A-G’s opinion on SABAM’s tariffs for festivals

In our blogpost of 30 April 2019, we discussed the legal dispute between festival and concert organisers, on the one hand, and SABAM, on the other hand, regarding SABAM’s tariffs for festivals and concerts and how the matter was being taken to the European level. In two parallel legal proceedings, one pending before the Court of Appeal of Brussels and the other before the Antwerp Enterprise Court, the European Commission and the Court of Justice of the EU (‘CJEU’) were asked to ‘shine a light’ on SABAM’s tariffs. On 16 July 2020, Advocate-General Pitruzzella delivered his opinion in the latter case.

Facts and preliminary question

The case before the CJEU (case C-372/19) was brought by SABAM (the Belgian music authors’ collecting society) against the organisers of Tomorrowland and Wecandance, two well-known Belgian electronic music festivals. Over a number of years, the parties have been involved in legal proceedings regarding the payment of royalties for the music played at the festivals. SABAM initiated legal proceedings before the Antwerp Enterprise Court seeking the payment of royalties from the festival organisers, whereas the festival organisers contested SABAM’s tariff on which the royalties were being calculated, which they deemed to amount to SABAM abusing its dominant position. The Antwerp court decided to stay the proceedings and referred the following question to the CJEU for a preliminary ruling:

“Must Article 102 TFEU, whether or not read in conjunction with Article 16 of Directive 2014/26/EU 1 on collective management of copyright and related rights and the multi-territorial licensing of rights in musical works for online use in the internal market, be interpreted as meaning that there is abuse of a dominant position if a copyright management company which has a de facto monopoly in a Member State, applies a remuneration model to organisers of musical events for the right to communicate musical works to the public, based among other things on turnover,

which uses a flat-rate tariff in tranches, instead of a tariff that takes into account the precise share (making use of advanced technical tools) of the music repertoire protected by the management company played during the event?

which makes licence fees dependent on external elements such as, inter alia, the admission price, the price of refreshments, the artistic budget for the performers and the budget for other elements, such as decor?”

The A-G’s opinion[1]

The A-G has somewhat reformulated the preliminary question[2] and treated its two parts inversely:

  • For the second part, the A-G has clarified that the referring court would like to know whether applying a tariff based on the revenue of the gross receipts from ticket sales or the artistic budget amounts to an abuse of a dominant position; in particular, when no account is taken of the portion of those receipts that does not depend on the service provided by SABAM (i.e. the making available of protected music for its communication to the festival visitors),[3] on the one hand, and without allowing the deduction of expenses that are not specifically related to music,[4] on the other hand. The A-G has also clarified that it is not the level of royalties charged per se which is at issue, directly at least, but rather the structure of the tariff (the calculation method) and the relationship between that structure and the service actually provided by SABAM.
  • For the first part, the A-G has clarified that the referring court would like to know whether SABAM is abusing its dominant position when it applies a remuneration model which uses a flat-rate tariff in tranches, instead of a tariff that takes into account the precise share of the repertoire protected by the CMO played during the event. This tariff is based on the “1/3-2/3 rule” whereby: (i) if less than one third of the songs performed were in the SABAM repertoire, SABAM charged one third of the tariff; (ii) if more than one third and less than two thirds of the works performed were in its repertoire, SABAM charged two thirds of the tariff; (iii) in all other cases, the full tariff was charged.

After an analysis of the CJEU’s case law on collecting societies’ tariffs (the United Brands, Basset, Tournier, Lucazeau, Kanal 5, OSA, and AKKA/LAA cases) the A-G has advised the CJEU to reply to the preliminary question as follows:

“Point (a) of the second paragraph of Article 102 TFEU must be interpreted as meaning that a collective copyright management organisation which has a de facto monopoly in a Member State does not abuse its dominant position by imposing unfair prices solely because it adopts a tariff structure on the basis of which the royalties received for making protected musical works from its repertoire available for communication to the public at festivals are calculated by applying a degressive rate to the revenue from ticket sales or to the artistic budget, without the possibility of deducting costs not directly linked to the service provided by that organisation, and by providing for a system of discounts based on the use of flat-rate tranches to take into account the proportion of musical works actually performed at the festival.

 However, it is not excluded that the application of such a tariff structure may lead to unfair prices being imposed, especially when another method exists that enables the musical works actually performed to be identified and quantified more precisely and that method is capable of achieving the same legitimate aim, which is the protection of the interests of authors, composers and publishers of music, without leading to a disproportionate increase in the costs incurred for the management of the contracts and the supervision of the use of musical works protected by copyright. It is for the referring court to assess, in the light of all the circumstances of the case before it, whether those conditions are met and, if so, whether imposing unfair prices is supported by further evidence derived, in particular, from a comparison with the rates applicable in other Member States adjusted using the purchasing power parity index, from a comparison with the fees applied in the past by the same management organisation, or from a comparison with the royalties set by that organisation for similar services.”

In short, the A-G advises that applying a flat-rate tariff in tranches on the basis of the revenue of the receipts from ticket sales or the artistic budget does in principle not constitute an abuse of a dominant position, unless, amongst other things, there is another method for identifying and quantifying the number of protected works played at the festival more accurately and provided that such a method does not lead to a disproportionate increase in the costs incurred for the management of the contracts and the supervision of the use of musical works played during the festival. The imposition of unfair prices can be confirmed by other indications supported by a geographical comparison (fees applied in other Member States), a historical comparison (fees applied by the CMO in the past) and an internal comparison (fees applied by the CMO for similar services).   

Tomorrowland and Wecandance have referred to DJ Monitor, a Shazam-like music recognition software, as an alternative method for identifying and quantifying the music played at the festivals. SABAM has raised doubts about this software’s accuracy and reliability. That being said, the software is already being used by several other CMO’s in other Member States, including PRS (UK) and SACEM (FR). On DJ Monitor’s website, SABAM is named as a client as well. If the CJEU follows the A-G’s opinion, then it will ultimately be up to the referring court to decide whether or not DJ Monitor or any similar technological means are a more appropriate method of measuring the music played at the festivals.

Up next

 The next step in this legal saga (dixit the Antwerp Enterprise Court in its judgment requesting for the preliminary ruling) is the CJEU’s ruling. It will remain to be seen whether the CJEU will follow the A-G’s opinion and how the Antwerp Enterprise Court as well as the Brussels Court of Appeal will apply the CJEU’s findings in their proceedings.

[1] Opinion of Advocate-General Pitruzzella, 16 July 2020, case C‑372/19, SABAM v Weareone.World BVBA, Wecandance NV, ECLI:EU:C:2020:598.

[2] Also, the A-G has not made any declaration about Directive 2014/26 (the CMO Directive), because the referring court basically only sought clarification on the concept of ‘abuse of dominant position’, which does not appear (at least not explicitly) in that Directive.

[3] For example, the revenue that is the result of the ‘special’ experience created and the additional services provided by the organisers before, during and after the festivals (lighting, fireworks, catering, etc.).

[4] For example, costs related to environmental and safety regulations.