical works is a unique market, described
as a search market.12 Compared to other market operators an author is in a very
specific position as far as the exploitation and marketing are concerned. Handke and
Towse explained how the licensing market for musical works in an analogue world was
and are highly complex. A large number of creators (artists) and products (songs)
have to be matched with a similarly large number of diverse users. In this condition,
asymmetry of information creates prohibitive transaction costs for individual licensing
between a copyright owner and a user. In an economic sense, this kind of individual
licensing exhibits market failure in which copyright owners and the users both would
be in a disadvantageous position. The right holders will not be able to make the
income they want while the user will not
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be able to legally access the music they will be looking for. The CMOs intend to cut
down the market failure. They collect the revenue for low value, high volume
secondary uses. It implies that the uses where the individual licensing fee is small but
the number of licenses which needs to be issued add up to a substantial revenue
stream. CMOs collectively manage the rights of its members by way of providing
blanket licenses to the users. In this way, the transaction costs are lowered and also a
stable licensing framework is created. Consequently, the CMOs ensure copyright
effectiveness in the market in such situations where it is difficult for the copyright
owners to contact directly.13
A. CMOs in the face of Transaction Costs

CMOs are considered to be an effective way of reducing the problem of high
transaction costs14 for the administration of copyright in some markets. Ronald H.
Coase in “The Nature of the Firm” (1937) and “The Problem of Social Cost” (1960)
explained the foundation of transaction costs approach. According to the Coase
theorem, if private parties can bargain without cost over the allocation of resources,
they can solve the problem of externalities on their own.15 In every transaction, costs
will accrue because to carry out a market transaction it becomes necessary to discover
all information concerning both parties of the transaction. If the transaction costs are
so high that they exceed the benefits of contracting, then a reasonable person will
choose not to carry out the transaction. The level of transaction costs plays an
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important role in individual negotiation and enforcement of the contract. Transaction

cost analysis helps to identify possible ways of cost savings so that parties can reduce
the costs incurred in the making of the agreement. In respect of the functioning of
collective management organizations, transaction costs analysis helps to identify the
right holders and potential users, the negotiation of terms and licenses, the
enforcement of contracts, the collection and distribution of royalties and the litigation
of infringement.16
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There are three types of transaction costs: (a) search costs; (b) bargaining costs;
and (c) enforcement costs17 . Search costs accrue in the soliciting of a potential
contracting partner. The search costs are generally high for unique goods or services
and low for standardized good or services. The number of copyright holders is
numerous, but, the number of copyrighted works can be much larger because each
author usually creates more than one work. Since there is an innumerable number of
works available, users are required to find suitable licensors and make contact with
them so that the negotiation can proceed. At the same time, search costs incurred by
right holders can also be prohibitively high. When the contracting parties have been
found, bargaining costs get accumulated for the negotiation and concluding of the
contract. Ordinarily, contracts involve two parties, but, in the copyright industry, many
bargains may involve three or more parties since the rights are dispersed in this area.
This distinctive feature of copyrighted products raises to a larger extent the costs of
negotiation. Enforcement costs are accrued in order to ensure the agreement is
fulfilled. Generally, enforcement costs are low when violations of the agreement are
easy to observe and punishment is cheap to administer.18
The supporters of collective management of copyright believe that considering the
vast number of works and parallel uses, it is extremely difficult for the individual right
holder to record every use of the protected work. Additionally, the costs incurred by
potential users would be substantially high. The markets for copyright works are
usually complex since a great number of creators and other right holders supply an
even greater number of different products which encompasses a wide variety of rights.
Consequently, the transaction costs for identifying potential trade partners and to
negotiate the terms of trade become very high. In respect of the right holders, the
fixed costs of managing a bundle of copyright among all the users will also be very
significant. They also have to set up procedures to monitor unauthorized use and to
prosecute the cases of copyright infringement. From the users' point of view, they are
required to identify the concerned right holders and avoid chances of infringement. In
this way, both the right holders and
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users need to negotiate the terms of use and price. Thus, there will be no market and
both right holders and future users will suffer loss.19 Moreover, in the copyright
industry, third parties may conceal the information concerning the particular work,
which users find difficult to find. This information asymmetry can disrupt the market
so much that a social optimum is difficult to achieve.20
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Adoption of uniform contract by the CMOs with the users brings down the
bargaining and enforcement costs as well. Since the right holders and users comply
with standard form contracts, users are able to commercially use copyright protected
works by paying a fixed royalty and thus the bargaining costs of negotiating detailed
terms with CMOs are cut down. By relying on settled administrative mechanisms, both
owners and users find it easier in respect of collection and distribution of royalties. By
way of granting blanket licenses, the copyright societies help in further reduction of
transaction costs. A blanket license spares licensees the costs of access to the entire
repertoire and the cost of every single transaction. Landes and Posner had explained
additional benefits of the blanket license other than lowering of the transaction cost.
Firstly, the blanket license avoids “the misallocation of resources that would occur if
some musical compositions, being unique and protected from competition by
copyright, were priced far above marginal cost.”21 This leads some users to choose
second-best substitutes because the user can use any song as much he wants under
the blanket license. The user can use the optimal level of his first best choice.22 The
second benefit has been identified by Landes and Posner in the form of “block
booking”.23 The blanket license offered by CMOs is similar to block booking as it allows
the CMOs to sell a bundle of songs at a uniform price to a class of users whose
valuation of specific songs may differ.24 CMOs reduce transaction costs by imposing
low compliance costs on users and
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providing a one-stop shop service. The blanket license lowers the costs additionally by
providing unlimited access to the entire repertoire in a single transaction.25
B. Price Discrimination Strategy by CMOs in the face of Public Goods

