The European Commission today (Feb. 7) confirmed a formal investigation into the way collecting societies gather royalties for artists from Internet sites and through satellite and cable broadcasting.

The European Commission today (Feb. 7) confirmed a formal investigation into the way collecting societies gather royalties for artists from Internet sites and through satellite and cable broadcasting.

The Commission -- the European Union's executive authority -- said a preliminary probe into the agreements among collecting societies suggested that the current rules effectively amounted to a monopoly.

"The Commission considers that certain aspects of the agreements might infringe the EU Treaty's prohibition of restrictive business practices," it said, adding that the exclusive territorial arrangements for collecting societies were being entrenched by new technologies.

"The historical de facto monopoly is strengthened and potential new entrants are prevented from entering the market for the management of copyright," the Commission said.

Brussels has sent a Statement of Objections to the International Confederation of Societies of Authors and Composers and all its member agencies in EU countries that collect royalty payments. They have two months to reply, and can ask for an oral hearing to state their case before the Commission issues its final conclusions.

In its inquiry, tipped in Billboard.biz, the Commission will only examine relatively new forms of copyright exploitation -- Internet, satellite transmission and cable retransmission of music.

The investigation will look into parts of the CISAC model contract that appears to break EU Treaty rules on restrictive business practices. It will cover such issues as membership restrictions which oblige authors to transfer their rights only to their own national collecting society.

Billboard.biz understands that CISAC will issue a formal response tomorrow.

The Statement of Objections comes five years after RTL Group lodged a complaint with the Commission after the broadcaster was thwarted in its bid to secure a pan-European radio broadcasting license.

The Commission's actions come as European collecting societies come under pressure to overhaul their business models. In 2004, the Commission warned 16 authors' rights societies that the way they cross-license repertoire through what is known as the "Santiago agreement" is "potentially in breach of European Union competition rules."

It also comes on the heels of Brussels' recommendations last October to streamline the rules on pan-European collective licensing. The Commission criticized the existing system, saying a single Europe-wide copyright and licensing system for online music would make it cheaper for commercial users to buy rights.