C-395/87

My Lordi, the Law of 3 July 1985 on copyright and the rights of performers, of manufacturers of sound recordings and video tapes, and of broadcasting undertakings), the copyright vested in the author (i.e. the creator) of a 1. In these four cases (Case 395/87 work includes the right of performance Ministère public v Tournier and Joined ('droit de représentation') and the right of Cases 110/88 Sacem v Lucazeau, 241/88 reproduction ('droit de reproduction'). Sacem v Debelle and 242/88 Sacem Under Article 27 of the law, performance is v Soumagnac), the Court is asked to rule on defined as 'the communication of the work the interpretation of Articles 30, 59, 85 and 86 of the EEC Treaty as regards the to the public by any process what­ conduct of the French copyright soever . . . '. Under Article 28, reproduction management society, the Société des is defined as 'the material fixing ("fixation auteurs, compositeurs et éditeurs de matérielle") of the work by any method musique (Sacem) in relation to French which permits indirect communication to discothèque owners, and as regards the the public' and includes mechanical relationship between Sacem and the recording. Article 30 provides for the copyright management societies in other transfer of the rights of performance and EEC Member States. reproduction for consideration or otherwise. Article 31 inter alia provides that where an author transfers his copyright, the precise scope and purpose of the use to which the work may be put must be defined in the 2. Before turning to these questions of contract. This provision permits the author interpretation, it is necessary to consider the or his assigns to use the same right for legal and factual background to the disputes different purposes. In practice, in before the French courts, by looking at the consideration of a reproduction fee, the relevant French law, the role and func­ author of a musical work will assign his tioning of Sacem and the organization of its relations with other copyright management right of reproduction to a manufacturer of societies and with categories of customers sound recordings with a view to manu­ such as discothèque owners. facture and sale for private use only. If the record, tape or disc is thereafter played in public, for instance in a discothèque, café or shop, the author is entitled to receive from the owner of the establishment both a fee in The relevant French legislation relation to the performing right and a supplementary mechanical reproduction fee ('droit complémentaire de reproduction 3. Under the Law of 11 March 1957 on mécanique') in regard to the public use of literary and artistic property (as amended by the sound recording.

5. As regards the principles underlying the remuneration of authors, Article 35 of the Law of 11 March 1957 provides that the transfer of copyright 'must involve for the The role and functioning of Saccm benefit of the author a proportionate share in the revenue received from the sale or use.' Fixed-rate remuneration is permitted only in exceptional cases, for instance where it is not possible in practice to determine the basis for the calculation of the author's 8. The members of Sacem are authors and share. composers of musical works and also music publishers who exploit musical works by virtue of contracts with authors and composers. Under Articles 1 and 2 of its Statutes, by joining the Society, a member assigns to Sacem the exclusive right to 6. Title IV of the Law of 3 July 1985 lays exercise worldwide the rights of public down certain rules concerning the creation, performance and of mechanical repro­ dissolution and functioning of copyright duction in the works created or exploited by management societies. Article 38, which him. The specific function of Sacem is to inter alia requires such societies to make collect and distribute the royalties due to its available to music users the entire repertory members in respect of the exercise of those of authors and composers, whether French rights. Sacem's subsidiary, the Société pour or foreign, represented by them, has been l'administration du droit de réproduction taken by commentators to require the mécanique des auteurs, compositeurs et societies to maintain a complete list of that éditeurs (SDRM) is entrusted by Sacem repertory to be consulted by music users. with the exploitation of the right of Under Article 41, a copyright management mechanical reproduction; however, by society must send a copy of its annual virtue of an agency agreement, Sacem accounts to the Minister for Culture and collects and distributes royalties due in also inform him in advance of any proposed respect of the supplementary mechanical