In the economic sense, copyright products are considered as public goods. Books,
music, as well as other copyrightable goods, show characteristics of public goods. A
public good is non-excludable and non-rivalrous in nature. Public goods are non-
excludable because the user cannot be prevented from using the same. It is also non-
rivalrous since the use of the good by one person cannot diminish use by other users.
The non-rivalrous and non-excludable feature of public goods gives rise to the free-
riding problem. The under-production and under-consumption of copyrighted works
result from the free-riding problem. Once the content of the work is made available to
the public, the same can be used by numerous users and at the same time one single
use does not deplete the content or exhaust the use of others. Resultant, physical
control of intellectual goods becomes less efficient with respect to restraining free
riding, compared to tangible goods. Free riding also results in market failure.26 Wendy
J. Gordon observed that when there is no legal rule that requires copyists to get
permission and pay license fees, market failure results then.27 With more free riders in
the market, authors get demotivated and the amount of works they produce gets
reduced. Consequently, the drop in the supply of copyright-protected works leads to a
deadweight loss since it results from a market distortion.
In order to reduce the negative externality brought by public goods, the owners
resort to price discriminate the consumers. A price discriminating monopolist could be
selling more products in comparison to a single price. By pricing differently, the
producers intend to satisfy the demand of different consumers in order to reduce the
free-riding
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issue to a greater extent. The licenses issued by CMOs are a typical kind of price
discrimination. Per use contracts, per program contracts and blanket licenses are the
main three categories of licenses granted by CMOs. A per use contract targets those
users who want to use work only for once.28 Copyright societies charge users a license
fee from a tariff of elaborate categories, like, the size of the premises or the audience.
They also collect and evaluate information on the number of uses or the value
generated by various users within such categories to determine both willingness and
ability to pay. Price discrimination restricts the number of potential users that would
be excluded from consuming copyright works when a single, inflated price is charged
by a CMO.29 When the producer knows definitely the willingness to pay of each
consumer and charges each consumer a differing price, no user will be excluded from
licensing and perfect price discrimination will happen. By way of price discrimination,
the entire surplus in the form of profit derived from the market accrues to the
producer without any deadweight loss. By managing the works in their repertoire
collectively, CMOs indirectly strengthens the right holders' control of their works.
Consequently, with the elimination of free riding, the economic interest of copyright
holders is protected and the total surplus increases.30
C. The Positive Effect of Monopoly — Economies of Scale

Since individual management of copyright is expensive and impractical, collective
management is a key and efficient method for licensing, collecting and distributing
copyright and royalties. It is argued that society is better served by a single seller. The
principal contention behind collective management of copyright is that the market for
managing such rights is a natural monopoly. A natural monopoly is formed when a
single entity can supply a good or service to an entire market at a lower cost than two
or more entities could. When a natural monopoly occurs, it is believed that there are
economies of scale in the monitoring, licensing and distributing of copyright, which
makes the management of an aggregate of rights more efficient
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than the management of a single or few rights. Economies of scale get decreased in
per unit cost resulting from increases in quantity produced or distributed.31 When all
related rights are administered by a single CMO, the cost of the behavior becomes the
lowest. Moreover, economies of scale can have a deterring effect on the grant of
injunctive relief by the court. When the individual right holder seeks injunctive relief
from the court, such injunction will have a prohibitive effect on the specific work of the
owner rather than other copyrighted works. However, if the injunction is claimed by a
collecting society, the unauthorized user will be prevented to use any of the works
available in the collecting society's repertory in the future.32
D. Regulation of Copyright Societies in India under the Copyright Act, 1957

Under Section 13(1) of the Copyright Act, 1957, copyright subsists in a sound
recording.33 Copyright in the sound recording is separate from copyright in the
music.34 A phonogram or a CD-ROM are sound recordings. Copyright in the music
vests with the composer whereas copyright in the recorded music vests with the
producer of the sound recording. Playing any sound recording in private is not
copyright infringement of sound recording. When the recording is communicated to
the public without the consent of the copyright owner or without procuring license of
the work is an infringement of copyright in that work under section 51 and attracts a
heavy penalty for the same. Therefore, procuring a public performance license is a
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legal necessity under the Copyright Act, 1957. The royalty share, received by way of
issuing a license, goes to the music creators and publishers. Instead,
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such licenses can be issued by copyright societies, formed for the purpose of working
for the interests of the member.
The Parliament of India incorporated the provisions related to copyright societies by

