AUSTRALIAN DEMOCRATS DISSENTING REPORT - Part 2
10. Theory supporting removal of parallel import restrictions
The theory on which the Government relies to support the removal of the
parallel import restrictions suggests that introducing direct competition
will reduce prices, increase sales of CDs (sound recordings) in Australia,
boost the retail sector and provide greater choices for consumers and
jobs for Australians in the industry [1].
The PSA report [2] addressed the economic theory
distinguishing between “market failure” for copying and “market
failure” for parallel importation restrictions, stating:
“This rationale...[`market failure' for copying]...justifies protection
against the importation of pirate recordings, otherwise the basic reproduction
right is undermined. However, it cannot be used to justify protection
against parallel imports since they are not illegally copied in their
country of origin. Such protection may increase the value of copyright
protection for the copyright owner, but that does not necessarily serve
the public interest as a whole. Whilst there is a strong case for copyright
legislation to protect against copying at the production stage, once
a record has been validly issued there appears to be no prima facie
case for legislation which imposes restrictions on the domestic or multinational
distribution of such validly issued records. It is only if some market
failure in the process of distributing records can be established that
there might be a case for restrictions on parallel imports. Even then,
this case would have to be weighed up against the considerable restriction
on competition which is embodied in such restrictions”.
The Australian Record Industry Association [3]
state:
“The copyright in question perform a `market failure' function
and complete the basic right of copyright ie. the reproduction right.
The rights perform an industry and public interest role by (1) preventing
the inflow of pirate and counterfeit product, (2) encouraging investment
in promotion to generate demand for music products and (3) supporting
the reproduction right by ensuring the rights holder is the only one
who can make and supply its copyright products and thus obtain a return
should sales eventuate ie. provide economies of scale”.
The Australian Competition and Consumer Commission [4]
provides a succinct statement of the practical effects of the theory:
“The central thesis is that the prices of sound recordings are
unnecessarily high in Australia, often substantially so, and that the
choice and availability of music are also restricted. High prices and
lack of choice and availability have limited consumption in Australia
and, in turn, this has restricted job creation and investment”.
The Australian Consumers' Association [5] submitted
that lower prices would increase demand for CDs. This submission was based
on two (2) examples, (i) the experience of British Telecom in reducing
prices, and (ii) increasing demand and the increased number of home loans
with reducing mortgage rates.
Doubt as to the practical effects of this theory were set out by the
Australian Copyright Council's [6] concerns
with the Bill:
(i) that the Bill assumes prices are affected by parallel import restrictions
and that retailers will sell sound recordings for lower prices without
these restrictions, when the price comparisons are with countries, such
as the United States, Canada and New Zealand which enjoy similar parallel
import restrictions;
(ii) different prices for sound recording in different markets may
be accounted for by an election to sell sound recordings at a lower
price where piracy is rife, disposable incomes are low or because it
is a “deletion”;
(iii) cheaper recordings will reduce or remove royalty payments damaging
the Australian music industry - lower prices should not be pursued at
the expense of supporting creativity;
(iv) removing the parallel import restrictions may adversely affect
local record companies who provide the opportunities for Australian
artists to gain access to international releases;
(v) without parallel import restrictions recordings are likely to be
released outside Australia first which means:
(a) Australian composers and artists are likely to receive lower
royalties;
(b) the collection and accounting procedures for royalties collected
overseas are more difficult to administer and monitor than in Australia;
and
(c) artists and composers would most likely only be able to negotiate
lower advances;
(vi) the inability to control imports may create a disincentive to
export;
(vii) the increase in piracy is likely because of the difficult distinguishing
between legitimate and pirated sound recordings;
(viii) it is not certain that Australian importers and retailers are
currently impeded from making sound recordings available in Australia
and there is no guarantee that even if an importer could import a sound
recording that they would.
The Australian Music Publishers' Association and Australasian Mechanical
Copyright Owners' Society [7] suggested the
economic impacts were also uncertain, including the following factors:
(i) the improved Government revenue and balance of trade seemed unlikely
if a successful exporting and job creating industry was replaced with
an import and distribution industry;
(ii) the Bill would provide an incentive to manufacture off-shore in
low (or no) royalty countries with the attendant reduction in payments
to Australian writers and the output of Australian music;
(iii) profits and taxes on profits from royalty collection, manufacture
and sale of sound recordings would remain outside Australia;
(iv) without the obligation to pay royalties the withholding tax would
be foregone;
(v) job losses will result in the publishing, manufacturing and recording
industries, followed by lost job opportunities in related areas; and
(vi) loss of Government revenues, such as tax on company profits, income
tax on lost employment and increased unemployment benefits, lost withholding
taxes, lost sales taxes on lower CD prices and reduced advertising,
promotion and marketing, lost export income and reduced investment and
the effect on the balance of payments with increased numbers of imported
CDs.
The Australasian Performing Rights Association [8]
and Australian Music Publishers' Association and Australasian Mechanical
Copyright Owners' Society [9] argued the Bill
represented bad policy because it would lower Australia's overall commitment
to intellectual property protection in the eyes of the world (discussed
further below).
The Australasian Performing Rights Association [10]
and Australian Music Publishers' Association and Australasian Mechanical
Copyright Owners' Society [11] also argued
that it would create yet another import regime under the Act, in addition
to books and software.
The International Managers Forum [12] indicated
the investment environment required the existence of parallel import restrictions:
“...the Australian population base is not such as to generally
provide sufficient reason for investment in local talent in its own
right solely relying on returns generated in Australia. Neither are
we, with our major international music trading partners, part of a block
which allows us to freely trade physical music product within such a
block. Therefore every Australian investor/artist combination should
and must be able to look to the potential returns from international
successes to justify their initial local investment, whilst maintaining
a fall back market at home”.