'In consideration of the right granted to the licensee to use the present and future works comprising the general repertory of Sacem for the whole duration of the contract in accordance with the conditions and methods of exploitation set out in the contract, the 10. Essentially, in an agreement of this royalty laid down in Article 2 of the special kind a copyright-management society conditions is required irrespective of the undertakes, on a reciprocal basis, to manage composition of the programmes of works the performing rights attached to the actually performed in the establishment.' repertory of a foreign society within its sphere of operations (normally its national territory). To this end, it agrees to apply in relation to the collection and distribution of royalties due in respect of the foreign The discothèque is required to pay a royalty repertory the same terms and conditions as in the form of a percentage of the total it applies to its own repertory, and to take gross receipts of the establishment, defined any necessary proceedings in respect of as all the revenue received by the disco­ infringement of copyright. It also agrees to theque in return for the provision of a transfer at least once a year to the foreign service or the sale of a product to the society the sums collected in respect of the public, including revenue from entry use of the latter's repertory, and is entitled charges and sales of food and drink, and to deduct reasonable management costs including also VAT and service. The current from that amount. By virtue of reciprocal percentage is 8.25%, which is made up of agreements with other societies throughout 6.60% in respect of the public performance the world, Sacem controls in its sphere of right and 1.65% in respect of the operations the performing rights in prac­ supplementary mechanical reproduction tically the entire world repertory of right. The amount paid by the discothèque protected musical works. is subject to a guaranteed minimum monthly

payment fixed by Sacem by reference to the that Sacem did interfere with the normal characteristics of the establishment. functioning of the market by discriminating between different categories of discothèque owners. However, in a further opinion issued on 13 March 1984, the same commission dismissed all the complaints, including that of discrimination. Complaints were also made to the Commission which in 12. In practice, the majority of discothèque September 1987 commenced a formal inves­ owners benefit from more favourable terms. tigation into the compatibility of the level of More than three-quarters of the approxi­ the royalty required by Sacem with Article mately 4 000 French discothèques belong to 86 of the EEC Treaty. trade associations which have negotiated agreements with Sacem under which, in return for certain advantages, of which the most important are the exclusion of VAT from the basis of calculation and a 10% reduction on the remaining receipts, they 14. Sacem has since 1978 instituted undertake to assist Sacem specifically by the hundreds of proceedings in criminal and provision of copies of their tax returns and civil courts against rebel discothèque generally by the provision of information owners, seeking in some cases the and support and by the amicable settlement conviction for copyright infringement of of disputes. In addition, a number of indi­ operators who have used its repertory vidual discothèques which are not members without authorization and in other cases of trade associations benefit from the payment of royalties outstanding under exclusion of VAT from the basis of calcu­ licence agreements. In many of these lation in return for copying their tax declar­ proceedings the discothèque owners have ations to Sacem. relied on the EEC Treaty, notably Articles 85 and 86. However, the majority of French courts up to and including the Cour de cassation have ruled that Sacem's conduct does not infringe the Treaty. A number of other French courts have stayed proceedings pending the rulings in the cases 13. Since 1978 there has been a determined now under consideration. revolt by a minority of French discothèque owners against the terms required by Sacem for the use of its repertory. The essential complaints of the discothèque owners were that Sacem charged excessively high rates, that it discriminated unfairly between disco­ theques and that it refused without objective 15. Three of the cases now before the justification to grant licences for the only Court, namely Joined Cases 110/88 and 241 category of its repertory in which the disco­ and 242/88, concern discothèque owners, theques were interested, namely popular namely Mr Lucazeau, Mr Debelle and Mr dance music of predominantly Anglo- Soumagnac, who played recordings of American origin. Certain discothèque works protected by Sacem without benefit owners took these complaints to the French of a licence agreement. The discothèque Commission de la concurrence which in an owners were convicted of copyright opinion issued on 17 November 1981 found infringement, but in civil proceedings for

'(1) Is the amount of the fee or of the combined fees fixed by Sacem, which occupies a dominant position in a substantial part of the common market '(1) Does the imposition by Sacem, an as­ and enjoys a de facto monopoly in sociation of music writers and France in copyright management, and publishers which occupies a dominant the charging of royalties connected position in a substantial part of the therewith compatible with Article 86 of common market and is bound by reci­ the Treaty of Rome, or does it, on the procal representation contracts with contrary, amount to an abusive and copyright societies in other countries of restrictive practice through the impo­ the EEC, of aggregate royalties on the sition of conditions which are not basis of 8.25% of the gross turnover of negotiable and are inequitable? a discothèque amount to the direct or indirect imposition on those entering into contracts with it of unfair trading conditions within the meaning of Article 86 of the Treaty of Rome if that (2) Does the organization, by means of a rate is manifestly higher than that group of agreements known as reci­ applied by identical copyright societies procal representation agreements, of a