virtue of the amendment of 1994 under chapter VII of the Copyright Act, 1957. A
copyright society is a registered collective administration society, formed by the
owners of copyright under section 33(3) of the Copyright Act, 1957. Generally, a
copyright society issues a license in respect of the rights administered by the society;
collects fees in pursuance of such licenses; and distribute such fees among copyright
owners after deducting the administrative expenses.35 As per section 33(1) of the Act,
the business of issuing or granting licenses in respect of all the works in which
copyright subsists shall be carried out only by a copyright society registered under the
Act. The minimum membership required for registration of a society is seven.36 The
Central Government is permitted to establish only one copyright society in respect of
one class of work.37 Registration conferred to a society shall remain valid for five years
subject to renewal.38 Under section 34, a copyright society may accept an exclusive
authority to administer any right from the owners and authors by issuing license and
collecting fee. Such a society can enter into reciprocal agreements with overseas
collecting societies.
Copyright societies in India are required to remain under the collective control of
authors and owners of the rights of its members.39 The societies have to take the
approval of its members while devising any procedure for collection and distribution of
fees. Moreover, the societies are required to provide detailed information regarding the
functionality in respect of the administration of members' copyright. They are
prohibited from discriminating among its members at the times of payment of
royalties and the members of the society will be having equal status. The royalties
collected should be distributed by the societies among authors and owners in
proportion to the use of
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their work. For collective administration of copyright in musical works in the Indian
market, initially, there were two major players, Indian Performing Rights Society
(IPRS), Phonographic Performance Ltd. (PPL) and the most recently established
society, Indian Singers Rights Association (ISRA). In case of communication of sound
recording of its members to the public, PPL collects royalties for sound recordings.
Where there is a live performance of the work of its members, IPRS claims royalty.
ISRA collects royalties on behalf of singers. Although IPRS has recently got re-
registered as per the mandate of the Amendment Act of 2012, PPL has constantly
failed to get itself registered after the said amendment and is no longer a copyright
society.
E. Copyright Societies and the Amendment Act of 2012

The Copyright (Amendment) Act of 2012 intends to restructure the working of and
the eligibility criteria for membership in copyright societies. This amendment provided
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that the copyright societies shall have the exclusive right to carry out the business he
business of issuing or granting the license in respect of literary, dramatic musical and
artistic work incorporated in a cinematographic film. The 2012 Amendment also
provided that all the copyright societies already existing in India before the
Amendment shall get themselves re-registered within a period of one year from the
date of Amendment. In addition to that, the newly inserted section 33A requires every
copyright society to publish its tariff scheme. There is also an opportunity of appealing
to the Copyright Board by any person, aggrieved by such tariff scheme. After the
amendment of 2012, the Copyright Board has the power to determine an interim tariff
to be paid by the parties after necessary hearing
Before the amendment of 2012, under section 34, the administration of copyright
was provided only in respect of the authors. After the said amendment, ‘other owner’
was added to the provision. It implies that composers and lyricists are also authorized
to carry out the administration of copyright. Primarily the rationale of including ‘other
owner’ in section 34 was the changes brought in sections 17 and 18 of the Act, where
the authors of musical works, i.e., the composers
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and lyricists, who were working under the employment of producers of cinematograph
films are also regarded as the owners of the work. Moreover, after 2004, the copyright
societies stopped payment of royalties to singers. Although at the beginning the
societies comprised of singers, composers, and publishers, later it was taken over
mainly by the publishers. Disputes related to payment of ringtone royalty are also
attributed as one of the significant factors behind the amendment of 2012.40 As a
result of such non-payment of royalties, there were major conflicts between music
labels and cellular companies. All these factors have led the central legislators to
amend the Copyright Act, 1957 in order to protect the composers and singers from
further exploitation of their works.
IV. THE I NTERFACE BETWEEN THE FUNCTIONING OF COPYRIGHT SOCIETIES AND COMPETITION LAW
IN I NDIA
Since the law of copyright provides the owner with the exclusive right to distribute
the protected work, a copyright owner enjoys a favorable bargaining position when
dealing with potential buyers and licensees. If demand for the copyrighted work is
sufficiently great, the owner may be able to take advantage of that bargaining power
to obtain certain legal concessions from a licensee.41 As per the mandate under
Copyright Act, 1957, copyright societies have acquired a near monopoly status in the
market. The obligation of carrying on the business of issuing or granting the license in
respect of cinematograph film only through a registered copyright society is attributed
as a reason for the monopoly-like situation. Moreover, the statutory requirement of
registering one copyright society in respect of one class of work has provided ample
opportunity to create a monopoly in the market of management of copyright.
In India, Competition Act, 2002 had been passed to (a) prohibit anti-competitive
agreements; (b) prohibit the abuse of dominant position by enterprises, and (c)
regulate combinations exceeding threshold limits in
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terms of prescribed turnover or assets. Section 3 of the Competition Act 2002 states
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that no enterprise or association of enterprises or person or association of persons shall
enter into any agreement in respect of production, supply, distribution, storage,
acquisition or control of goods or provisions of services, which causes or is likely to
cause an appreciable adverse effect on competition within India. Sec. 3(5) of the Act
provided a blanket exemption on IPR, displaying the country's strong commitment to
protecting IP rights vis-à-vis competition. However, section 4 which deals with abuse
of dominant position, provides ample room for interfering in IP matters as well. Abuse
of dominant position is a common form of anti-competitive practices and may be in
the form of refusal to deal, tying arrangements, exclusive licenses, etc. Multiple
agencies dealing with IP and competition are also a concern in India. Moreover,
exercise of intellectual property rights, especially that of copyright cannot be allowed
to create a dominant position in the market. In spite of the exemption provided under
section 3(5) of the Competition Act, intellectual property laws have no absolute
overriding effect over competition law.42 CCI has the jurisdiction to deal with
competition cases involving IPR.
A. Abuse of Dominant Position and CMOs