John Quiggin [13] accepted that international
price discrimination was occurring for Australian sound recordings, and
suggested the reasons for this included (based on the exercise of monopoly
or oligopoly powers in a market having monopoly characteristics):
(i) discriminating monopoly – charging higher prices where there
is a low elasticity of demand;
(ii) differential enforcement of competition policy – higher prices
in Australia compared to the US reflect a less stringent application
of competition policy;
(iii) preferential treatment of the home market – choosing to
treat the home market more favourably (for example, to maximise long
term profitability or maintain good will);
(iv) strategic trade policy – improve national welfare by providing
monopoly powers to foreign trading companies;
(v) piracy – parallel importing prevents piracy; and
(vi) promoting the development of music – parallel imports assist
the development of the local industry.
11. Relevant major reports
Copyright Law Review Committee
The Copyright Law Review Committee was set up in 1983 to consider and
report to the Attorney General on copyright matters referred to it. In
August 1983 the Attorney General referred the matter of whether changes
should be made to the parallel import provisions in the Act [14].
The Committee considered sound recordings a well as a number of other
works and subject matter other than works, and concluded:
(i) the parallel import provisions should continue to apply subject
to some aspects of relaxation;
(ii) that parallel importation should be allowed where an article is
not available in Australia within a reasonable time or it is for their
personal non-commercial use;
(iii) that the knowledge requirement should be made consistent within
the Act;
(iv) that parallel importers (without the permission of the copyright
owner) should only be open to civil proceedings; and
(v) that section 135 of the Act be amended to cover all works and subject
matter other than works.
Prices Surveillance Authority (PSA)
On 15 February 1990 Senator Nick Bolkus as the then Minister of State
for Consumer Affairs set out the term of reference for an inquiry by the
PSA to report by 1 October 1990 which was later changed to 15 December
1990. The inquiry was to examine among other matters, competition and
efficiency in the supply of sound recordings, effect of the Act on sound
recordings and their prices, piracy, the current industry structure and
pricing practices on the development of Australian music, the effect of
price on profitability and employment, and the introduction of new technologies
(such as CDs) and their impact on prices [15].
The main objective of the report was to determine whether the price of
sound recordings in Australia were too high and if they were, why [16].
The PSA report [17] reflected on the sound
recording industry:
“The sound recording industry deals with the mechanical reproduction
of copyright material. Copyright is the core income producing asset
of the industry; and its organisation is underpinned by a particular
international structure of copyright protection. The structure of copyright
protection which exists today has evolved over many years, reflecting
the international economic structure, technology, stages of development
and the political power of interest groups and countries at various
times. It is not static, but continuing to evolve as all these factors
change.
The current copyright regime has given rise to certain industry structures
and practices, which are often regarded as given and unchangeable. In
fact, they have evolved to maximise the returns to copyright owners
from the prevailing copyright regime. They may or may not be desirable
when viewed from the wider interests of the economy and society at large.
To say that current practices would have to change if there was a change
to copyright arrangements is not to say that there is necessarily either
good or bad”.
The PSA report [18] concluded:
“The central conclusion of this Inquiry is that the prices Australian
consumers pay for records are too high. Three factors underpin these
high prices:
- price inelastic demand;
- the absence of domestic price competition; and
- the restriction on import competition arising from importation provisions
of the Copyright Act 1968.
None of these factors could sustain excessive prices in the absence
of the others. Price inelastic demand does not necessarily imply high
prices, but where there is also a lack of domestic and importation competition,
it will make high prices profitable. Where there is such a lack of competition,
it will be profitable for suppliers to charge different prices in different
markets according to what each market will bear. The price inelastic
demand in Australia encourages high prices. These differential prices
can only be sustained where there is effective geographical segmentation
of the markets. The importation provisions of the Copyright Act impose
a barrier to free trade in copyright articles such as records. Without
such a barrier, it would be possible and profitable for `parallel importers'
to import goods into the high priced market from the low priced market.
This process of `arbitrage' tends to equalise traded prices for goods
and services. Importation provisions may not always be effective in
sustaining price differentials where markets are geographically in close
proximity, such that individuals in the high priced market have ready
access to goods in the low priced market. However, Australia's geographic
isolation precludes this process.
The high price of records in Australia are in part reflected in above
average profitability, but also in high costs, where costs are directly
determined as a percentage of price and where high prices encourage
`bidding' in expenditure on advertising and promotion”.
The recommendations of the PSA report [19]
were:
(i) the parallel import provisions in the Act (sections 37, 38, 102
and 103) be repealed in relation to parallel imports from countries
providing comparable levels of protection;
(ii) the repeal of the parallel import restrictions should be delayed
for 12 months to allow the industry time to implement necessary contractual
rearrangements;
(iii) adoption of policies which better target protection against piracy
including increased penalties; and
(iv) to develop Australian music the PSA considered:
Music Industry Advisory Council (MIAC)
The Music Industry Advisory Council was established by the Government
in response to the PSA report. In its final report, the Music Industry
Advisory Council [20] concluded:
“While there is significant uncertainty as to whether parallel
importation will produce price advantages for Australian consumers,
the negative effects are clear. These include:
- a severe impact on the music industry's confidence;
- a major adverse effect on investment by the industry, which will lead
to reduced repertoire development, contraction of small independent
recording/distribution companies and an increased industry concentration;
- a significant increase in the level of piracy in Australia and the
costs associated with policing this illicit activity; and
- a constraint on the capacity of the industry to grow and develop”.
Monopolies and Mergers Commission (MMC)
This Monopolies and Mergers Commission [21]
was provided terms of reference to report on the supply in the UK of pre-recorded
CDs and other media containing music. The Commission's [22]
major findings include:
(i) there was a price difference between UK and US CDs, particularly
“full priced” CDs and that this difference was no different
from price differences for a range of other products [23];
(ii) the price differential could not be ascribed to the right of the
copyright owner to control parallel imports;
(iii) uncontrolled parallel imports would be damaging because of the
increased risk of piracy and the general weakening of copyright protections;
and
(iv) despite the monopoly situation of the major record companies there
was no market power to exploit their copyright and there was therefore
effective competition.