MINISTÈRE PUBLIC v TOURNIER

The issues before the Court

(4) Is the refusal by a society of authors and publishers enjoying a de facto monopoly in a Member State to permit 18. The questions put by the national users of phonograms to have access courts are highly complex but in essence solely to the foreign repertoire which it seek the guidance of the Court on the manages, thereby partitioning the following issues:

OPINION OF MR JACOBS — CASE 395/87

(1) The compatibility with Articles 30 is fixed in a discriminatory manner, and and 59 of the French legislation which that the level of the royalty is unrelated permits Sacem to require from disco­ to the sums actually distributed to theques, after royalties for the manu­ authors and is several times higher, or facture and sale of sound recordings alternatively manifestly higher, than that have already been paid, further royalties applied by copyright-management in respect of the public performance of societies in other EEC Member States. the sound recordings where those further royalties are excessively high or must otherwise be regarded as unfair.

MINISTÈRE PUBLIC v TOURNIER

21. Taking these considerations into pective of the actual use of the account, it is in my view possible from the repertory by those customers? seven questions referred by the national courts to distil four essential questions concerning the interpretation of the Treaty, as follows: (4) What criteria should be applied by a national court in order to determine whether the royalty required by a copyright-management society occu­ pying a dominant position in a (1) Must Articles 30 and 59 of the EEC substantial part of the common market Treaty be interpreted as precluding the for the public performance of its application of national legislation which repertory is excessively high so that the treats as an infringement of copyright imposition of that royalty constitutes an the public performance of musical abuse of a dominant position within the works by means of sound recordings meaning of Article 86? May the national without payment of a royalty in a case court take into consideration whether where a royalty in respect of the manu­ the royalty was fixed in a discriminatory facture and sale of the sound recordings fashion; the relationship between the has already been paid in another level of the royalty and the amount Member State? actually paid to authors; and the relationship between the level of the royalty and that required by copyright management societies for the public performance of their repertories in other Member States? (2) Must Article 85(1) of the EEC Treaty be interpreted as prohibiting the conclusion of agreements between copyright management societies estab­ lished in different Member States I shall deal with the questions in the order whereby the societies undertake, on a set out above. reciprocal basis, the management of each others' repertories within their respective national territories, and the refusal by those societies to grant licences for the public performance of The first question (Articles 30 and 59 of the their repertories to music users in each EEC Treaty) others' national territories?

23. It is clear that the receipt of a fee in respect of the manufacture or sale of a sound recording does not exhaust the possi­ bilities of exploitation of the copyright in a 25. As regards Article 30, the Court's musical work. As the Commission points out case-law acknowledges that in respect of in its written observations in Case 395/87, certain types of literary and artistic works it the doctrine of exhaustion of rights is part of the essential function of copyright developed in the Court's case-law is for the copyright owner or his assigns to designed to prevent the owner of an require fees in respect of any public industrial or intellectual property right from performance of the works. (See, as regards making use of the territorial scope of films, Case 62/79 Coditei v Ciné Vog Films national legislation in order to benefit more (•Coditeli') [1980] ECR 881, paragraphs 12 than once from the sale of the to 14; as regards sound recordings, Case article — such as a sound recording — in 402/85 Basset v Sacem [1987] ECR 1747). which his creative effort has found material In the Basset case the Court considered the form. The present cases, however, are compatibility of the charging of the concerned not with the sale of sound supplementary mechanical reproduction fee recordings but with the public performance with Article 30. Taking the view that, in of musical works, and public performance, spite of its misleading name, the fee was to by its nature, can be repeated an indefinite be regarded as part of the author's number of times. remuneration in respect of public performance, the Court ruled that:

28. The discothèque owners argue that the effect of the network of reciprocal agency agreements taken in conjunction with the 'Whilst Article 59 of the Treaty prohibits refusal by each of the copyright- restrictions upon freedom to provide management societies to license the use of services, it does not thereby encompass its repertory by music users outside its limits upon the exercise of certain economic national territory is to segregate national activities which have their origin in the markets and ensure a de facto monopoly for application of national legislation for the each society within its own national protection of intellectual property, save territory. In consequence, the French disco­ where such application constitutes a means theque owners have no choice but to deal of arbitrary discrimination or a disguised with Sacem on the terms laid down by the restriction on trade between Member States' latter and do not have the possibility of (paragraph 15). seeking better terms from the foreign copyright management societies. They therefore argue that the agreements, taken together with the refusal to engage in direct licensing, must be viewed as incompatible with Article 85(1). As already mentioned, the Court confirmed in the Basset case that the requirement of a fee in relation to the public performance of a sound recording could not be qualified as an arbitrary discrimination or a disguised 29. Article 85(1) prohibits as incompatible restriction on trade. with the common market all agreements between undertakings, decisions by associ­ ations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or 27. I would therefore give the following distortion of competition within the answer to the first question: common market. In particular, Article 85(1) prohibits agreements and other restrictive practices which share markets or sources of supply. Under Article 85(3), an agreement, decision or concerted practice is capable of Articles 30 and 59 of the EEC Treaty do benefiting from an exemption from the not preclude the application of national prohibition contained in paragraph 1 if it legislation which treats as an infringement fulfils certain conditions. of copyright the public performance of musical works by means of sound recordings without payment of a royalty in a case where a royalty in respect of the 30. A number of factors can be taken as manufacture and sale of the sound agreed between the parties to the national recordings has already been paid in another proceedings. First, that the reciprocal Member State. agreements exist and that they must be

viewed as agreements between undertakings even this element of potential competition within the meaning of Article 85(1); appears to be illusory, since it is recognized secondly, that the agreements are by the parties that a direct licence limited non-exclusive in character (an exclusivity to the repertory of a single copyright- requirement having been deleted in the management society is unlikely to be a commercially attractive proposition either 1970s at the insistence of the Commission) for the society or for the discothèque and that it is therefore in principle possible owners. for copyright management societies both to entrust the management of their repertories to more than one society in respect of the same territory and to engage in direct licensing in each others' territories. However, it is also not disputed that the consequence of the territorial limitation on the scope of each of these agreements is that the copyright-management societies, even if they wished to grant licences to customers 31. Two points are disputed. The first is in each others' territories, could in any whether the refusal to engage in direct event only license the use of their own licensing is the result of a concerted repertories, but not the use of the reper­ practice, and thus capable of being caught tories of other societies whose management by Article 85(1). The second is whether the has been entrusted to them by virtue of the reciprocal agreements and the refusal to reciprocal agreements. To give a concrete license are in any event, having regard to example, while it would in principle be the practical requirements of the possible for the German performing rights management of performing rights in relation to discothèques, capable in practice of society GEMA to license the use of its own preventing, restricting or distorting compe­ domestic repertory to music users in France, tition on that market. it could not compete with Sacem by offering the repertory of the British Performing Right Society or indeed Sacem's own domestic repertory which GEMA manages in Germany under a reciprocal represen­ tation agreement. It is furthermore agreed that to date no French discothèque owner has succeeded in obtaining a direct licence for the use of its repertory from a foreign copyright-management society and that so 32. Sacem does not dispute the facts of long as no such direct licensing takes place, market segregation and de facto exclusivity each society will enjoy absolute exclusivity for each copyright management society, but, of fact within its own national territory. supported by the Commission, argues that Thus, to return to the concrete example these features are not the result of any given above, a refusal by GEMA to license practice prohibited by Article 85(1) but are its own repertory to French discothèque rather a reflection of the economic realities owners means that Sacem need not fear of the particular market which make competition from GEMA even in respect of competition impracticable and which point the latter's own repertory. At the same time, inexorably to the need for management of performing rights on a territorial basis.

