CISAC, the umbrella trade groups for performing right societies, must reform its royalty collection practises and has been told to remove all obstacles impeding the pan-European licensing system after losing its long-running battle with European regulators.

The European Commission handed down its ruling today, which it describes as "an antitrust decision prohibiting societies from restricting competition."

The Brussels-based Commission, the European Union's executive authority, called for the removal of the membership clause, currently applied by 23 collecting societies, that prevents an author from choosing or moving to another collecting society.

The regulatory body also called for the cessation of territorial restrictions that prevent a collecting society from offering licences to commercial users outside their domestic territory.

In its decision, Brussels today said the outcome "recognizes the valuable role of collecting societies and does not challenge the existence of the reciprocal representation agreements. It does, however, prohibit certain aspects of those agreements as well as concerted practices among collecting societies."

Not surprisingly, CISAC was duly unimpressed with the development. "Whilst it is true that the Decision's approach to territoriality will inevitably lead to a catastrophic fragmentation of repertoire and therefore to legal uncertainty for music users," CISAC notes in a statement, "it is the Commission's assertions that the Decision is somehow in the creative community's interest which has been of particular surprise to CISAC."

Its statement continues, "CISAC and its members continue to count the full costs of the Commission's decision - not just on the world's 2.5 million creators whose interests have been jeopardized by the Commission's stance on territoriality, but also on users."

On the other hand, the European Digital Media Association welcomed the result as an "important step toward ensuring a pro-growth and competitive environment in Europe for all players in the online music value chain from artists to consumers." Ultimately, notes EDiMA, the knock-on effect will create a more flexible and efficient environment for online music licensing in Europe.

Brussels issued a Statement of Objections (SO) in February 2006 to CISAC to inform them that they were potentially breaking competition rules by extending their national monopolies over licensing authors' rights for physical goods and performances into the online space. It suggested that the societies' model for gathering royalties was potentially flouting competition rules.

The Commission had launched its investigation following complaints lodged by RTL Group and Music Choice Europe. RTL Group issued a complaint in 2000 with the Commission after the broadcaster was thwarted in an attempt to secure a pan-European radio broadcasting license. Music Choice Europe made a similar complaint in 2005.

"This decision will benefit cultural diversity by encouraging collecting societies to offer composers and lyricists a better deal in terms of collecting the money to which they are entitled," comments European competition commissioner Neelie Kroes in a statement issued today. "It will also facilitate the development of satellite, cable and internet broadcasting, giving listeners more choice and giving authors more potential revenue. However, the Commission has been careful to ensure that the benefits of the collective rights management system are not put into question in terms of levels of royalties for authors and available music repertoire."

Back in October 2005, Brussels recommended a streamlining in the rules governing pan-European collective licensing. The Commission had criticized the existing set-up, claiming a single Europe-wide copyright and licensing system for online music would make it cheaper for commercial users to buy rights.