EC to issue 'Statement of Objections.'

The European Commission will next week challenge Europe's collecting societies over their arrangements for royalty gathering, has learned.

The Commission -- the European Union's executive body -- will issue a formal Statement of Objections in which it will allege that the mechanisms for royalty collections between the national collecting societies within the EU have effectively led to restrictive business practices, including the carving up of markets. It will say there is no need for the local collecting society in each country to enjoy exclusive licensing rights, as licensing can be monitored from abroad.

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 Statement could bring about a system of multi-licensing, with economies of scale ensuring that administration costs are slashed.

"The current system means much of the license fee is spent of administration costs," says one industry insider. "This will open the way for a central licensing system, which will be easier all round - and be a win-win solution for users too."

The Commission action will not necessarily sound the death knell for collecting societies, as they will still be required to handle local licenses for bars and discos. However, it will mean they do not have to take responsibility for all of the licensing demands in a single territory.

The Commission's actions come as European collecting societies come under pressure to overhaul their business models. In 2004, the EC 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.