33. In my view, it may not be possible to 34. The extreme nature of the issue thus give a categorical answer at this stage to the presented is demonstrated by the stark issues which might arise under Article 85 in choice posed by the terms of Article 85 in these cases. The cases are highly unusual this case. On the one hand, if it is to be ones. At first sight, we are confronted with established that there is no restriction or distortion of competition within Article an absolute exclusivity de facto, a total 85(1), such a finding could in this sector compartmentalization of the common only be based on a detailed analysis of the market within national frontiers, and a market. On the other hand, if it were found, complete absence of competition, all of in the light of that analysis, that there was which would, in any other sector, be such an effect, the agreements in question manifestly incompatible with Article 85(1). would seem incapable of an exemption On the other hand, the market is a wholly under Article 85(3): for if they do affect exceptional one, because of the unusual competition they could not satisfy the final nature of the intellectual property rights in requirement under Article 85(3) because question, which are not only territorial in they would eliminate competition in respect scope, regulated exclusively by national laws of the entire market. differing significantly among themselves, and incidentally subject to very long periods of protection, but which also require continuous supervision and management within the national territories if they are to be effectively exercised. Sacem urges, in this connection, that competition between copyright-management societies in different EEC Member States is not feasible and that the reciprocal agreements and refusal to engage in direct licensing cannot therefore in any real sense be said to prevent or restrict competition. Sacem points out that any copyright-management society wishing to do business in a national territory other than its own would need to establish a management system enabling it to negotiate contracts with customers, verify the factors forming the ba.is of the assessment of 35. These are matters which in my opinion royalties, monitor the use of its repertory the Commission is under a duty to resolve and take the necessary action in respect of by taking a position on the agreements infringements of its copyright. Faced with which have been notified to it. The this prospect, each society can more cheaply Commission is in any event better placed and effectively ensure the management of its than the national courts to examine the repertory by entrusting it to the society market on a Community-wide basis. The already established in that other territory. Commission should also be in a position to This arrangement also benefits the customer decide whether the continuing exclusivity de in that the reciprocal arrangements permit facto is the result of a concerted practice him to obtain access to the whole world among the performing rights societies of the repertory of music through negotiations Member States or whether such exclusivity results necessarily from the nature of the with a single copyright-management society. market in question.

39. If a different view were taken as to the 37. If it were considered necessary for the significance of the issue of direct licensing, national courts to rule directly on the then the essential question for the national application of Article 85 in these cases, then courts would be whether the conduct of the the first issue for their consideration would foreign copyright-management societies in be the refusal of the copyright-management refusing to grant direct licences to French societies to grant licences for the use of discothèque owners is the result of their repertories to users outside their own conscious coordination or cooperation national territory. It would be for the between the societies, or whether, on the national courts to decide whether this can contrary, it results from the independent be seen as an issue which has an inde­ decision of each society acting for its own pendent significance apart from the reci­ account in response to an assessment of its procal agreements, and if so, whether the individual interest. In deciding this question, refusal to grant direct licences is the result it would in my view be legitimate for the of a concerted practice between the societies national courts to take into account the as has been alleged by the discothèque cooperation which already exists between owners in these proceedings. the copyright-management societies by virtue of the network of reciprocal represen­ tation agreements and the fact that an exclusivity requirement was only deleted from those agreements at a comparatively recent date (see Case 243/83 Binon v AMP [1985] ECR 2015, at paragraph 17). At the 38. In my view, the issue of direct licensing same time, the national courts would need cannot be seen as separate from that of the to consider whether the parallel behaviour

40. The next issue for consideration by the national courts would be whether the reci­ (b) the refusal by copyright-management procal agreements (and, if considered societies linked by a network of reci­ relevant, the refusal to engage in direct procal representation agreements to licensing) are capable, having regard to the license directly the use of their domestic special requirements of the market for repertories to music users in each copyright management (referred to at others' national territories, if it is estab­ paragraph 33), of preventing, restricting or lished that the refusal to license is the distorting competition in that market. result of a concerted practice between Finally, if they are satisfied that there is an those societies and if that refusal is actual or potential effect on competition, capable, having regard to the special the national courts would need to consider characteristics of the market for the whether the agreements might be capable of management of performing rights, of benefiting from an exemption under Article preventing, restricting or distorting 85(3). If they do consider this to be a possi­ competition on that market. bility, then they must stay the proceedings and wait for the decision of the Commission which, under Article 9(1) of Council Regu­ lation No 17 (Official Journal, English Special Edition 1959-62, p. 87), is alone competent to grant or refuse exemptions. The third and fourth questions (Article 86 of the EEC Treaty)