12. International agreements and monopolies
Australian Competition and Consumer Commission [24]
argues:
“There is no international agreement or treaty that requires countries
to impose import monopolies on copyrighted products, even though the
US has sought such an outcome. Indeed, such an agreement would be very
curious as it would be anti-free trade. It is also interesting to note
that the European Union itself has dropped bans on parallel importation
of CDs and books within the EU because they have been found to be inconsistent
with the Treaty of Rome”.
This view is supported by the lack of international consensus in favour
of copyright control over parallel importation in the TRIPs agreement
negotiations [25], the existence of regimes
around the world where there are no copyright parallel import restrictions
(such as Japan, Singapore, etc.), and there has been no action against
these countries by the World Trade Organisation [26].
Further, courts have stated that parallel import of intellectual property
are not inconsistent with international law [27].
However, this view was countered by other submissions before the Committee
[28]. Legal advice submitted to the Committee
by the Australian Recording Industry Association [29]
indicated there was no direct requirement for Australia to maintain parallel
import restrictions, but rather, a failure to maintain those restrictions
was likely to breach Australia's obligations under TRIPs - “This
potential is very real and certainly not fanciful”. This advice is
based on the words of Article 41 of the TRIPs agreement which provide
“Members shall ensure that enforcement procedures...are available
under their national laws so as to permit effective action against any
act of infringement of intellectual property rights covered by this [TRIPs]
agreement...” and Article 51 which sets out a requirement for border
measures to protect the copyright owner against “pirated copyright
goods” as defined in the TRIPs agreement.
Further, in the Explanatory Memorandum the Government concedes:
“[The] potential for the US, UK and some other EU members to take
retaliatory trade actions due to perceptions that intellectual property
protection is being weakened. This would be an extreme reaction given
the strength of intellectual property laws in Australia and increased
penalties for piracy in the proposed amendment” [30].
Responses to date from the US [31] suggest
retaliatory trade actions may be a reality. Although in a letter to the
Committee from the US Embassy in Australia, this is not assured:
“In the view of the US, elimination of the ability of the copyright
holder to control parallel importation of their work, is contrary to
the basic structure of international copyright protection where protection
within each country is granted by that country's laws and limited geographically
to its borders. Thus, a work enjoys a different set of rights in each
country, and acts outside of a country should not affect the protection
provided there. Any impact on consumer prices, other than from piracy,
would result from the `free ride' the parallel importer receives by
avoiding the investment risk, marketing costs and costs in the development
of the intellectual property.
The US maintains that price distorting practices in the manufacturing,
distribution, and retail industries that are based on anti-competitive
practices should be addressed through anti-competitive laws, rather
than through the unrelated act of lowering the level of protection provided
to the copyright holder. We urge Australia to maintain in law the current
right of copyright owners to control parallel importation of copyright
works, including for CD sound recordings.”
A number of submissions raised the concern that Australia was introducing
the Bill to remove parallel import restrictions, which would be lowering
the level of Australia's commitment to strong intellectual property protections
[32] while other nations maintained the restrictions
[33]. Ann Capling [34]
suggested copyright laws already existed to protect the interests of global
entertainment corporations and so it was not necessary to extend this
through an import and distribution monopoly. The Australian Consumers'
Association [35] stated:
“Recorded music is the most concentrated global media market.
The leading five companies, in order of global share, are PolyGram (19%),
Time Warner (18%), Sony (17%), EMI (15%) and BMG (13%). Estimates vary
on the combined sales of these companies as between 80 and 90% of global
markets”.
The Media Entertainment and Arts Alliance [36]
argue the Performances and Phonograms Treaty (1996) (the WPPT) provides
that signatories acceding to the WPPT should amend their national legislation
to provide performers and producers economic rights in recordings.
A significant issue in this debate which was not considered extensively
in the Committee processes is the role of international interests in this
debate. Ann Capling [37] touched the issue
saying:
“The US Trade Representative (USTR) has repeatedly maintained
that it is `gravely concerned about the impact on US industry and bilateral
relationship' if parallel importation is allowed.
This is an issue which is dear to the heart of the USTR, due to the
powerful and well-financed intellectual property lobby in the US, backed
by the global entertainment corporations, pharmaceutical companies,
information technology companies and the manufacturers of luxury products
such as perfume, clothing and jewellery
...[T]here seems to be an expectation on the part of the US authorities
that other countries should continue to make difficult domestic decisions
while the US, by sheer dint of its economic and political power, can
`do as I say, not as I do'“.
The PSA report [38] noted moves to trade liberalisation
through GATT are in conflict with measures which restrict import competition.
13. Cost of CDs
There is contentious debate about whether the removal of parallel import
restrictions will reduce the price of CDs. The Government suggests the
price will reduce, citing Bureau of Transport and Communications Economics
estimates of $1.60 to $3.00, Australian Competition and Consumer Commission
estimates of $3.00 to $10.00 [39], while other
organisations suggest there will be no changes [40].
The price outcome of the Government's proposal and those of its Opposition
are unclear, as the examples are variable and chosen to support the particular
arguments [41].
