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Music copyright investigation closed

A Commerce Commission investigation has resulted in a voluntary change of rules in the music copyright industry that will allow for competition to occur, to the benefit of those who purchase licenses for copyrighted music.

The Commission began an investigation in 2009, following a complaint about royalty agreements between owners of music copyright and Phonographic Performance NZ Ltd (PPNZ). The royalty agreements were expressed as being exclusive agreements which meant that persons wishing to purchase licenses for copyrighted music could only deal through PPNZ. This prevented potential purchasers from negotiating on price directly with the owners of the copyrighted music.

The Commission’s investigation identified concerns under section 27 of the Commerce Act and concluded that the removal of any exclusive licenses would have a positive impact on competition for music broadcast licenses.

As a result of the investigation, PPNZ and the four New Zealand major recording companies (Sony, Warner, EMI and Universal) have agreed to express their royalty agreements as being non-exclusive. That will allow direct negotiation between potential purchasers and the four companies. It will also have the effect of opening up about 70 per cent of the market to competitive negotiation.
In addition, the four recording companies have developed and published protocols outlining their direct dealing policies.

“The Commission is satisfied that this is a pragmatic solution to the issue. It will allow competition for the sale and purchase of licences. However, it also preserves the efficiency gains that arise from PPNZ being the one point of contact for small users of copyrighted music (such as restaurants and ‘on hold’ background music), instead of having to deal with the large numbers of owners of copyright,” said Kate Morrison, General Manager Enforcement at the Commerce Commission.

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The Commission will be taking no further enforcement action as the voluntary resolution to this matter has satisfactorily dealt with the competition concerns raised.

Phonographic Performance NZ Ltd (PPNZ) is an incorporated joint venture that centrally administers the licensing of public performance and broadcasting rights for music and music video recordings on behalf of its clients. Clients assign their rights to PPNZ to license public performance and broadcasting of their copyrighted music and music videos. PPNZ administers the issuing of the licenses and the payment of license fees to its clients. PPNZ itself is a not for profit organisation.

The Commerce Act
Section 27 of the Commerce Act prohibits agreements between two or more people or businesses that contain provisions that substantially lessen competition.

Only the courts can decide if the Commerce Act has been breached and set appropriate penalties.

If the court finds that the Commerce Act has been breached, it may:
impose pecuniary penalties on businesses that must not exceed the greater of:
$10 million;
or either:
three times the value of any commercial gain or expected commercial gain resulting from the breach; or
if commercial gain is not known, 10 per cent of the turnover of the business and all of its interconnected businesses (if any).
Media contact: Allanah Kalafatelis, Communications Manager
Phone work (04) 924 3708, mobile 021 225 4417
Felicity Connell, Senior Communications Adviser
Phone work (04) 924 3709, mobile 021 225 4454

Commission media releases can be viewed at www.comcom.govt.nz


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