41. I therefore propose that the second question should be answered as follows:

43. It should be stated at the outset that this is no ordinary dominant position. The fact that Sacem is the only copyright-management society of its type in France, that it has no reason to fear the 44. As already mentioned, by means of the competition of foreign societies, and that 'clause forfaitaire' in the standard contract there is no substantial regulation of its acti­ concluded with discothèque owners, Sacem vities by public authorities means that it requires the payment of a single fee for enjoys a near-absolute freedom of action. access to its whole repertory, irrespective of There is moreover a clear inequality of the type or number of musical works bargaining power as between Sacem and the actually used by the discothèques. The discothèques, which constitute a large discothèque owners argue that it is number of geographically scattered small or oppressive to require them to pay for access medium-sized undertakings (albeit for the to the whole world repertory managed by most part grouped in several trade organiz­ Sacem when their needs could be met by ations), who are completely dependent on access to only a certain part or parts of that music for their operation and have no repertory. It is not entirely clear from the choice of negotiating partner. While these file what the precise requirements of the factors do not in themselves point to the discothèques are. In one place it is existence of any abuse, or require a higher suggested that they seek access simply to standard of conduct from Sacem than from certain foreign repertories managed by any other dominant undertaking, they do in Sacem, notably the American and British; my view point to the need for a particularly elsewhere, that they seek access to a certain stringent examination by the national courts category of musical works, i.e. popular of the justification for the practices which dance music, predominantly but not exclu­ are alleged to be abusive. The approach sively of Anglo-American origin. In any taken by a national court to the issue of event, they argue for something less than justification would differ in accordance with the global licence, and imply that such a its national legal rules. Where one national lesser licence would be bound to be cheaper.

46. The Court has not yet had occasion to rule on the compatibility with Article 86 of a practice such as global licensing. However, in Case 127/73 BRT v Sabam and NV Fonior[\974] ECR 313 it was asked to consider inter alia whether the requirement by a copyright management society of the global assignment by its members of all their rights without any distinction between categories could be regarded as an abuse 48. In a landmark judgment given in 1979 within the meaning of Article 86. In its in the case of Columbia Broadcasting System judgment the Court ruled that in deter­ v BMJ and Ascap (441 US 1, 60 L Ed 2nd 1, mining whether the society had imposed 99 S Ct 1551) the United States Supreme unfair conditions on its members, account Court ruled that 'blanket licensing' could should be taken of all the relevant interests not be considered as a per se violation of the with a view to striking a balance between Sherman Act but must be evaluated in terms the effective management of rights by the of a 'rule of reason' analysis. Under the rule society and the requirement of maximum of reason, a court is required to weigh up freedom for the members in disposing of the pro-competitive effects of a practice their works; to that end, it was necessary to against its anti-competitive effects in order consider whether the disputed practices of to determine whether the practice un­ the society exceeded the limit absolutely reasonably restrains trade in the relevant necessary for the attainment of its object market. In applying that analysis to chal­ (paragraphs 7-11). I suggest that a similar lenges made by different users to blanket approach should be adopted here, except licensing, the lower American courts have in that the balance needs to be struck between general found in favour of the blanket the interests of the copyright-management licence. (See in particular Buffalo Broad- society and a category of its customers, i.e. casting Inc. and Others v Ascap and BMI, the discothèque owners. United States Court of Appeal for the

Second Circuit, 18 September 1984, 744 F. disadvantages of the global licence, taking 2nd 917; 223 US PQ (BNA) 478; Copy. L. into account the particular context in which Rep. (CCH) P25, 710; Fed. Sec. L. Rep. it is imposed. In so doing, the courts can (CCH) P66, 204). Of particular interest is have regard to the obvious convenience of the case of BMI v Moor-Law Inc. (527 F. the global licence as a vehicle for the Supp. 758 (D. Del. 1981)) in which the marketing of performing rights, as well as to performing rights organization brought a the flexibility which it offers to users such as copyright infringement suit for the unauth­ discothèques who cannot predict their orized use of its repertory by the precise needs in advance. It is also for the defendant's night-club and the defendant national courts to consider whether there is counterclaimed that BMI had violated the a viable alternative to the global licence. In anti-trust laws because its failure to offer a so doing it will be necessary at the outset to realistic alternative to the blanket licence determine what the discothèques' real constituted an illegal tie-in. Applying the requirements are. If they only seek access to rule of reason approach, the court inter alia certain foreign repertories, then categori­ found that the blanket licence deprived zation costs are likely to be low but moni­ music users of control over their total obli­ toring costs correspondingly higher. gations to BMI, in that the royalty paid was Creation of a new category of popular not calculated on the basis of factors over dance music, on the other hand, is likely to which they had control, such as the number prove costly, at any rate initially, but, of performances of a particular work, but provided the category is widely enough less controllable factors such as (in that defined, should not necessarily give rise to case) the expenses incurred by the club in increased monitoring costs. Finally, the providing live entertainment. On the national courts should also, in my view, positive side, the court stressed the take into account a further factor which was simplicity and cost-effectiveness of the considered relevant in the Sabam case blanket licence as a means of marketing mentioned above and also in certain performing rights, as well as the flexibility American decisions, which is the relative which it offered to users, such as the bargaining power of the parties. defendant in that case, who could not identify in advance the compositions they would use. The court moreover found that there were no practicable alternatives to the blanket licence: in particular, the alternative of a licence based on the category of music used by the licensee would involve additional costs in respect of categorization, monitoring of use and resolution of disputes over the scope of the licence.

