Lessons for Kenya: South African Copyright Tribunal Sets Aside License Tariff for Use of Sound Recordings

PicknPay

It is recommended that a tariff to be set by the tribunal should neither be too high nor too low, but a tariff which the owners of the royalty will realise profits on the one hand and the consumers will purchase voluntarily. It is hard, in my view, to satisfy the preferences of either party. It has already been indicated that I am not tasked to judge as to which case is superior in law but to set a tariff that may be said to be reasonable. – Foschini Retail Group (Pty) (Ltd) and 9 (Nine) Others v South African Music Performance Rights Association (0003/2009) [2013] ZAGPPHC 304 at Paragraph 76.

Recently this blogger reported a major victory for Kenya’s related rights collective management organisations (CMOs) when the court upheld their statutory mandate to license for the communication to the public right (See here). It is clear that the majority of these disputes between the related rights CMOs and users arise because the latter contest the license fees charged by these CMOs. The genesis of this contestation stems from the users’ perceived “double taxation” of paying both a copyright CMO on the one hand and the related rights CMOs on the other hand.

In this regard, this blogger has argued on several occasions (see here, here and here) that the Competent Authority must be immediately operationalised to deal with the rising cases of CMO-user disputes. Meanwhile, in South Africa, the Copyright Tribunal (equivalent to the Competent Authority under the Kenya Copyright Act) has recently issued a landmark judgment in which it set aside the license tariff for retailers as fixed by the South African Music Performance Rights Association (SAMPRA) holding that the tariff was not reasonable and proceeded to set a tariff to be applied by SAMPRA. In addition, the Copyright Tribunal ordered SAMPRA to pay the the retailers’ costs of referring the matter to the Tribunal.

For Kenya, this judgment is of great importance as the tariff determined by the Copyright Tribunal in South Africa is significant lower than that of the concerned related right CMO in Kenya. Therefore this blogger submits that there is a need for a review of all tariffs set by related rights CMOs using the methodology of the South African Copyright Tribunal.

In the present case, the retailers, namely Foschini Retail Group (Pty) (Ltd), Pepkor Retail Limited Stores, Just Kor Fashion Group (Pty) (Ltd), Mr Price Group Limited, Pick ‘n Pay Retailers (Pty) (Ltd), Truworths Limited, New Clicks SA (Pty) (Ltd), Dunns Stores, Metrotoy (Pty) (Ltd) and Young Designers Emporium (Pty) (Ltd) contended that SAMPRA had unilaterally set a tariff, and that it basically adopted a take-it-or-leave-it approach, when demanding payment. The retailers claimed that the tariff was inflated and without economic justification. They said that they had tried to negotiate with SAMPRA, but that the parties had been unable to reach agreement, hence they referred the matter to the Copyright Tribunal for determination.

As many know, the South African Music Performance Rights Association (SAMPRA) is a national, non-governmental, organization that licenses to third parties specific copyrights that vest in record companies that are members of the Recording Industry of South Africa (RiSA). It is therefore clear that SAMPRA’s equivalent in Kenya is the Kenya Association of Music Producers (KAMP).

In response to the retailers’ contentions, SAMPRA claimed that its tariff was reasonable. It stated that its tariff was bench-marked with international best practice, with reference to the UK, Australia and Canada being mentioned. SAMPRA’s tariff was based on the square meterage of the ‘audible area’, in other words those parts of the store where the music can be heard even if they are inaccessible to customers. Therefore according to SAMPRA’s tariff, the annual fee for a store of 51 to 100 square metres was ZAR 1000.00, whereas the annual fee for a store of 201- 300 square metres was ZAR 2000.00.

The Tribunal agreed with the retailers that the SAMPRA’s tariff was too high, even compared with lower tariffs in developing countries such as Australia. The Tribunal also agreed with the retailers that SAMPRA’s take-it-or-leave-it approach in setting its tariff was wrong both under the Copyright Act and the Collecting Society Regulations. In this connection, the Tribunal found that it would not be in the interest of justice to “cut and paste” the international practice without engaging the market forces prevailing in South Africa.

Therefore the Tribunal was of the view that tariff to be set must be a tariff that “optimizes public welfare”, in other words “a tariff that is neither too high nor too low, by which the service providers would realize profits, whereas the consumers would purchase voluntarily”. The Tribunal therefore set a tariff which, for example, saw the annual cost for shops of 50 to 100 square metres drop down to ZAR 389.00, whereas the annual fee for shops of 200- 300 square metres was set at ZAR 620.00.

As alluded to above, the tariff set by the Tribunal does not compare favourably with KAMP’s tariff here in Kenya. According to KAMP’s recent tariffs available here, the annual cost for shops of 50 to 100 square metres is currently set at KES 6500.00 which is approximately ZAR 650.00. In other words, a Kenyan shop half the size of a South African shop pays twice as more in license fees per year.

In light of the above, this blogger submits that there is a pressing need for the relevant government agencies to intervene and regulate the license tariffs, terms and conditions imposed by CMOs in Kenya to protect the public interest.

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