Traditionally, each country has a single copyright organization, known as an authors' rights or collecting society, which has an exclusive local monopoly on the representation of both performing and mechanical rights in their territory.
Authors' societies operating in Europe have been accused by the Commission of acting as a "de facto monopoly" and having "restrictive business practices."
In a preliminary probe, the findings of which were issued in February, the Commission said the cross-licensing agreements among collecting societies and the exclusive territorial arrangements currently prevalent between them do not reflect the development of new technologies and hinder the development of a pan-European digital music market.
In its written response to the Commission, CISAC (the International Confederation of Societies of Authors and Composers of which BMI is a member) argued that "reciprocal representation agreements are the cornerstone of relations between authors' societies, and are partly inspired by a CISAC model contract, which is not mandatory."
The Commission's February 7 ruling said: "The historical de facto monopoly is strengthened and potential new entrants are prevented from entering the market for the management of copyright."
On that day, the competition authorities in Brussels sent a document known as Statement of Objections (SO) to CISAC and all its members in all 25 EU states.
The inquiry comes five years after Europe's biggest broadcasting company, the Bertelsmann-owned RTL Group, lodged a complaint with the Commission noting that it had failed in its attempts to secure a pan-European radio-broadcasting license. In 2003, satellite radio broadcaster Music Choice Europe issued a similar complaint.
The Commission is willing to see more competition among European societies and the possible establishment of "one-stop shops" for music users. The philosophy behind the EC's action stems from the EU's founding treaties, which call for a free circulation of people, goods and services within the 25 member states.
Collecting societies have been under the scrutiny of the Commission for a while. Last October, under the aegis of European Union internal market and services commissioner Charlie McCreevy, the EC issued a document named "Recommendation on Collective Cross-Border Management of Copyright and Related Rights for Legitimate Online Music Services."
In that document - which aimed at establishing new guidelines for licensing online music in Europe in a more simple and efficient way - societies were asked to streamline the rules on pan-European collective licensing. "We need a new generation of copyright licensing models more in tune with the Internet age," McCreevy said. He added that the licensing system should be working "openly and transparently."
While the document outlined a possible policy for the EU, with the SO, societies are under pressure to explain their modus operandi. According to EC procedures, companies subject to a SO have two months to reply and can also can ask for an oral hearing before the Commission issues its final conclusions.
CISAC said that the objections - which target three clauses of the reciprocal representation agreements signed between authors' societies - are without merit.
CISAC noted that the reciprocal contracts "allow each authors' society to operate as a 'one-stop shop' because, through a single license, it can authorize the use of the entire global repertoire."
It added that CISAC already voluntarily dropped two of the three clauses in the contract that the Commission objected to. As a result, authors have the right to join the society of their choice within the European Economic Area, and the representation mandates from a given society to other societies are no longer exclusive.
Overall, what is at stake in the system, according to CISAC, is the "collective bargaining power" that creators will have in negotiating with what it described as "increasingly powerful international users." Any attempt to weaken the societies may have repercussions on the way creators are remunerated, warned CISAC.