Section 4(1) of the Competition Act, 2002 clearly states that no enterprise shall
abuse its dominant position. ‘Dominant position’ has been defined as a position of
strength enjoyed by an enterprise in a relevant market, which enables it to operate
independent of the established competitive forces and adversely affect its competitors
or the consumers in the relevant market.43 It implies that the dominant position of
enterprises is per se not prohibited, but their abuse which
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adversely affects the competitive forces and consumers in the relevant market is
prohibited under the Act.44
In FICCI Multiplex Association of India v. United Producers/Distributors Forum

(UPDF)45 , the FICCI filed information against UPDF and others stating that they were
creating market cartels in films, against multiplexes. In order to raise their revenue,
the UPDF had refused to deal with multiplex owners and it is well known that the
multiplex business is hundred percent dependent upon films. Hence this amounted to
a refusal to deal, which was inherently anti-competitive. Another fact was that the
UDPF and others held almost 100 percent share in the Bollywood film industry and the
UDPF was indulging in unprofessional tactics by limiting/controlling the supply of films
in the market and this thereby amounted to a refusal to deal with multiplexes. This
was alleged to be a case of abuse of dominant position under Competition Act, 2002.
Consequently, the CCI directed the Director General of CCI to inquire into the matter.
The DG inquired into the same and submitted a report indicating a violation of the
provisions of the Competition Act, 2002. The CCI ruled that the concerted activity of
the UPDF in not releasing films through the informant, in this case, was clearly
violative of the Competition Act, 2002. The CCI's decision in the FICCI Multiplex case
was significant as it tried to end the abuse of dominance of association in the film
industry. The Commission fined 27 film producers, a nominal amount of Rs. 1 lakh.
The monopoly given to the functioning of copyright societies, as discussed
previously, have given rise to many suspicious activities and therefore alleged to have
an impact on competition in the market of collective administration of copyright.
Moreover, unrestrained monopoly is subject to abuse and a bigger concentration of
power in their hands may lead to the corrupt exercise of those powers. In different
jurisdictions, especially in the United States of America and the European Union, the
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functioning of copyright societies have been
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made subject to strict scrutiny through the provisions of competition law. However, in
India, the examination of the activities of copyright societies by applying the
competition rules does not contain any concrete jurisprudence.
A collecting society may abuse its dominant position by (a) requiring royalties on
works unprotected by copyright,46 or (b) charging royalties on records placed on the
market in another member state with the consent of the authors and artists through
the collecting society based in that state47 ; or (c) charging a higher levy on imported
recording apparatus than on apparatus produced in the state where the society is
based; or (d) calculating royalties differently for commercial television channels than
for public broadcasters, where this places the former at a competitive disadvantage
and is not objectively justified having regard to the task and method of financing the
latter48 ; or (e) charging unfairly high royalties, in particular where compared on a
consistent basis, they are appreciably higher than those charged by collecting societies
and the difference is not justified by reference to objective and relevant dissimilarities
between copyright management in the respective states.49 Copyright societies of India
have the possibility to affect the competition in the relevant market and anti-
competitive activities of these societies may eventually lead to abuse of the dominant
position both towards copyright holders as well as users.50
B. Abuse of Dominant Position by CMOs towards copyright users
The dominant position of IPRS, ISRA, and PPL can be identified by way of providing
blanket license in respect of their categories of work and the high royalty rates,
charged by them. There is a high probability that this dominant position may be
abused by way of charging excessive
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prices for their services. It is alleged that the royalty rates imposed by them are very
high and unreasonable.51 No fixed royalty rate has been charged by the copyright
societies and the rate of royalty varies as per the negotiation between the personnel of
the copyright societies and the user of the repertoire. Although there is a mandatory
requirement of publication of the tariff of licensing rates, the societies have not
published their tariff rate on the website.52
Telangana Chamber of Event Industry of Hyderabad has claimed that in the United
Kingdom, the general fee for a phonographic performance license for a year is INR
16,112/-, whereas, in India, this amount goes up to INR 1 lakh per event.53 General
users may not be able to know the correct tariff and they may not have any option
except to pay the amount asked by the societies. In certain instances, it has been
observed that IPRS has asked for unreasonable royalty rate in respect of the content
which was already available in the public domain. In 2004, Eastern Railway decided to
play Rabindra Sangeet in the trains running in the Eastern division of the Indian
Railway for making the journey of passengers a more soothing experience. After
knowing this IPRS asked for a hefty royalty of INR 16 lakh form the Railway as a
license fee of those songs. It is interesting to note that the songs written composed by
Rabindranath Tagore are already in the public domain.54 This type of instance of
charging a high license fee, even in cases where the copyright societies have no such
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claim over it, can be contended to be a case of the abusive practices of copyright
societies because of their dominant position in the market.
The practice of charging high license fee may amount to an abuse of dominant
position under section 4(2)(a)(i) of the Competition Act, 2002.
Page: 160
In HT Media Ltd. v. Super Cassettes Industries Ltd.,55 the informant, HT Media Ltd.
filed information against Super Cassettes Industries Ltd. (opposite party) claiming a
violation of sections 3 and 4 of the Competition Act, 2002. It was alleged that T-Series
was holding 70% share of the Bollywood music and it is using its position abusively by
charging a high rate of fee for its broadcasting license. The informant has submitted
that the opposite party has abused its dominant position by excessively and unfairly
licensing its music content. Excessive price is covered under the Act as an ‘unfair
price’ under section 4(2)(a)(ii) of the Act.
The informant has further submitted that in order for the copyright license to be fair
it must bear a reasonable relation to the economic value that the license provides to
the licensee and consequently it must correspond to/reflect a proportion of the
revenue generated by the exercise of a license. It was submitted that the broadcast
license fee of INR 660 per needle hour and performance license fee of INR 666 per
needle hour which is not payable as per the recent judgments of the Delhi, Bombay
and Kerala High Courts imposed by the opposite party is unfair and excessive and in
violation of section 4(2)(a)(ii) of the Act. The informant has argued that imposition of
minimum commitment charge (MCC) on the informant is an unfair condition in
violation of section 4(2)(a)(ii) of the Act. An enterprise is held to abuse its dominant
position if it exploits the opportunities arising out of its dominant position in such a
way so as to reap trading benefits which it would not have reaped had there been
normal and sufficiently effective competition. The MCC imposed by the opposite party
has no relation to the music content that is actually broadcast nor is it necessary or
indispensable for such broadcast and the opposite party is abusing its dominant
position by imposing unfair and discriminatory conditions which are unconnected to
the actual service provided by the license.
It was submitted that the opposite party as a holder of the copyrights to a majority
of ‘new’ Bollywood music is an unavoidable trading partner for FM radio stations. As a
result of the dominance in the relevant market, the DG has found that the opposite
party is the only
Page: 161
music company that dictates such unfair conditions for the provision of its license to
FM radio stations. No other music provider including PPL requires the payment of MCC
from FM stations for grant of a license to broadcast their music. Given this
overwhelming dependence of the informant and other private FM radio stations and
the weakness of their position vis-à-vis the opposite party, it is submitted that the
opposite party is imposing an excessive and unfair condition in violation of section 4
(2)(a)(ii) of the Act.
The Competition Commission of India (CCI) held that if a dominant entity imposes
unreasonable and discriminatory prices while licensing their content it will amount to
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an abuse of dominant position under section 4(2)(a)(i) of the Competition Act. CCI
observed that Super Cassettes Industries Ltd. is abusing its dominant position in
contravention of the provisions of section 4(2)(a)(i) of the Act by imposing an
unreasonable condition of MCC on private FM radio stations.
IPRS and PPL have imposed unreasonable conditions on the users while granting
them a license for the use of the work which may lead to abuse of dominant position.
IPRS and PPL claim a flat fee for the full year for their blanket license without
considering the level of business.56 Both societies offer only blanket licenses to users.
The users are required to pay an annual sum for their entire repertoire irrespective of
the users' requirement. Both of these societies are in a practice of claiming royalties
for six months or yearly basis. In many cases, the business guild of entertainment
industries has alleged that they are compelled by these societies to procure a license
on an annual basis or on a half-yearly basis.57 Especially, users like, hotel owners
might not be using the work of the repertoire of IPRS and PPL for a full year but they
are forced to pay for a year if they want to have a license. This type of practice of IPRS
and PPL forcing people to pay for a period when they are not using the work at all may
be subject to scrutiny under section 4(2)(a)(i) of the Competition Act.
Page: 162
C. Abuse of Dominant Position by CMOs towards Copyright holders