51. As the Commission points out in its 53. There is a consensus in the obser­ written observations in these cases, there is a vations made to the Court in these cases natural tendency on the part of a monopoly that the test laid down in Case 27/76 United to charge a monopoly price, i.e. a price Brands v Commission [1978] ECR 207 for which maximizes its profit and which is determining whether a price is excessive in higher than it would be able to charge in a relation to the economic value of the benefit competitive market. While from the conferred is inapplicable in the present economic point of view such behaviour is context. In that judgment, the Court perfectly rational, it may result in the impo­ indicated (in relation to a product rather sition of unfairly high prices on customers than a service) that it is necessary to or consumers. Article 86 specifically consider whether the difference between the prohibits unfair prices as an abuse, and the costs actually incurred in producing the Court has ruled that an abuse of a dominant product and the price actually charged is position within the meaning of Article 86 excessive and, if the answer to that question may consist in the imposition of a price is in the affirmative, whether a price has which is excessive in relation to the been imposed which is unfair in itself or economic value of the service provided when compared with competing products (Case 26/75 General Motors v Commission (paragraph 252 of the judgment). It is [1975] ECR 1367). pointed out that it is inappropriate in the present context to proceed on the basis of a comparison between the costs of production and the selling price because it is impossible to determine the cost of the creation of a work of the imagination such as a musical 52. The Court has moreover already ruled, work. It is moreover impossible to compare in relation to the level of the royalty applied the level of the royalties charged by Sacem by Sacem to the French discothèque owners, with that of competitors because there are that: none.

(i) The criteria mentioned by the national courts (4) The royalty is discriminatory having regard to the level charged to other categories of music users.

55. The issue of discrimination is raised in the second and fifth questions referred by the national court in Case 395/87. It is not 56. The first hypothesis raises the same however clear from the order for reference issue as that of the global licence which has in that case in what respect the level of the already been considered above (at para­ royalty might be considered to be discrimi­ graphs 44 to 49). The relevance of the natory. Four hypotheses might therefore be levels of royalties charged in other Member considered : States in determining whether the royalty charged by Sacem is excessive is considered below (at paragraphs 60 to 63); but in any event, the difference between the levels cannot be regarded as the consequence of (1) The royalty is discriminatory because it discrimination by Sacem since it has no is in effect fixed in accordance with the responsibility for fixing the levels in other

MINISTÈRE PUBLIC v TOURNIER

OPINION OF MR JACOBS — CASE 395/8;

the discothèques. The reason for this is that of mechanical reproduction, a factor which the copyright in a musical work is typically will necessarily boost the overall level of the owned and exploited by a number of royalty charged in those countries. As different persons for a number of different regards the methods of assessment and purposes. Each copyright owner, whether he collection, while Sacem requires a fixed is a composer in the narrow sense, or a percentage of total revenue, other music publisher or a producer of sound copyright-management societies fix their recordings, will have a claim to royalties on a flat-rate basis by reference to remuneration from royalties received in factors such as the size of the discothèque, respect of the musical work as the the number of seated places, the entry price counterpart for his creative effort or of his or the price of the most popular drink. investment. To focus on the amount of the royalty actually paid to one category of copyright owners, i.e. composers, can in my view only be misleading. On the other hand, the relationship between the level of the royalty and the amount actually paid to copyright owners as a whole is in my opinion relevant to evaluating the fairness of the royalty, and I will return to this issue shortly (see paragraphs 69 to 73 below).

