Spanish Society of Authors & Publishers Fined Nearly $7M for Anti-Competitive Behavior

The Spanish Society of Authors and Publishers (abbreviated SGAE in Spanish) has been fined 6.38 million euros (more than $6.9 million, using the average 2023 conversion rate) by the Comisión Nacional de los Mercados y la Competencia (CNMC) for anti-competitive practices related to its licensing deals with radio and TV stations.

SGAE has been fined for “two infractions of abuse of dominant position” by designing and applying its licensing rates in a manner that forces radio and TV operators to accept an “averaged availability rate” (comparable to a flat rate) to be able to use its repertoire, according to a CNMC press release on Wednesday (June 26).

The widespread application of the flat rate by the Spanish collecting society “has had a double anti-competitive effect,” the CNMC says. The first effect, which the CNMC refers to as “exploitative abuse,” results from SGAE’s practice of forcing licensees to pay the flat rate “unrelated to the actual use they make of their repertoire, both in terms of the number of works and the intensity of their use,” according to the release, which states this practice has been ongoing since “at least” Jan. 1, 2016.

Because licensees are forced to pay the flat rate regardless of the extent of their use of SGAE’s repertoire, the CNMC adds, licensees’ incentives to contract with SGAE competitors with less substantial repertoires are limited — a second anti-competitive effect that hinders “the entry and expansion” of those competitors in the marketplace.

According to the CNMC, SGAE “enhanced” the latter effect — which it says SGAE instituted from “at least” Jan. 1, 2016, through Dec. 31, 2017 — by “presenting its musical repertoire to users as universal and offering guarantees of indemnity against possible claims by third parties for the use of rights that do not belong to its repertoire.” The CNMC argues this further limited incentives for licensees to contract with SGAE competitors.

In addition to fines, SGAE has been ordered to cease these behaviors.

Investigations into SGAE began after complaints were made by audiovisual media copyright entities Management Entity (Dama) and Unison Rights, S.L. (Unison), the release states.

In an extensive statement sent to Billboard, SGAE said “both findings” reached by the CNMC are “clearly flawed.” Among other things, the organization denied it forces licenses to pay the average availability (i.e. flat) rate, writing that the CNMC “decision ignores or attempts to minimise both the fact that SGAE also offers users an effective use tariff, and, above all, the basic fact that it is the users themselves who opt for one or other type of tariff, based on what they consider to be the most appropriate for their interests.”

To the second claim accusing SGAE of blocking the “entry and expansion” of competitors by, in part, misrepresenting the rights it represents, SGAE says it “keeps a permanently updated database of the works comprising its repertoire, to which all operators have access” and that it only offers licensees “the rights that it is entrusted with, and therefore, it is not true that it claims to represent the repertoires of third parties.”

The statement concludes, “SGAE thus radically disagrees with the CNMC’s decision and is already preparing its appeal with the Audiencia Nacional (National High Court).” You can read the response in full below.

Earlier this year, Billboard reported SGAE’s intentions to improve its reputation under new CEO Cristina Perpiñá-Robert, who was appointed a little more than a year ago.

“SGAE is one of the world’s leading CMOs, with a crucial role to play for its members,” Perpiñá-Robert previously said. “This year is our 125th anniversary, which is a chance to celebrate what we’ve achieved but also highlight where we need to reform. I’m determined that SGAE should achieve a greater presence internationally.”

Last year, SGAE took in 349.1 million euros ($377.8 million, based on the 2023 average conversion rate) and distributed 354.1 million euros ($383.2 million), according to its 2023 financial results, while the number of members with authors rights grew from 36,956 to 83,148.

Full SGAE response:

With respect to the recent Decision of the Spanish Competition authority (CNMC) which accuses SGAE of conducts allegedly constituting abuse of a dominant position, based on the structure and design of SGAE’s broadcasting tariffs for musical and audiovisual works, and for presenting SGAE’s repertoire as universal, SGAE would like to make the following observations.

Both findings are, in SGAE’s view, clearly flawed.

SGAE’s tariffs offer broadcasters a flat rate/availability tariff and an effective use tariff, as required by the Spanish Copyright Law. This is an obligation applied to all collective management societies and which SGAE scrupulously complies with. Furthermore, the availability tariffs are an absolutely common phenomenon in many sectors (for example, telephone or television flat rates, etc.), which tend to favour, cheapen, and simplify users’ and consumers’ use of products or services. For this reason, establishing and applying an availability-based fee cannot be considered to constitute abusive conduct.

The CNMC’s decision ignores or attempts to minimise both the fact that SGAE also offers users an effective use tariff, and, above all, the basic fact that it is the users themselves who opt for one or other type of tariff, based on what they consider to be the most appropriate for their interests.

It is, therefore, radically disingenuous that, as the CNMC states, “all radio operators and the vast majority of television operators have had to use an “averaged availability fee” (comparable to a flat rate) in order to be able to use their repertoire”. It is the broadcasters themselves who have mostly opted to use the averaged availability fee. However, some operators have opted to use the effective usage tariff, including in particular the Spanish public broadcaster, RTVE – a fact that the CNMC endeavours to minimise – which proves that, contrary to what the CNMC also claims, the effective usage tariff does represent a real alternative to the averaged availability fee. More importantly, both tariffs have been established based on economic studies that have applied consistent criteria, to ensure that both tariffs are consistent and reasonable.

The CNMC’s first accusation is therefore unfounded.

The same applies to the second allegedly abusive practice. SGAE keeps a permanently updated database of the works comprising its repertoire, to which all operators have access. Thus, they are always fully aware of which works form part of SGAE’s repertoire, and which do not.

Given that other collective management societies and other rights management entities have emerged in Spain which can manage the same types and categories of rights, SGAe only offer users the rights that it is entrusted with, and therefore, it is not true that it claims to represent the repertoires of third parties.

It is also important to recall that in December 2023, the National High Court already annulled a previous ruling issued by the CNMC in 2019 for similar grounds (Judgment dated December 19, 2023). Additionally, the CNMC’s latest decision ignores its own legal precedents as it had already validated SGAE’s Broadcasting tariffs in previous cases without raising any competition concerns.

SGAE thus radically disagrees with the CNMC’s decision and is already preparing its appeal with the Audiencia Nacional (National High Court).

UPDATE: This story was updated on July 2 at 1:27 p.m. ET to add a statement by SGAE.