IPRS and PPL do not allow their membership to small music labels or regional music
labels because of the low popularity of their music. South India Music Association
claimed that it was denied membership by the PPL on impractical grounds.58 PPL
refused to deal on the ground that its eligibility criteria provide that for becoming an
associate member there must be at least 50 music albums and cover version
excluding classical and devotional albums.59 It implies that PPL that does not
recognize devotional music as per its eligibility criteria. However, no such condition is
being provided in the Memorandum of Association.60 Moreover, as per the PPL's
registration certificate, no distinction is made between film and non-film music. It may
amount to a refusal under section 3(4)(d) of the Competition Act.
D. Refusal to license as an abuse
Exercising the exclusive rights conferred by copyright is not abusive on the sole
ground that it is the act of an undertaking occupying a dominant position if that right
has not been used as an instrument for the abuse of such a position.61 The right of an
IPR owner to prevent third parties from manufacturing and selling or importing,
without her consent, products incorporating the protected subject matter constitutes
‘the very essence of his exclusive right’.62 An obligation imposed upon him to grant to
third parties a license, ‘even in return for a reasonable royalty’, would lead to the
proprietor ‘being deprived of the substance of his exclusive rights’. Consequently, a
refusal to grant such a license cannot in itself constitute an abuse of a dominant
position.63
Page: 163
In Entertainment Network (India) Ltd. v. Super Cassette Industries Ltd.64 , the

