UMI FILES FURTHER SUBMISSION TO EUROPEAN COMMISSION IN ANTI-TRUST COMPLAINT AGAINST BIEM’S EXCESSIVE MECHANICAL ROYALTY RATE
LONDON – 11 March, 2003 – Universal Music International has today filed a further submission to the European Commission as part of its ongoing anti-trust Complaint against Europe’s copyright collecting societies.
Universal Music International’s original Complaint, filed last year, is against the Paris-based organisation, BIEM (Bureau International des Sociétés Gérant les Droits d’Enregistrement et de Reproduction Mécanique), and its member societies, which collect and distribute mechanical royalties in continental Europe.
The mechanical royalty is a percentage of the wholesale price of a sound recording. It is paid by record companies to BIEM societies, which collect the income on behalf of music publishers and composers whose songs are used on the recordings. Record companies pay close to €600 million annually in mechanical royalties in the European Economic Area.
UMI contends that the terms which are imposed by the collecting societies for the right to manufacture sound recordings for sale to consumers in continental Europe are unfair and in breach of EU anti-trust laws. Only BIEM members can grant mechanical rights, leaving the record companies with no other source for the licence necessary to conduct their business.
The royalty rate imposed by BIEM, which results in the record companies having to pay close to 11% of the average price they receive for the records they sell, is by a significant margin the highest in the world. The BIEM terms penalise record companies for granting discounts to their wholesale and retail customers, for selling records at reduced prices and for including more than a certain number of tracks on albums. These onerous terms bear no relation to actual market conditions or to the risks and investment undertaken by record companies in bringing a record to market. They result in higher prices and in a reduction in consumer choice.
Universal Music International Chairman and CEO Jorgen Larsen said, “Our latest submission reflects our view that certain provisions of the BIEM standard contract are not compatible with European anti-trust laws, and work against the interests of consumers.
“Universal is not against the existence of the standard contract as such, nor of collective licensing,” Mr. Larsen continued. “We think both can work fairly and efficiently for everyone’s benefit, but that is not the case at present. As a monopoly in the music publishing industry-an industry which enjoys major sources of income other than mechanical fees-BIEM have an obligation to act fairly, and in a manner consistent with the EU anti-trust laws. Their refusal to address the legitimate concerns of the record companies has left us with no option but to turn to the European Commission.”
The new submission rejects the substance of BIEM’s response to the original Complaint submitted last year and includes a report, prepared independently, by Janusz Ordover, Professor of Economics at New York University and former Chief Economist for the Antitrust Division of the U.S. Department of Justice. Professor Ordover’s report offers compelling economic evidence that competition, the overall efficiency of the music industry, and consumer welfare would benefit from changes to the terms and conditions of the BIEM standard contract.
Universal Music International
Universal Music International is a division of Universal Music Group, the world’s leading music company with wholly owned record operations or licensees in 63 countries. Its businesses also include Universal Music Publishing Group, one of the industry’s largest global music publishing operations.
Universal Music Group consists of record labels Decca Record Company, Deutsche Grammophon, Interscope Geffen A&M Records, Island Def Jam Music Group, Lost Highway Records, MCA Nashville, MCA Records, Mercury Records, Motown Records, Philips, Polydor, Universal Records, and Verve Music Group as well as a multitude of record labels owned or distributed by its record company subsidiaries around the world. The Universal Music Group owns the most extensive catalogue of music in the industry, which is marketed through two distinct divisions, Universal Music Enterprises (in the U.S.) and Strategic Marketing & Commercial Affairs (outside the U.S.).
Universal Music Group is a unit of Vivendi Universal, a global media and communications company.