The activities of the Swedish collecting society, ALIS, are held not covered by exemption in Article 81(3) of the EC Treaty and its Rights holders’ Association Agreements are declared void by Stockholm District Court

29 September 2008

Henrik Nilsson, Josephine Tessmar

The Administration of Literary Rights in Sweden (ALIS) is a collecting society established in 1995, representing approximately 2,500 writers most of which are organised by one of the Swedish Writers' Union (SFF), the Swedish Union of Journalists (SJF), the Swedish Playwrights' Union (SDF) or the Swedish Association for Educational Writers (SLFF). ALIS’ stated purpose is to protect dramatists, authors, translators and journalists’ copyright concerns. ALIS acts according to either a copyright agreement between each respective interest organisation and right holder or through a direct agreement with ALIS regarding the copyright administration of the rights holder’s published piece.

Mediearkivet (“the Media Archive”), part of Schibsted, a major Norwegian-based publishing company, administrates an internet-based information database, containing earlier published material from journals, news agencies and other media corporations. Mediearkivet sells subscriptions which enables the user to search among the articles available in the database. For every text the subscriber uses, Mediearkivet makes additional charges, in excess of the subscription fee.

ALIS filed suit against Mediearkivet, claiming they were in breach of the Act on Copyright in Literary and Artistic Works in using two identified pieces of work without permission. Mediearkivet, responded that ALIS’ agreements with the rights holders were a restraint of trade according to Section 6 of the Swedish Competition Act as well as of Article 81 of the EC treaty.

The Stockholm District Court, in its decision of 26 August 2008, presented a thorough review of EC legislation and case law. The Court, in a reasoned opinion, chose to apply a step-by-step analysis regarding the extent to which the claim that the agreement constituted an illegal restriction of trade would be required to produce a full-scale Competition law analysis. While Mediearkivet did not allege that ALIS was part of an actual cartel, given the circumstances and the low nominal value of the claim the Court chose not require Mediearkivet to present a complete analysis containing a definition of the relevant market, an estimate of market power and arguments on appreciable effects.

The Court progressed to discuss the acceptance of collecting societies within the competition law area discussing why such organisations do not per se breach the prohibition concerning anti-competitive agreements. The Court reviewed the justification for such organisations, setting out the benefits they provide to the economy.

The Court noted that collecting societies are however not immune to the prohibition of anti-competitive agreement according to Article 81(1) and Section 6 of the Competition Act. In ALIS’ case, the Court found that ALIS business model did not produce sufficient benefits to outweigh the inherent restriction of competition. The Court pointed out that ALIS did not publish a list of which rights it administered but made the information available upon special request. ALIS did not appear in reality to offer any collective license to its administered works, requiring purchasers to negotiate on case-by-case basis, thus excluding economies of scale in licensing. As ALIS enjoys exclusive rights to the rights administered, the organisation holds a monopoly on these rights. There was also evidence of monopoly prices being charged for these rights.

In conclusion, the Court denied the claim for compensation in the two cases put forward by ALIS, citing that it lacked standing as the rights holders association agreements with ALIS were void for being an illegal restraint of trade according to Section 6 of the Competition Act and Article 81(1) of the EC treaty. The Court stated that a more detailed decision on what parts of ALIS business is in breach of Competition law would be set out in a decision in another case pending before the Court.

ALIS has announced that the decision will be appealed.

Source: Stockholm District Court decision 26 August 2008, in case FT 27829-06

(available in Swedish only)