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Supreme Court of India discussed the relationship between IP protection and effects
on competition in the market. The court observed that when the owner of copyright
exercises a monopoly over it, any unreasonable terms would amount to refusal. It is
true that the copyright owner has complete freedom to enjoy the fruits of his labor by
charging royalty through the issue of licenses. However, this right is not absolute. In
United States v. Microsoft, the District Court held that ‘copyright does not give its
holder the immunity from laws of general applicability, including anti-trust laws’. It is
clear that the rights granted under IP laws are subject to competition laws. The
European Court of Justice was also of the opinion that refusal to license may constitute
abuse and breach of competition laws.
Excessive pricing and predatory pricing have close links to the refusal of license.65
In Singhania & Partners LLP v. Microsoft Corporation (I) (P) Ltd.66 , the CCI considered
the question of anti-competitive behavior and anti-competitive behavior and abuse of
dominant position in the selling of Windows and Office 2007 software. In this case, the
informant/petitioner ordered the software, Windows Operating Systems and Office
2007 from a Microsoft distributor. The petitioner alleged that different dealers of
Microsoft were charging different prices for the same product and thus the opposite
party was artificially controlling the market. Indeed Microsoft with market shares
pegged at 90percent held a dominant position in the market and therefore coercing
the petitioner to purchase volume licenses at double the price of original equipment
manufacturer (OEM) licenses amount to discriminatory pricing under section 4(2)(a)
(ii) of the Competition Act, 2002. Microsoft argued that there was no competition issue
in this case and they did their business through three distribution channels, i.e.,
volume licenses, OEM and retail chains. This was mainly to protect their IPR. However,
the CCI could not find any violation of competition provisions. The Commission
Page: 164
observed that charging different prices for the same product under different kinds of
licenses are justified and common in the market. Hence there was no violation of any
competition provisions by Microsoft.
V. CONCLUSION
After the Copyright (Amendment) Act of 2012 has come into effect, the operation of
Indian copyright societies has gained attention multiple times due to different non-
compliances. These non-compliances are found to be majorly in respect of licensing
conditions, management and fixation of tariff rates. The societies lack necessary
supervision in respect of preparation of tariff schemes. There has been a lack of
transparency in the day-to-day affairs of the functioning of the copyright societies.
This is happening mainly because of the representatives of music labels and other big
stakeholders67 . They are manipulating the royalties received for their own corporate
gains, where ideally the money should have gone to authors and composers. In this
situation, the bigger question which arises here is whether a greater degree of control
by the Government is required to be addressed. An effective response to this question
will depend on a bigger policy question, i.e., whether copyright societies perform a
‘public function’ and therefore strictly regulated by State. Since the copyright societies
deal with public resources in majorly monopolistic setting and considering the public
interest involved in assuring the just and fair royalties to authors, effective
governmental control is required to be exercised. The system of collective
administration of copyright in India still suffers from a lack of transparency and has
resulted in many unfair results. In the existing schemes of the Copyright Act, 1957
the government not only control the formation of copyright societies but also
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supervises their activities through Registrar of copyright. Still, the instances of abuse
of dominant position are yet to come to light on more occasions and therefore not an
only supervisory role, but an actual governmental control is required to eliminate the
abuse of dominant position by copyright societies in India.
Page: 165
Despite multiple models in existence, the effectiveness and efficiency of the

