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July 27, 2009
JASRAC


Japanese Society for Rights of Authors,
Composers and Publishers (JASRAC)

Hearings Begin with the Japan Fair Trade Commission


The first appeal hearing was conducted today at 2:00 p.m. regarding the cease and desist order issued by the Japan Fair Trade Commission against JASRAC on February 27, 2009. JASRAC offered a statement of opinions during the hearing, the content of which is listed below.
Upon commencement of the hearings, the statement of opinions was made to express the main points of JASRAC's claims, namely that the cease and desist order in question was issued illicitly. Details are and will be demonstrated in the trial request document, corroborating written statements and evidence.

-----(JASRAC's Statement of Opinions of the First Hearing)-----

The Japan Fair Trade Commission issued its cease and desist order upon the notion that, the fact that JASRAC's broadcast royalty calculation does not take into account the number of JASRAC-administered musical works broadcast as a percentage of the total number of musical works used in the broadcast programs by each of the broadcasters obstructs market entry for other businesses, and that it therefore constitutes a violation of the Anti-Monopoly Act. However, the acknowledgements and decisions by the Commission include egregious errors which are elaborated below.

1   As music copyright administration is a matter of public interest, businesses administering copyrights are regulated by the Law on Management Business of Copyright and Neighboring Rights (LMB). In accordance with the LMB, businesses are required to report its royalty rates and any changes made to it to the Agency for Cultural Affairs of the Japanese government, and designated businesses like JASRAC are further required to consult a representative of users, such as the National Association of Commercial Broadcasters in Japan (NAB), prior to enforcing any such changes. Once such a consultation concludes in an agreement, changes to the royalty rates then must be made accordingly.
JASRAC, in accordance with the LMB, held consultations with the NAB, in which a final royalty rate of 1.5% of the broadcaster's broadcast revenue (the applicable rate will only gradually increase each year to the final rate so as to not overburden the broadcasters immediately) was agreed to, and concluded agreements with the individual broadcasters based on the agreed rate. The agreements JASRAC reached with the NAB and the individual broadcasters were the result of negotiations that took into consideration outlooks on future music usage trends, possible increases and the speed of increases in the amount of musical works that will be used, royalty rates applied in Europe and America, and all information available to us at that time as a basis. In other words, the figures agreed to are royalty rates which were deemed reasonable compensation for the benefit enjoyed by broadcasters, namely the benefit of obtaining the legal status to freely use all musical works administered by JASRAC. At the same time, the agreement was based on all knowledge available to the negotiating parties at the time the agreements were negotiated. Therefore, even if the number of works actually used or the frequency of usage amassed by the end of the term of agreement did not fully match the predictions made during the negotiations, as long as the actual change is not as far off from the predictions made by both parties as to invoke the "Fundamental Change of Circumstance" doctrine, the difference should have absolutely no bearing on the royalty rates agreed to. Such is the market principle of contracts.
The cease and desist order is nothing other than illicit interference with free market negotiations.

2   Furthermore, blanket license agreements with blanket royalty rates are used by the majority of music copyright societies around the world. The difficulty in ascertaining the precise number of musical works actually used by broadcasters is a major reason for the blanket scheme's popularity. The scheme JASRAC utilizes is in fact a global standard in terms of royalty collection and licensing, and to claim that this is in violation of the Anti-Monopoly Act is to reject a global standard of music copyright administration. What is even more important is the fact that the royalty rate in Japan is lower than in most Western countries, and JASRAC has continually been requested by its international counterparts to raise its royalty rates. In other words, JASRAC has not conducted unjust negotiations with the broadcasters that would overly burden music users in the broadcasting industry.

3   As demonstrated above, JASRAC has abided by the LMB, and based on reasonable agreement negotiations, agreed to reasonable royalty rates. Given these facts, we conclude that the cease and desist order is illicit intervention in private autonomy, namely the processes and results of agreement negotiations.
JASRAC's business activities consist of being entrusted with copyrights by music copyright owners, licensing users, collecting royalties, and distributing them back to the copyright owners. Through these activities, JASRAC contributes to the overall enforceability of copyrights and of intellectual property rights as a whole. The cease and desist order is also a serious threat to this enforceability.

4   The cease and desist order in question accuses the license agreement between JASRAC and the broadcasters of being in violation of the Anti-Monopoly Act, based merely on the information (erroneous information at that) that broadcasters did not use musical works controlled by e-License. False evaluation of the blanket licensing and collection schemes for broadcasters, which are utilized around the world, has led to this cease and desist order. This is a case of "failing to see the forest for the tree."

5   According to the written answer, the deputy secretary general of the Commercial Broadcasters Association at the time is said to have mentioned to e-License that, since the total expenditure for music is static, if JASRAC's royalty rate does not change, and an extra payment has to be made to e-License, then they would not use music administered by e-License. However, whether music administered by e-License is used or not is at the sole discretion of the individual broadcasters, and this brings into question whether the deputy secretary general of an association of broadcasters would actually elect to say such a thing in the first place.
It is only reasonable for broadcasters to use music that is optimal for the purpose and effect of the program they are broadcasting. For any broadcaster to decline to use a certain group of works solely because they are not administered by a certain copyright management organization would be unfathomable behavior by a broadcaster. Even if we assumed that certain broadcasters had acted irrationally, to lay that blame on the comprehensive license and royalty scheme would be unreasonable.

6   Finally, we touch upon the illicitness of the text of the cease and desist order. The cease and desist order in question orders JASRAC to adopt a broadcast royalty calculation scheme which takes into account the number of JASRAC-administered works broadcast as a percentage of the total number of musical works broadcast, the relevant percentage reflected in the royalties paid.
However, through the entirety of the text of the order, it is left completely unclear as to exactly what kind of scheme JASRAC has been ordered to adopt for its broadcast royalty calculations. Additionally, regardless of the kind of scheme JASRAC adopts, it would be impossible for JASRAC to fulfill its obligations under the order on its own. Furthermore, even if cooperation from the broadcasters is obtained, it is impossible to estimate how long it would take to implement what is being required.
Therefore, the cease and desist order text, the fulfillment of which is determined by the actions of parties other than to whom it is addressed, cannot be considered legitimate.

7   This statement does not represent JASRAC's claim in its entirety, and further details are and will be demonstrated in our trial request document, as well as in corroborating written statements and evidence that will be submitted in due course.
However, in commencing the hearings, JASRAC has elected to express its opinion in order to convey to the examiner the main points of the illicitness of the cease and desist order in question.

End

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