From the 2021 Annual Report: From law-making to implementation

The «Regulations» division is responsible for SUISA’s legal affairs. This starts with its involvement in political law-making activities, runs through tariff negotiations and drafting the distribution rules, and ends with the implementation of rules and regulations in case of disputes. In 2021, the division dealt with a number of key issues. Text by Vincent Salvadé

From the 2021 Annual Report

The 2021 Annual Report contains all the relevant figures and information relating to the previous financial year at SUISA (cooperative and group). (Photo: SUISA)

1. Legislation

In last year’s Annual Report, we mentioned the initiative of National Councillor Philippe Nantermod demanding an exception to copyright law for protected works used in hotel rooms and similar facilities. This parliamentary initiative was revisiting a provision that the National Council and the Council of States had rejected in September 2019 as part of the revision of the Copyright Act. On 3 March 2021, the National Council accepted the parliamentary initiative. For us, that was inadmissible. There was no good reason to revise the Copyright Act after such a short time, especially since it was the fruit of a compromise. Cultural circles had made significant concessions to reach a solution. They would have been cheated if certain elements were to have been changed unilaterally. Moreover, the initiative was inconsistent with international law. As a result, either Switzerland would have been exposed to economic sanctions, or, to avoid violating international agreements, it would have had to apply the exception only to the works and performances of Swiss nationals. That would have blatantly discriminated against Swiss artists compared with those of other countries. Fortunately, the initiative was rejected by the Council of States in early March 2022, and the matter was definitively shelved.

The revision of the Swiss Code of Civil Procedure also kept us busy. For a while, it seemed that conciliation would be made mandatory before any legal action could be brought to enforce royalty payments of less than CHF 30,000. During legal proceedings, it is often worthwhile to seek an arrangement. However, collective management organisations must respect the principle of equal treatment, and their tariffs are binding. It follows that they have limited leeway for proposing or accepting out-of-court settlements. Under the circumstances, we argued in favour of a voluntary conciliation procedure which would avoid unnecessary costs when an out-of-court arrangement appears to be out of reach. The matter seems to be on the right track, although the revision of the Code of Civil Procedure is yet to be completed as this report goes to press.

Just before Christmas, the Federal Council published a report in response to a motion requesting an evaluation of the effectiveness of the revised Copyright Act (which came into force on 1 April 2020). On the whole, the Government is relatively positive. It noted that the anti-piracy measures seemed to have had a dissuasive effect and that there was less criticism from rightholders. On the other hand, the Federal Council was more reserved about the new extended collective licence model: the latter should enable collective management organisations to issue global licences for an entire repertoire (even on behalf of rightsholders that they do not represent contractually) but was still to realise its full potential. In this context, we welcome Switzerland’s intention to follow the international talks: regulation at international level will be necessary to ensure that the extended collective licence is also used in multi-territorial operations.

2. Tariffs

In terms of tariff negotiations, we concluded two significant agreements in 2021.

The first was an agreement with our international partners on a new Tariff 4i regulating private copying on digital storage media. This agreement extends the levy scheme to include laptops and external hard drives. The new tariff is currently before the Federal Arbitration Commission for approval and is expected to enter into force on 1 July 2022. This will significantly increase our revenues from the blank media levy. Moreover, in 2022 we will pursue talks on a new tariff for private copying on the Cloud (i.e. on remote servers). The talks had been suspended in autumn 2021 pending a decision by the European Court of Justice on a similar levy scheme applied in Austria. The ECJ handed down a ruling favourable to rightholders at the end of March 2022.

In 2021, in a different context, we finalised negotiations on a new Common Tariff Z regulating circuses. The objective had been to achieve a better delimitation between this tariff and Common Tariff K which regulates concerts and certain other types of shows. Henceforth, Common Tariff Z, with more advantageous rates, will apply only to certain well-defined shows. The Federal Arbitation Commission approved the new tariff on 8 November 2021.

3. Distribution Rules

In spring 2021, the amendments to the Distribution Rules decided by SUISA’s Board at the end of 2020 were all approved by the Federal Institute of Intellectual Property (IPI). The new distribution system for private copies was implemented for the first time in September 2021.

Moreover, SUISA’s Board adopted three amendments to the Distribution Rules concerning online rights. The first applies to situations where an online platform does not report sufficient information on the works it uses: in this case, distribution is made based on the information obtained from other platforms using a similar repertoire. The second amendment concerns «residuals», namely the amounts paid by online providers «in final settlement» for works that have not been claimed by any rights management organisation. As of the end of 2021, these residuals are distributed to entitled parties in the form of supplemental payments on their settlements for current uses. The third and last amendment concerns «Play Suisse», the video on demand (VoD) platform of the SRG-SSR (Swiss Broadcasting Corporation). The Board decided that a portion of the amounts paid by the SRG-SSR under Tariff A would henceforth be allocated to distribution category 22S covering VoD. This portion is calculated based on the share of costs invested in «Play Suisse» as against SRG-SSR’s total costs.

This third amendment still requires IPI approval. The latter has first requested an addition to Tariff A. The SRG-SSR agreed, and the matter was referred to the Arbitration Commission in spring 2022: we are looking forward to a favourable outcome soon.

4. Regulatory authority

Finally, two cases are pending on which IPI, our regulatory authority, and SUISA hold divergent views. Both cases concern the relationship between «conventional» collective rights management, which is under federal oversight, and the liberalised management of online rights. In the first case, IPI opposes the granting of guarantees by SUISA to secure a bank loan to MINT, the joint venture company with SESAC for the management of online rights. In the second case, IPI opposed a cross-selling initiative undertaken by SUISA to inform its Tariff 3a (background music) customers that they would have to obtain an additional licence for the use of music on their websites or social media pages.

In both cases, we filed an appeal with the Federal Administrative Court. In the first case, we argued that the proper functioning of MINT was in the best interest of SUISA’s members. After all, the aim of the joint venture is to bring the Swiss repertoire together with other repertoires to achieve greater bargaining power in our dealings with giants like Google, Apple, or Spotify. The guarantees granted to MINT will be submitted to the 2022 General Meeting and the matter will thus be closed. In the second case, IPI deemed that data protection requirements disallow the communication of this information by SUISA, and that the information is misleading since conventional rights management and the management of online rights are governed by different rules. We believe that IPI exceeded its competence in this context and has disregarded the realities of collective management in its interpretation of statutory rules. We are now awaiting the decision of the Federal Arbitration Court.

Both these cases address an important question: how far can SUISA go to respect its obligations as a monopolistic organisation in certain areas while coming to terms with a liberalised market in others? We need the regulatory authority to provide a practical answer to this question. Otherwise, SUISA’s members may have to suffer the consequences.

2021 Annual Report
The 2021 Annual Report contains all the relevant figures and information relating to the previous financial year at SUISA (cooperative and group). Informative articles shed light on income, political developments and tariff negotiations in the past year. Once again, 2021 was dominated by the coronavirus pandemic and its impact on the music industry. You can find out what this meant for SUISA’s members and customers in the 2021 Annual Report.
www.suisa.ch/annualreport
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