The PSA report [42] examined pricing extensively
in its inquiry and set out its findings on the price of sound recordings:
| Cost component |
Percentage of net sales (1989 figures) [43]
|
Percentage of retail price
|
| product cost |
20.8% |
12.6% |
| origination and recording costs |
2.5% + 1.6% (or 4.1%) |
2.5% |
| artists royalties including royalty advances |
23.6% |
14.3% |
| mechanical royalties |
9.6% |
5.8% |
| publicity, etc. |
11.9% |
7.2% |
| selling |
7.8% |
4.7% |
| distribution |
3.4% |
2.1% |
| administration |
9.4% |
5.7% |
| earnings before interest and tax |
9.4% |
5.7% |
| sales tax |
- |
12.1% |
| retail margin |
- |
27.5% |
The PSA report [45] was primarily concerned
with cassette tapes as the major component of sound recordings in Australia
at 56% of total sales in 1989, compared to CDs at 29% of total sales and
LPs at 15% of total sales (at page 5). Compared to other countries the
PSA found [46] Australian CD prices in 1989
were lower than prices in Canada, France, UK, Germany and Holland, while
the US and New Zealand had lower prices. The price differential between
Australia and the US was approximately $1 and $3 dollars on 30 April 1990
and 26 November 1990 respectively [47]. The
PSA report [48] stated:
“It is also the case that CD prices in Australia are generally
less out of line with other countries than the prices of cassettes and
vinyl...In the case of CDs, it has already been noted that relative
prices in Australia are more in line with overseas prices”.
The Australian Competition and Consumer Commission [49]
submission relied on the data presented before the Prices Surveillance's
Authority Inquiry into the Prices of Sound Recordings which the Australian
Competition and Consumer Commission claims found and recommended:
“the prices of CDs, records, etc., were excessive in Australia and
had been consistently higher than in overseas retail markets for many
years...
- for example, CD prices were 42% higher than the US and 56% higher
than in Germany;
- this is still the case whether the Australian exchange rate has been
`low' or `high';
...there would be substantial falls in prices if sound recordings released
on overseas markets could enter this country (except pirates)”.
A later submission from the Australian Competition and Consumer Commission
[50] set out recent data on top 20 CDs from
the US – “We are informed such prices are available to buyers
under normal commercial conditions such as credit worthiness and do not
include special new release discounts”. This data showed the imported
costs to retailers as less than $20 in Australian dollar values and that
the US was not necessarily the cheapest source of the sound recordings.
The Spicegirls CD was the highest priced CD in the list relied in this
analysis.
The Australian Competition and Consumer Commission [51]
contracted their findings with the Australian Music Retailers Association
[52] who found sound recordings could be purchased
nationally between $23.03 (and $29.95) in Australian dollars. The difference
are said to be the result of lower purchasing costs and tax effects and
it was claimed better deals will be available for CDs once the parallel
import restrictions have been removed [53].
The Australian Consumers' Association [54]
claim to have duplicated the Australian Competition and Consumer Commission's
research using the same methodology and found a $7 difference between
Australia and the US. The Australian Consumers' Association also presented
the price comparisons of CDs in different markets and concluded there
was on average a $6 difference compared with other countries [55].
The Australian Competition and Consumer Commission [56]
conclude:
“The striking feature of these international comparisons is that
prices in Australia have remained consistently higher than `best practice'
or competitive markets, such as the US...This persistent gap in relative
prices for sound recordings may at first seem puzzling, as prices for
internationally traded goods are usually expected to equalise over time.
However, this is simply explained in the Australian case by the fact
that there is no real import competition to drive prices down against
the fortunate holders of import monopolies”.
The Australian Consumers' Association [57]
expressed concerns about the use of monopoly powers to maintain high prices:
“The record companies use their monopoly powers to maintain profit
margins by setting the price for imported music higher that what the
price would be if we could import directly. Because imported music is
popular and there are no substitutes for any individual artist once
these have developed market pull, the big record companies will charge
as much as they can”.
The Australian Consumers' Association [58]
also suggested there may be price fixing arrangements. This is a matter
that must be investigated, and if the US Federal Trade Commission confirms
price fixing charges the matter will require immediate attention in Australia.
The Australian Competition and Consumer Commission presented comparisons
of Australian and US CD prices over a period December 1989 to December
1997 which showed consistently higher prices in Australia (claimed to
be between 33% and 42.3% higher in Australia compared to the US) [59].
Other submissions challenged this conclusion on the basis of additional
costs (such as Australian taxes) and other market factors affecting the
price comparison [60].
The Australian Record Industry Association [61]
state:
“Retail prices in Australia vary considerably and Top 40 titles
sell from $22 through to $29.95. The most common price points for Top
40 albums are $23.95 or $24.95 being the prices in the chain stores.
This didn't exist in the 1980s and together with the discounting from
the record companies shows the competitive nature of the market”.
The Australian Record Industry Association [62]
presented price comparisons showing Australia was a lower price ranked
country compared “to the main entertainment product countries”.
This submission [63] also suggested the key
price issues were, from its perspective:
(i) discounting makes price comparisons difficult;
(ii) the currency exchange rate affects prices significantly;
(iii) Australia's taxation scheme affects price significantly;
(iv) royalty rates affect (for example, the US has lower royalty rates
than Australia) and economies of scale affect price where large markets
having a price benefit, but once these factors are accounted for Australia
has similar prices to the US;
(v) price advantages from parallel imported copyright goods will be
from counterfeit, deleted or `fire sale' stock;
(vi) retail prices are adjusted by retailers to meet the circumstances
(such as loss of credit, sale or return, rebates, discounts, primary
promotion, etc.); and
(vii) lower wage rates and (effectively) non-existent royalty rates
affect prices.
The Australian Record Industry Association [64]
claimed:
“...40% of all album units sold at less than $20 retail and...70-75%
of full price are sold at $25 or less. This leaves only 15% of purchases
in the $25 to $30 range. At the time of the PSA Inquiry in 1990, new
release CDs sold for $27.95 and $28.95. Clearly then, prices have fallen”.
Before the Committee Ron Bewley [65] stated:
“I think, through no fault of any individual, it has been impossible
in this debate to work our which price we are talking about. There are
wholesale prices, there are retail prices and there are wholesale prices
with and without tax, with and without distribution, etc.”.