copyright societies' operation are directly relevant to the circumstances under which
the models operate. Replicating a foreign model without considering the political and
economic realities of this nation will be unsuccessful and disastrous. However, similar
to the Code of Conduct of Singapore, or the UK Collective Rights Management
Directive, India should also create a broad set of guidelines and regulations to be
followed by all copyright societies. Developing a suitable model would be functional if
it is based on the nation's unique national situation.
The functions of the copyright societies have been criticized by prominent IP
scholars on the ground that these societies do not effectively serve any purpose except
for being inconvenient regulatory barriers with numerous compliance requirements.68
It is suggested that instead of being copyright societies, bodies like IPRS and PPL are
required to become value-added distributors or middlemen, for example, Spotify or
Netflix. In this juncture, it is to be remembered that India has not reached the stage
where copyright societies cannot be totally eliminated. By taking the benefit of block-
chain technology and/or artificial intelligence, manual intervention could be restricted
and this will lead to transparency in the functioning of the society and better royalty
collection and distribution.
———
1 Assistant Professor, School of Law, CHRIST (Deemed to be University), Bengaluru. He can be contacted at
avishek.chakraborty@christuniversity.in.
2
European Parliament Resolution on a Community framework for collective management] societies in the field of
copyright and neighbouring rights of 15 January 2004 [2002/2274(INI)], ¶ ¶ 6 and 7 as cited in J. Sladic,
“Introduction to Copyright and Collective Management in Competition Law”, 5 J.L. & ECON. 37(2013).
3 Dr. Mihàly Ficsor, World Intellectual Property Organisation, “Collective Management of Copyright and Related
Rights” (2002) as cited in Zijhan Zhang, “Rationale of Collective Management Organisations: An Economic
Perspective”, 10 Masaryk U.J.L. & TECH. 73, 74 (2016) (“Zhang” hereinafter).
4 Ibid., at 78.
5 Gervais, D.J., Collective Management of Copyright and Related Rights 75 (Kluwer Law International 2010).
6 Zhang, supra note 2, at 75.
7
C. Handke and R. Towse, “Economics of Copyright Collecting Societies”, 38 INT'L REV. Intell. Prop. &
Competition L. 937, 938(2008) (“Handke & Towse” hereinafter).
8 Ibid.
9
A. Hollander, “Market Structure and Performance in Intellectual Property: The Case of Copyright Collectives”,
2 INT'L J. INDUSTRIAL ORG. 199, 199 (1984).
10 S.M. Besen et al., “An Economic Analysis of Copyright Collectives, 78 VA.L. REV. 394, 398(1992).
12M. Hviid et al., “Regulating Collective Management Organizations by Competition: An Incomplete Answer to
the Licensing Problem”, 7 J. INTELL. PROP. INFO. TECH. & ELEC. COM. L. 256, 256 (2016).
-----------------------------------------------------------------------------------------------------------------------------------------------------------
-
13
Handke & Towse, supra note 6.
14Transaction cost refers to the cost of providing for some good or service through the market rather than
having it provided from within the firm.
15 R.H. Coase, “The Problem of Social Cost”, 3 J.L. & ECON.1, 13(1960).
17 R. Cooter & T. Ulen, Law and Economics 89 (5th edn., Pearson Education, 2000).
18 Ibid., at 91.
19 Handke and Towse, supra note 6.
21W.M. Landes and R.A. Posner, The Economic Structure of Intellectual Property Law 387 (Harvard University
Press 2009).
22 A. Katz, “The Potential Demise of Another Natural Monopoly: Rethinking the Collective Administration of
Performing Rrights”, 1 Journal of Competition Law and Economics 541, 567(2005) (“Katz” hereinafter).
23Block Booking refers to the practice of movie studios charging distributors a price for a bundle of movies rather
pricing them separately.
24
Katz, supra note 21, at 568.
26 M.A. Lemley, Property, “Intellectual Property, and Free Riding”, 83 TEX L. REV.1031,1073 (2004).
27
W.J. Gordon, Asymmetric Market Failure and Prisoner's Dilemma in Intellectual Property, 17 U. DAYTON L.
REV. 853, 858 (1991).
28
Zhang, supra note 2, at 82.
29 Handke and Towse, supra note 6, at 941.
31 L.L. Laudati, “Economies of Scale: Weighting Operating Efficiency when Enforcing Antitrust Law”, 49 FORDHAM
L. REV.771, 774(1980).
33“Sound recording” means a recording of sounds from which sounds may be produced regardless of the medium
on which such recording is made or the method by which the sounds are produced [S. 2(xx) of the Copyright
Act, 1957].
34“Musical work” means a work consisting of music and includes any graphical notation of such work but does
not include any words or any action intended to be sung, spoken or performed with the music. A musical work
need not be written down to enjoy copyright protection [S. 2(p) of the Copyright Act, 1957].
35 The Copyright Act, 1957, S. 34, No. 14, Acts of Parliament, 1957 (India).
36
The Copyright Rules, 2013, G.S.R. 172(E) 9 (India) R. 44(1).
37 The Copyright Act, supra note 32, at proviso to S. 33(1).
38
The Copyright Act, supra note 32, at S. 33(3A).
39
The Copyright Act, supra note 32, at S. 35.
40T. Prashant Reddy, “The Background Score to the Copyright (Amendment) Act”, 2012, 5 NUJS L. REV. 469,
511(2012).
41 John T. Cross and Peter K. Yu, “Competition Law and Copyright Misuse”, 56 DRAKE L. REV.427, 435 (2008).
42
FICCI-Multiplex Assn. of India v. United Producers/Distributors Forum, 2011 SCC Online CCI 33; Film &
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-
Television Producers Guild of India v. Multiplex Association of India (MAI), Mumbai, 2013 Comp LR 19 (CCI).
43There are five kinds of abusive use of dominant position under S. 4(2) of the Competition Act, 2002: (a) unfair
or discriminatory trade practices; (b) limiting production or technical or scientific development; (c) denial of
access to market, barriers to entry and expansion; (d) imposition of supplementary obligations; and (e)
protection of other markets.
44 K.D. Raju, “The Inevitable Connection Between Intellectual Property and Competition Law: Emerging
Jurisprudence and Lessons for India”, 1 J. INTELL. PROP. RTS. 111, p. 119 (2013).
45
FICCI-Multiplex Assn. of India v. United Producers/Distributors Forum, 2011 SCC Online CCI 33.
46 Commission Decision 71/224/EEC of June 2, 1971 (GEMA I), OJ L 134 (1971). See, <https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A31971D0224> (last visited on Mar. 20, 2018).
47 Ibid.
48
Kanal 5 Ltd. & TV 4 AB v. Föreningen Svenska Tonsättares Internationella Musikbyrå (STIM) upa, 2008 ECR I-
9275.
49 Fran¸ois Lucazeau v. Sociètè des Auteurs, Compositeurs et Editeurs de Musique, 1989 ECR 2811.
50S. Mishra and D. Mishra, “Legal framework of Copyright Societies and Competition Law in India”. 2 INDIAN
COMPETITION L. REV. 52, 59 (2017).
51
Meera Srinivasan, “Caught Between Music and Royalty Claims”, The Hindu (Sep. 5, 2012),
<https://www.thehindu.com/news/cities/chennai/caught-between-music-and-royalty-
claims/article3859670.ece>.
52
Divij Joshi, “Comparative Transparency Review of Collective Management Organisations in India, United
Kingdom and the United States”, The Centre of Internet and Society (July 31, 2015), <http://cis-
india.org/a2k/blogs/comparative-transparency-review-of-collective management-organisations-in-india-uk-usa>.
53
Dear Santa, “Save My Industry”, SpicyIP, <http://spicyip.com/wp-content/uploads/2015/01/iprs-ppl-santa-
claus.pdf>.
54
Swaraj Paul Barooah, “Guest Post: IPRS, Indian Railways, & Rabindrasangeet”, SpicyIP (Jan. 3,2015),
<http://spicyip.com/2015/01/guest-post-iprs-indian-railways-rabindrasangeet.html>.
55 HT Media Ltd. v. Super Cassettes Industries Ltd., 2014 SCC Online CCI 120.
56 SpeakGoa, IPRS, “PPL Agencies Harassing Small Business Men in Goa”, <https://www.mail-
archive.com/goanet@lists.goanet.org/msg94191.html.> (last visited on Mar. 22, 2018).
57
Ibid.
58Prashant Reddy, “Music Labels Across India Complain Against PPL's Anti-Competitive Behaviour”, SpicyIP (Dec.
29, 2011), <http://spicyip.com/2011/12/music-labels-across-india-complain.html>.
59 Ibid.
60
Ibid.
61Hoffmann-La Roche & Co. AG v. Centrafarm Vertriebsgesellschaft Pharmazeutischer Erzeugnisse mbH, 1978
ECR 1139, ¶16.
62 AB Volvo v. Erik Veng (UK) Ltd., 1988 ECR 6211, ¶8.
63
22 Lamping M., Compulsory Licensing. MPI Studies on Intellectual Property and Competition Law, Refusal to
Licence as an Abuse of Market Dominance: From Commercial Solvents to Microsoft 121-145 [R.M. Hilty & K.C. Liu
(eds.), 2015].
64 Entertainment Network (India) Ltd. v. Super Cassette Industries Ltd., (2008) 13 SCC 30 : (2008) 37 PTC 353.
65Predatory pricing is a strategy that entails a temporary price below the cost of production in order to injure
competition and thereby reap higher profits in the long run.
66
Singhania & Partners LLP v. Microsoft Corporation (I) (P) Ltd., 2011 SCC Online CCI 50.
67
Asian Patent Attorney Association, Copyright Committee (2014), <http://apaaonline.org/committees/standing-
committees-2/> (last visited on Mar. 24, 2018).
-----------------------------------------------------------------------------------------------------------------------------------------------------------
-
68 Tarini, Koka S., Janardhan, Dipti. and Mahajan, S., Copyright Societies Monograph, Artistik License. The
opinions expressed by leading IP scholars, such as Ananth Padmanabhan, Dr. Shamnad Basheer, Dhruv Anand
and others have been referred to from Copyright Societies Monograph, published by Artistik License. The
monograph can be accessed from <https://artistiklicense.files.wordpress.com/2017/12/artistik-license_csm-
2017.pdf> (last visited on June 18, 2018).
Disclaimer: While every effort is made to avoid any mistake or omission, this casenote/ headnote/ judgment/ act/ rule/ regulation/ circular/
notification is being circulated on the condition and understanding that the publisher would not be liable in any manner by reason of any mistake
or omission or for any action taken or omitted to be taken or advice rendered or accepted on the basis of this casenote/ headnote/ judgment/ act/
rule/ regulation/ circular/ notification. All disputes will be subject exclusively to jurisdiction of courts, tribunals and forums at Lucknow only. The
authenticity of this text must be verified from the original source.