MINISTÈRE PUBLIC v TOURNIER

OPINION OF MR JACOBS — CASE 395/87

69. I accept, of course, that the precise method established there, i.e. comparison 67. Sacem goes to some lengths to set out between the cost price and the selling price the rates of royalty charged to other in order to determine the profit margin, important music users such as radio and cannot be directly transposed to the present television networks, arguing that the context. However, having regard to the differentials between the rates paid by Court's approach in the Sabam case, to different categories of users reflect the which I have already referred, I do consider

MINISTERE PUBLIC v TOURNIER

that it is feasible for national courts to undistributed because the relevant copyright determine whether the royalty is excessive owners could not be identified. by an objective method consisting in a comparison between the level of the royalty (taking account for this purpose of the total revenue generated by the royalty) on the one hand, and the necessary costs of the effective management of performing rights and the need to ensure reasonable remuneration of copyright owners on the 71. It is of course for the national courts to other hand. evaluate the costs structure and to draw any necessary conclusions. However, from the abovementioned figures two points appear to merit particular consideration; the first is the proportion of gross revenue retained by Sacem to cover management costs; and the second is the proportion of net revenue distributed to foreign copyright-manage­ ment societies.

OPINION OF MR JACOBS — CASE 395/87

73. If it is correct that French discothèques use predominantly popular music of Anglo- In determining whether the level of the American origin (and it will be for national royalty imposed on a category of its courts to determine as a question of fact customers by a copyright-management whether that is the case), then one would society which is in a dominant position in a expect to find that the greater part of the substantial part of the common market is net sum available for distribution would be excessively high so that the imposition of distributed to the British and American that royalty constitutes an abuse within the performing rights societies. The figures meaning of Article 86 of the EEC Treaty, a referred to above in fact indicate that in national court may have regard to whether 1986 of that net sum over 50 % was the level of the royalty is disproportionate:

MINISTÈRE PUBLIC v TOURNIER

(a) in relation to the royalties imposed by the dominant copyright-management society the same society on other categories of and those imposed by copyright- customers; management societies in other Member States (if established by objective methods (b) in relation to the necessary costs of the of comparison) will give rise to a strong effective management of copyright and inference that the royalty imposed by the to the need to ensure reasonable dominant society is excessive, with the remuneration for copyright owners. consequence that it will be incumbent upon The existence of substantial disparities that society to justify the level of the between the level of the royalty imposed by royalty.

(2) Article 86 of the EEC Treaty prohibits as an abuse the imposition by a copyright-management society which is in a dominant position in a substantial part of the common market of a requirement that its customers must pay a royalty for access to the whole repertory of the society, irrespective of the actual use of that repertory by the customers in question, if the imposition of that requirement exceeds what is necessary for the effective management of copyright.

(3) In determining whether the level of the royalty imposed on a category of its customers by a copyright-management society which is in a dominant position in a substantial part of the common market is excessively high so that the imposition of that royalty constitutes an abuse within the meaning of Article 86 of the EEC Treaty, a national court may have regard to whether the level of the royalty is disproportionate:

(a) in relation to the royalties imposed by the same society on other categories of customers;

(b) in relation to the necessary costs of the effective management of copyright and to the need to ensure reasonable remuneration for copyright owners.

The existence of substantial disparities between the level of the royalty imposed by the dominant copyright-management society and those imposed by copyright-management societies in other Member States (if established by objective methods of comparison) will give rise to a strong inference that the royalty imposed by the dominant society is excessive, with the consequence that it will be incumbent upon that society to justify the level of the royalty.

(3) Article 86 of the EEC Treaty prohibits as an abuse the imposition by a copyright-management society which is in a dominant position in a substantial part of the common market of a requirement that its customers must pay a royalty for access to the whole repertory of the society, irrespective of the actual use of that repertory by the customers in question, if the imposition of that requirement exceeds what is necessary for the effective management of copyright.

(4) In determining whether the level of the royalty imposed on a category of its customers by a copyright-management society which is in a dominant position in a substantial part of the common market is excessively high so that the imposition of that royalty constitutes an abuse within the meaning of Article 86 of the EEC Treaty, a national court may have regard to whether the level of the royalty is disproportionate :

(a) in relation to the royalties imposed by the same society on other categories of customers;

(b) in relation to the necessary costs of the effective management of copyright and to the need to ensure reasonable remuneration for copyright owners.

OPINION OF MR JACOBS — CASE 395/87

The existence of substantial disparities between the level of the royalty imposed by the dominant copyright-management society and those imposed by copyright- management societies in other Member States (if established by objective methods of comparison) will give rise to a strong inference that the royalty imposed by the dominant society is excessive, with the consequence that it will be incumbent upon that society to justify the level of the royalty.