Ron Bewley [66] proffered the argument that
prices of a range of products in Australia compared to the US, such as
batteries, cassette tapes, CDs (top 40), CDs (full priced), and computer
discs, etc., were between 30 and 65% more expensive in Australia even
though there were no parallel import restrictions on some of these products.
His data also showed Twinings teas was 40% cheaper in Australia. He concluded:
“...this indicates that it is the retail sector and not high import
prices that are the central issue. The USA is a very big country and
economies of scale prevail. That this is a reasonable hypothesis is
shown...where the price of Twinings tea are compared. Tea is not popular
in the USA and is cheaper in Australia where it is common. Where these
products is actually sourced from is not the point. The US could buy
from Coles in Sydney and potentially save money if quantities were sufficient!”
A number of submissions have provided a breakdown of the costs incorporated
into the price of a CD:
| Component price |
Woolworths Limited [67] |
Phil Dwyer [68] |
AMRA [69] |
| manufacture |
$2 |
|
|
| sales tax |
$3 |
$3.25 |
|
| Distribution fee |
|
$0.33 |
$1.00 |
| Packaging deduction |
|
$4.44 |
|
| warehousing and distribution |
$2 |
|
|
| royalties |
$2 |
$1.65, $2.40 [70] |
|
| gross profit |
|
$9.28 |
|
| retail price |
$22 |
$29.95 |
$32.05, $33.78 [71] |
The International Managers Forum [72] concluded
CD prices were dependent on market size and overriding national economic
factors.
It was put to the Committee that increased competition would reduce prices
and that present prices were the result of monopoly rents [73].
Ron Bewley [74] provided an analysis of the
concentration of some Australian industries. This analysis relies on the
HHI (Hirschman-Herfindahl Index) [75] and sensitive
commercial information provided to Ron Bewley by the industry. The following
table sets out the comparisons either based on the HHI reported in the
PSA reports [76] or calculated on the basis
of data in the report appendix. The lower the number of 1/HHI the fewer
the number of equal sized firms. This data shows the sound recording industry
in Australia is not concentrated compared to other industries, some of
which (for example, cinema, tea and toothpaste) the Prices Surveillance
Authority [77] considered were sufficiently
competitive [78]:
| Industry |
Equivalent number of Equal Sized Firms |
| sound recordings |
8.2 |
| beer |
2.2 |
| biscuits |
2.3 |
| cinema |
3.0 |
| coffee |
1.9 |
| tea |
3.3 |
| toothpaste |
2.3 |
| cigarettes |
3.0 |
The Australian Music Retailers Association [79]
suggested foreseeable economic conditions was likely to see a price increase,
and they also state:
“Previous comparisons by the PSA of Australian prices with those
of other countries were done in the absence of any consideration of
different market conditions. There are other explanations of price differences
which have little to do with whether parallel importation is allowed
or not” [80].
The foreseeable economic conditions include, lack of incentive for local
suppliers to reduce wholesale prices, higher retail rent rates than other
countries, sound recordings are product driven and not price driven, and
economies of scale in other markets compared to the “small and sparse”
Australian market [81]. Further, other factors
such as marketing, merchandising, media and tour support are essential
elements in selling sound recordings [82].
The Australian Consumers' Association [83]
quoting Mike Nock noted that high priced CDs might be too expensive for
most wage earners so that they would be unlikely to make speculative purchases
and test out unestablished talent.
The Australian Consumers' Association [84]
also suggested that if the parallel import restrictions are not removed
the price of CDs is likely to rise by about $2.
The Southern Cross [85] suggested the other
option considered by the Government, namely voluntary price capping agreements,
had not been tested or adequately investigated as a means of lowering
prices.
14. Choice of CDs
The PSA report [86] provides evidence that
the six major recording companies [87] do not
provide a comprehensive range of specialist music. The Australian Competition
and Consumer Commission [88] also states:
“A major retailer recently reported to the Commission that only
40% of total titles are available to Australian consumers and the views
of Australian retailers suggests that the proportions are lower in many
specialist markets. The Commission notes that where independents have
attempted to import specialist music, they have faced legal challenge
from the majors”.
The Australian Music Publishers' Association and Australasian Mechanical
Copyright Owners' Society [89] accepted consumers
should be given every opportunity to access sound recordings and supported
industry co-operation to increase availability in Australia, including
through negotiated industry agreements [90].
The Australian Music Retailers Association [91]
state:
“AMRA does...believe there is at present urgent need to allow
retailers to legally import those CDs which cannot be supplied quickly
by copyright owners. To this end, AMRA has been negotiating with ARIA
for the past two years to reach such an industry agreement...The substance
of this submission is dependent upon the successful and immediate completion
of this agreement”.
The status of the industry agreement, known as the AAA Agreement, is
presently unclear. Submissions from various music industry groups [92]
refer to this imminent agreement. However, in the hearings the Australian
Competition and Consumer Commission [93] indicated
they had examined the agreement and sought legal advice which indicated
the agreement “raised serious Trade Practices Act [1974] questions”.
In response to the advice the Australian Recording Industry Association
[94] said they would review this advice and
the Australian Music Publishers' Association Limited [95]
renounced the agreement. The PSA report [96]
received no direct evidence of that the Australian Recording Industry
Association was engaged in anti-competitive activities in breach of the
Trade Practices Act 1974.
Shock Records Pty Ltd [97] noted:
“Whilst it is true that the multinational companies control recordings
that are not made available locally, this could easily be solved by
instituting a system whereby if a copyright holder did not release a
title locally within a given time period, that retailers would be allowed
to import it. This would also address the claims that the multinational
companies exercise monopolistic rights over their catalogues”.
The Australian Music Retailers Association [98]
believed the back catalogue was a great strength of the present industry
arrangements and suggested a consequence of relaxing parallel import restrictions
will result in a:
“...diminution ability to continue to provide the consumer with
the existing variety and depth of stock in music stores because of the
erosion of support offered by credit facilities, stock support, and
return arrangements with Australian record companies”.