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(2019) 6 GNLU L. Rev. 141

Interface Between Copyright Societies and Competition Laws in India: An

INTERFACE BETWEEN COPYRIGHT SOCIETIES AND COMPETITION LAWS IN INDIA: AN

Keywords: abuse of dominant position, collective management of copyright,

Application of competition law to CMOs presents particular challenges to

II. COLLECTIVE MANAGEMENT OF COPYRIGHT

solution to deal with licensing of copyrighted works. Collective management

III. E CONOMIC RATIONALE OF COLLECTIVE MANAGEMENT ORGANISATIONS

Conceptually, the services provided by the collective management organizations are

A. CMOs in the face of Transaction Costs

important role in individual negotiation and enforcement of the contract. Transaction

B. Price Discrimination Strategy by CMOs in the face of Public Goods

C. The Positive Effect of Monopoly — Economies of Scale

D. Regulation of Copyright Societies in India under the Copyright Act, 1957

The Parliament of India incorporated the provisions related to copyright societies by

E. Copyright Societies and the Amendment Act of 2012

A. Abuse of Dominant Position and CMOs

In FICCI Multiplex Association of India v. United Producers/Distributors Forum

C. Abuse of Dominant Position by CMOs towards Copyright holders

In Entertainment Network (India) Ltd. v. Super Cassette Industries Ltd.64 , the

Despite multiple models in existence, the effectiveness and efficiency of the

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