17 April 2014
to recent ramblings on the ‘Czech
Spa’ case, I thought I’d quickly mention another collecting society
case. As you’ll remember, collecting societies operate in two-sided
markets, providing services to both: (i) the copyright holder or author (i.e.
upstream); and (ii) the end user of the repertoire (i.e.
downstream). Whereas the Czech spa case concerned services to the latter,
the recent Buma/Stemra case in the Netherlands concerned services to the
Dutch authority had investigated the possible abuse by the national collecting
society, Buma/Stemra. Dutch authors rely on Buma/Stemra for the
collection of royalties from the exploitation of their work on TV and
radio. However, authors don’t always necessarily need the collecting
society’s other services, for example for services for music played over the
internet where online exploitation is easier for rights holders to process
themselves. Buma/Stemra had only offered an all-in-one package covering
all formats – this gave rights holders little choice when deciding which rights
to transfer across to the collecting society and how they sought remuneration
for their songs or lyrics online.
conclude the investigation, Buma/Stemra offered commitments promising to give
rights holders more choice about which rights they transfer to it. An
‘opt-out’ system will be created, introducing greater flexibility for authors
to retain their rights in different categories. The Dutch authority has
welcomed the commitments (see here)
and expects them to result in further online innovation, to the benefit of both
rights holders and music fans.
It is fascinating to see competition law used as a tool to encourage innovation in the traditional collecting society business model. With a lot of the recent focus being on collecting societies’ services to rights users, it’s interesting to see that rights holders are also keen to wield the competition law sword. I suspect that this isn’t the end of the story across the EU...
3 April 2014
on from the Roma-branded Mobility Scooters case
earlier this year, the OFT has announced a second decision on mobility
scooters. The full text is not yet available, but it is clear that in Pride
the OFT’s concerns were similar insofar as online advertising was
OFT guidance (now also adopted by the CMA) has long emphasised that
restrictions on advertising can be potentially problematic, in particular if
parties are prevented from advertising prices, or prices below a minimum or
recommended level (see paragraphs 3.24 here
and 3.14 here).
This was also made abundantly clear in the
OFT’s 2003 decision in Lladró
(see paragraphs 68-77). The importance placed by the OFT on
preserving consumer trust in online markets was also stressed in a 2010 market
study on online behavioural advertising and price targeting (see Chapter
is therefore hardly surprising that Pride’s conduct was sanctioned.
Between 2010 and 2012, Pride had entered into arrangements with eight of its
UK-wide online retailers in respect of certain mobility scooter models.
These prevented the retailers from advertising prices online which were
lower than Pride's Recommended Retail Price (RRP). The OFT directed the parties to bring any such arrangements to an end and to refrain from entering into
similar arrangements in the future. All
parties concerned benefited from the immunity for 'small
agreements' provided for in the
Competition Act 1998 - no financial
penalties were imposed.
are likely to see similar cases in the near future for (at least) two
the CMA will clearly continue to focus on
online and emerging business models. Its Annual
Plan for 2014/15 highlights consumers’ increasing use of the internet to
compare products, goods and services and stresses the importance of ensuring
that consumers have confidence in online markets. The CMA also launched a ‘big
project yesterday designed to identify sectors of the economy where online
commerce is developing more slowly than might be expected, so it can
investigate whether this is the result of anti-competitive behaviour (see the
‘Extend competition frontiers’ subheading).
both the Roma and Pride decisions stressed that consumers with
limited mobility may find it difficult to visit more than one physical store.
The CMA’s recent Prioritisation
Principles explicitly note a concern for ‘disadvantaged’ consumers, who may
be particularly vulnerable to exploitation.
looking at advertising restrictions would therefore be well-advised to bear in
mind the relevant consumer demographic. This will be relevant to those involved
in the distribution of healthcare products.
Osman Zafar and Claire Davies
2 April 2014
Before it disappeared into the wide blue yonder, the OFT
published its merger decision in the acquisition by IP Group plc (IPG) of
Fusion IP plc (Fusion). There aren’t all that many UK merger decisions in
which IP rights are the central assets of the merging parties, so this one
particularly caught our attention. The deal involved the purchase by IPG of all
of the shares in Fusion – prior to the deal, IPG held a 20.1% stake in
Fusion. Both entities provided equity finance and associated services to
spin out companies from higher education institutions (HEIs). The OFT noted
that they play a key role in investing in early stage technology which is still
unproven and therefore cannot attract “general” investors.
The arguments on market definition are particularly
interesting. The parties tried to make the case that the relevant market
was the equity investment market for small private technology companies – an
obvious move, to broaden the scope of the market and therefore reduce their
market shares. The OFT didn’t buy this – although other types of equity
investors might sometimes be interested in the same investment opportunities,
generally they aren’t keen on such early stage companies. Nor do they
offer advisory services or support for the development of the spin-off, which
both the parties did. Moreover investment in “small private technology
companies” wasn’t considered to be specific enough – the OFT considered that
the provision of finance and services to HEI spin-outs specifically was
more appropriate. In fact the OFT considered an even narrower market definition,
looking at each technology sector in which a spin-out might operate as
potentially constituting a separate relevant market (although in the end it
didn’t find it necessary to reach a conclusion on this point).
On the substance of the case, the OFT looked at competition
for agreements with HEIs and competition for developing spin-off outside HEI
agreements. It concluded that the parties weren’t close competitors for
either – primarily because IPG was a much bigger outfit than Fusion. HEIs
thought the deal was a good thing, as IPG would be able to raise more capital
to invest and from larger institutional investors, given its increased size.
So the key lesson for us from the decision is not to forget
that the regulators can dice and splice a market in many ways when deciding on
the correct market definition – even in ways that may seem too narrow to make
much business sense. Businesses considering notification to the CMA going
forward will be wise to remember that the market definition may end up much
narrower than they anticipate, which may make their shares look very
high. If this is going to be problematic, it is better to prepare in
advance, so that when the CMA sets the exam questions, the merging parties
stand a good chance of getting an A grade.