The Australian Music Publishers' Association and Australasian Mechanical
Copyright Owners' Society [99] argued that
availability of sound recordings to Australian consumers was best achieved
by methods other than the Act or the Bill, assuming the availability of
sound recordings was a real problem.
It was noted that consumers always had access to any sound recording
through mail order and the Internet [100].
There appears to be some obscure music tastes which are not readily available
in Australia [101].
15. Free riding
“Free riding” are the actions of an agent who consumes a good
or service without paying the full market price for that good or service
[102].
The Australasian Performing Rights Association [103]
argued promotion, marketing, distribution, etc. requires an investment
which will benefit directly the later import of the sound recording by
another without the costs of promotion, marketing, distribution, etc.
- free-riding. Reducing the control over imports arguably reduce the potential
financial returns and the value of the property. This is argued to be
a disincentive to undertake the initial promotion, marketing, distribution,
etc. and will encourage import replacement.
The Australian Record Industry Association [104]
stated parallel imports would obtain substantial free rider benefits on
advertising and promotion by the copyright holder which would be a disincentive
to promote and expand the market. This was supported by data showing television
advertising of new release products ranged from $42 million in 1993 to
$84.8 million in 1997:
“Moreover, television advertised product will, in most cases,
account for approximately 50% of a large company's turnover. This of
course, defines why free-riding will be such a massive market failure
and an attractive prospect to opportunistic traders”.
The Australian Competition and Consumer Commission [105]
accepts free riding may be a problem:
“It should be recognised that while there are good arguments for
copyright providing an incentive for the creation and production of
sound recordings to overcome the free-rider problem and to guard against
piracy, these do not apply to the protection of the distribution
system against competition from legally produced recordings.”
16. Circumventing copyright laws
The Australian Copyright Council argued the Bill would allow the copyright
laws to be circumvented by [106]:
“The requirement is that the owner of the copyright in the sound
recording in the “original recording country”, or the “maker”
of the recording, consented to the making of the recordings. There
is no requirement that the owners of copyright in the songs recorded
consent to the copies being made. If an original recording is made
in a country with no copyright protection, the owners of copyright
in the songs recorded receive no income” [108];
“If an original recording is made in a country which has a copyright
law, but does not give copyright protection to foreign rights holders,
the owners of copyright in the songs recorded may receive no income.
For example, a karaoke recording made in Taiwan could be imported
without payment to the owners of copyright in the songs”;
The Australian Music Publishers' Association and Australasian Mechanical
Copyright Owners' Society [111] notes the
Bill would allow the importation of sound recordings which were not licensed
for retail sale, but rather another purpose entirely, such as sound recordings
manufactured royalty-free for promotional use.
Media Entertainment and Arts Alliance [112]
argues that importation of sound recording from non-WIPO countries could
undermine any laws passed in Australia according to the WPPT agreement
which would offer performers and producers economic rights in their recordings.
17. Onus of proof
To meet the industry concerns that parallel importation will allow a
greater potential for the importation of pirated copies of sound recordings
the Bill by maintaining the existing copyright owner's rights and shifts
the onus of proof to the defendant (such as the music retailer, etc.)
to establish that the copy that was imported is not a pirated copy [113].
The Australian Copyright Council [114] argues
the Bill will not change the onus of proof requirements of the Act because
the copyright owner would still have to prove each element of infringement.
The Australian Record Industry Association [115]
added the reverse onus would only apply in civil cases with the effect
that criminal cases were “unattainable”. Legal advice submitted
to the Committee by the Australian Recording Industry Association [116]
which stated:
“...copyright infringement by importation requires proof of at
least five elements:
1 ownership (or an exclusive licence) of copyright subsisting in the
CD;
2 importation of the CD into Australia;
3 that the importation was without the consent of the copyright owner
(or exclusive licensee);
4 that the importation was also for commercial purposes (as importation
for personal use is not an infringement); and
5 that the CD was a pirate copy or would have been a pirate copy if
made in Australia by the importer.”
Legal advice submitted to the Committee by the Australian Recording Industry
Association [117] suggested this regime was
unsatisfactory because:
(i) the plaintiff will have to prove the four factors plus “that
the defendant knew or ought reasonably to have know” that making
the CD in Australia would be infringing copyright;
(ii) this will be expensive and difficult;
(iii) the copyright owner will have to prove an element of the fifth
element (?);
(iv) the copyright owner will have to be sure the defendant can not
rebut the onus because there are serious sanctions for the plaintiff
if their claim is unsuccessful;
(v) legal action is slow and interlocutory relief which may be difficult
to establish; and
(vi) there is a likelihood courts will accept slight evidence from
the defendant, which will place the onus back on the plaintiff, because:
(a) the defendant will not be in a position to either prove or refute
the circumstances;
(b) circumstances outside the control of the copyright owner, such
as the passage of time or different legal requirements in different
jurisdictions, could lead to inferences against the plaintiff; and
(c) the reversal of the onus is a departure from the basic principles
of the common law.
18. Royalty payments
A range of royalties are available under the copyright laws in Australia.
These include:
(i) mechanical royalties - royalties payable to composers at 6.25%
of the retail price (which translates by industry agreement to 9.306%
of the published price to dealers;
(ii) print royalties - royalties payable on printed sheet music and
the licensing of lyrics; and
(iii) synchronisation royalties - royalties payable on works reproduced
in films, advertisements, videos and other audio-visual productions.
The Australian Record Industry Association [118]
suggested parallel importing would undermine royalty flows of local artists
and result in reduced investment in local artists and songwriters.
