Brazil’s competition regulator CADE is investigating the country’s main trade body for music publishers, UBEM, over its role in negotiating licensing deals around mechanical rights for its members. Although the investigation is ongoing, legal experts say that the intervention by the regulator has the potential to significantly change the way mechanical rights licensing works in the country.
The investigation, prompted by a complaint by broadcaster SBT, was formally launched last month and is considering whether UBEM’s role in negotiating licensing deals breaches competition law. The trade body has until this weekend to respond to a series of concerns raised by the regulator.
SBT accused UBEM of “engaging in anticompetitive practices, including setting minimum fees for synchronisation rights, imposing standardised contract terms for licensing music to digital platforms and restricting publishers from negotiating licences independently”, according to Fabio Kujawski, a partner at Brazilian law firm Mattos Filho, who is closely following the investigation.
After SBT filed its complaint last October, UBEM submitted an initial response in December, denying it has acted in an anticompetitive way. “UBEM stated that its licensing activities are lawful”, Filho explains, with the trade group stressing that “publishers remain fully autonomous in their negotiations with licensees”.
Additionally, “there is no coordination or exchange of sensitive information between publishers via UBEM; the organisation does not engage in price-fixing, monitoring, or punitive measures against publishers; and it does not discriminate against licensees”.
UBEM also added that “its bylaws only allow it to assist members in negotiations upon request” and that there are CADE precedents supporting its position that the collective deals it negotiates are lawful, not least because “the complexities of the music publishing market - especially copyright structures - make it difficult for individual publishers to determine pricing on their own”.
When it comes to the performing rights in songs in Brazil, there are multiple collecting societies plus a central organisation called ECAD that actually issues the licences.
As in many countries, collective licensing is regulated to overcome the competition law concerns that are always raised when a large number of creators or rightsholders come together to license as one. Under Brazilian law, collecting societies need to be registered with the country’s Ministry Of Culture.
However, whereas in many countries the collecting society that licenses performing rights also has a division that manages mechanical rights, in Brazil there is no mechanical rights society.
Which is why there has been a role for UBEM in negotiating licensing deals for its members for streaming and synchronisation, which both exploit the mechanical rights, which are in play whenever songs are reproduced. The question is, does that basically make UBEM a mechanical rights collecting society by proxy? Because if it does, it should be registered and regulated as such.
There are other countries where trade bodies get involved in negotiating licensing deals. In the US, the National Music Publishers Association has negotiated some template deals for its members - especially independent members - where mechanical rights are exploited, but the mechanical rights compulsory licence managed by The MLC does not apply.
In the UK, although there is a mechanical rights collecting society, MCPS, it is actually owned by the Music Publishers Association, and is therefore regulated differently than the member owned performing rights society PRS.
Despite UBEM being adamant that its licensing role is lawful, after reviewing SBT’s complaint and UBEM’s initial response CADE “pointed to concerns over collective negotiations, minimum price-setting, and standardised commercial terms for synchronisation and digital music rights licensing”, according to Maíra Scala Pfaltzgraff, another lawyer at Mattos Filho.
"As a result", she goes on, the regulator “has imposed immediate preventive measures, ordering UBEM to cease collective negotiations of synchronisation fees and contract terms on behalf of its members”, and also to “stop using or enforcing price tables for synchronisation or related rights” and to refrain from “any conduct that facilitates or encourages uniform pricing practices among publishers”.
“Failure to comply will result in a daily fine of BRL 50,000, or about $8600”, Scala Pfaltzgraff adds.
CADE’s investigation will proceed after UBEM makes its formal submission later this week. “Unless UBEM successfully challenges CADE’s decision”, Kujawski observes, “it will be required to comply with the new restrictions - a shift that could have major implications for synchronisation and mechanical licensing in Brazil”.