The Australasian Performing Rights Association [119]
argued removal of parallel import restrictions would make royalty payments
delayed or uncertain, and in some instances there would be no payments
at all [120]. This is a particular concern
to songwriters and composers as they rely on mechanical royalties collected
according to national legislation which varies across those countries,
and does not exist in other countries [121].
Australian Copyright Council [122] argued
that without parallel import restrictions recording are likely to be released
outside Australia first which means Australian composers and artists are
likely to receive lower royalties, the collection and accounting procedures
for royalties collected overseas are more difficult to administer and
monitor than in Australia and artists and composers would most likely
only be able to negotiate lower advances. The Australian Music Publishers'
Association and Australasian Mechanical Copyright Owners' Society [123]
argued that in Europe the royalty rates are similar to Australia, but
sub-publishers, collecting societies, withholding tax deductions, etc.,
Australian composers would receive less than the mechanical royalty rate
and there would be a considerable delay in payment, while in the United
States the different method of calculation means the final payment is
often lower, and in Asia there is either no royalty payable or there is
little or no infrastructure for royalty collection. A comparison of royalty
payments was set out by the Australian Music Publishers' Association and
Australasian Mechanical Copyright Owners' Society [124],
based on the assumptions the publisher controls all the works on the CD
and the published price to dealers is $18.00:
| Country |
Australia |
France |
United States |
Malaysia |
| Royalty payable |
$1.68 |
$1.37 |
$0.91 |
$0.57 [125] |
$0.29 |
Further, the verification and enforcement of collection in other nations
is likely to be difficult and often financially impractical [126].
It was claimed “these difficulties will be presented to the Australian
songwriter in relation to records sold in the Australian marketplace
and enjoyed by Australian consumers” [127].
Media Entertainment and Arts Alliance [128]
stated:
“Under the current system in Australia, artists and publishers
generally hold the copyright in a recording and the exclusive right
to reproduce a work in Australia and to control importation of their
records in Australia. The right to reproduce in a territory is the focal
point for negotiating various streams of income for the rights owners
in recordings. Lifting restrictions on parallel importations or records
shall undermine the rights owners ability to profit from those rights
and markedly reduce the value of their property. The flow on effect
of this we presume would be that the artist loses out in two ways, first
from reduced advances on their future work from the majors and secondly
by lost income from royalties on recordings reproduced in countries
with lesser requirements than Australia”.
The Australian Music Publishers' Association and Australasian Mechanical
Copyright Owners' Society [129] submitted
that current international practice was for mechanical royalties to be
paid in the country of sale, except where there were inadequate collection
mechanisms. Agreements are in place in Australia so that products manufactured
in Australia can “be exported royalty-free on the basis that the
country of import licences and accounts for the mechanical royalty”
[130]. It is claimed such a scheme could not
continue if the parallel import provisions were removed for sound recordings.
The concerns expressed by the representative organisations were also
expressed by composers/authors, performers, small businesses, publishers
[131].
The issue of remaindered copies of sound recordings brought into Australia
was argued to reduce the value of sound recordings as royalty payments
are significantly reduced [132], and this
is likely to affect the future income of legitimate rights owners [133].
Shock Records Pty Ltd [134] claimed:
“The market will be flooded with remaindered and deleted stock
(known as `cut-outs'), which are readily available on the world market,
and on which no artists royalties are payable”.
The Australian Consumers' Association [135]
noted:
“There are two serious weaknesses to the `import of deletion'
theory:
1 The copies are unlikely to be imported in the same period that the
Australian market is active - ie the first weeks after an album is released.
The artist should collect local royalties if their Australian version
is released before or at the same time is the international version;
and
2 There would not be any commercial sense in shipping large quantities
of a product that doesn't sell to Australia. This would simply be compounding
the original bad decision”.
The Australian Consumers' Association [136]
suggested:
“...most Australian musicians are part time or derive the greater
part of their income from live performance. They do not rely on mechanical
royalties for their livelihood - only 261 full time composers can claim
that status”.
19. Piracy
Piracy is generally the reproduction of a copyright work without the
permission of the copyright owner. The Attorney General's Department [137]
provided a more susinct description of piracy:
“Copyright piracy is usually used to refer to unauthorised commercial
reproduction and distribution, or intended distribution, of material
in which copyright subsists.”
Australian Competition and Consumer Commission [138]
argued:
“The ACCC is unaware of any significant problem of pirated CDs
in Australia now and sees no reason why a problem would emerge in the
future.”
Others argued piracy was a significant concern, and likely to be of greater
concern if parallel import restrictions were relaxed [139].
This may also reflect the Government's inclusion of increased penalties
in the Bill [140], and the acknowledgment
by the Government that there are industry concerns about a greater potential
for piracy without parallel import restrictions [141].
Further, in a letter to the Committee [142]
the US Embassy in Australia suggested that estimates of the capacity of
China, Hong Kong, Malaysia, Taiwan and Macao was 1,070 million CDs in
all formats while the legitimate demand for output from these countries
was only 79 million CD in all formats, suggesting a considerable piracy
potential.
Attorney General's Department [143] suggested
any risk from importation of pirated copies was countered by:
(i) the specific market conditions in Australia;
(ii) measures in the Bill increasing penalties for piracy; and
(iii) global actions to reduce international piracy.
The Australian Record Industry Association [144]
argued uncontrolled importing provided “ideal conditions” for
the bringing in pirated materials which would have the effect of big losses
across the Australian music industry. Further, the Australian Record Industry
Association [145] claimed the Australian Customs
Service was presently rarely able to distinguish between legitimate and
imported sound recordings and pirated materials and would not have “a
snowflake's chance in hell” if importation restrictions were allowed
[146].
The Music Industry Piracy Investigations [147]
is an anti-piracy unit funded by the Australian Recording Industry Association
and Australasian Mechanical Copyright Owners' Society to conduct investigative,
preventative and educational activities into piracy of sound recordings
and musical works, counterfeiting, bootlegging, intellectual property
fraud, and to provide timely and professional advice and intervention
[148]. This submission stated, in summary:
(i) copyright protection without parallel import restrictions will
become more difficult and expensive;
(ii) sound recording piracy is a sophisticated global industry with
growing evidence of involvement of organised criminals;
(iii) sound recording piracy it is difficult to detect;
(iv) at present detection and prosecution of piracy in Australia by
the Australian Customs Service and the Australian Federal Police is
limited and slow with considerable cost to the music industry;
(v) without parallel import restrictions there is an acknowledged increased
burden on the Australian Customs Service and the Australian Federal
Police and the incidents of piracy will increase; and
(vi) increased penalties for piracy are unlikely to be a deterrent
as inherent defects in the proposed legislation will make prosecution
unlikely.
The Music Industry Piracy Investigations [149]
submissions indicted four forms of copyright fraud, namely:
(i) counterfeiting - unauthorised copying of the sound recording and
the artwork;
(ii) piracy - unauthorised copying of the legitimate sound recording
with unauthorised artwork;
(iii) bootlegging - unauthorised copying of live music or supposedly
unauthorised sound recordings; and
(iv) ostensibly legal but bogus licensed - offender claims a valid
licence agreement for copying sound recording.
The Music Industry Piracy Investigations [150]
states:
“The result of removing parallel importation rights on the Australian
market are predictable. The public interest cannot be favoured by creating
a situation (we note inconsistent with world standards) where piracy
would be encouraged because detection and law enforcement would be rendered
in a “practical” sense useless. We estimate that piracy levels
would achieve no less that 15-20% in Australia if parallel import rights
were repealed”.
The Music Industry Piracy Investigations [151]
indicated that the process of detecting and prosecuting pirated ( and
other) material would be onerous and made more onerous by the removal
of parallel import restrictions:
“If parallel import laws were repealed identifying and prosecuting
illicit product becomes in a practical sense impossible as would obtaining
injunctions. The mere presence of stocks or recordings in retail not
made or authorised by the Australian copyright holder would not prima
facie mean anything other than an import has taken place. In order to
ascertain whether or not the import was illicit, the country of manufacture
would need to be known as well as other details - usually not offered
or known by the importer. Once the country of manufacture is known and
a technical test has been made to indicate a recording is illicit, the
prosecution case can only proceed if the Australian copyright owner
can produce to the satisfaction of Australian courts expert witnesses
from the country of manufacture as to the law in that country and further
witness as to the facts relating to the stocks in that country. In this
environment many months (possibly years) will transpire before these
facts are known (if at all). More importantly even if they were ascertained
quickly the ability to obtain an interlocutory would be remote because
the Australian copyright owner would not be confidant that these facts
would be accepted by an Australian court of law and the risk of providing
affidavits strong enough to obtain such an injunction will be too high
given the copyright owner has to give a cross-undertaking as to damages
in the event that he cannot prove his case for technical or other reasons.
The damages undertaking is a requirement to cover payment to the alleged
pirate trader for their damages in the event that the case is not resolved
in the copyright owner's favour. This would involve many hundreds of
thousands of dollars in each case.
With injunctions effectively precluded, final trial is the only available
tool and as we have said about this would take four or five years and
would involve dealing in other countries' laws. Equally because of the
same difficulties in committing to affidavits attesting to facts within
the copyright owner's reasonable and certain knowledge, the obtaining
of police assistance to counter piracy trade would be precluded.
That is, a search warrant is unlikely to be provided to the police
to search and seize under criminal provisions for the same reasons as
expressed above”.
Further, it was argued by Australasian Performing Rights Association
[152] that increasing penalties for pirated
subject matter was unlikely to be satisfactory because of the increased
difficulty of detection [153]:
“If copies of a CD, the copyright in which is owned by a record
company in Australia, appear in a record store and are known by the
record company not to have been sold by it to that store, then the record
company may currently rely on the parallel importation right to require
removal of those CDs from sale. Without that right, there arises the
potentially enormous issue of determining, on the basis of physical
examination, whether recordings in the market place are in fact pirated
or not. The very real questions that arise are:
(a) Who is to do this?;
(b) How is the determination to be made?;
(c) How are circumstances and facts that arose in a foreign country
to be established in Australia as part of a threshold determination,
let alone be proven in an Australian court?” [154].
The Australian Consumers' Association [155]
accepted that piracy was a significant concern and without strong piracy
protection there was a reduced incentive to promote new music. However,
they submitted that a reduction in CD prices would reduce the incentive
for pirates. Further, this submission questioned the `very thin' evidence
provided to the Committee which alleged a serious piracy problem faced
by the Australian music industry [156]. The
Australian Consumers Association [157] proposed
a strategic approach to piracy:
- Establishment of better cooperation between international law enforcement
bodies that is transparent to the record industry.
- A review of mechanisms for the transfer of `intelligence', or information
about piracy, to law enforcement agencies from all levels of the music
industry and from consumers. Australia can play a role in attacking
the source of piracy, and our relatively widespread access to the Internet
- particularly among young on-line consumers - could facilitate using
digital technology as a creative, transparent enforcement tool.
- Investigation of documentation administrative practices within the
import distribution to see how detection of pirated music can be improved
and streamlined. Tightening and adjustment of controls at the point
of entry into the country can make it more difficult for pirated material
to enter the Australian market.
- Training of law enforcement officers, retailers and consumers in the
detection of illicit music. Investment in an educative program may produce
more success - both in detection and as a deterrent - in stopping piracy.
From the evidence presented to the Committee, the current approach of
industry does not seem to have produced any results.
- Examine corporations law to see whether some of the alleged difficulties
in identifying principals of Australian companies responsible for importing
illicit CDs can be more effectively pursued. Legal issues for combating
this particular form of organised crime should be scoped. For example
are there particular ways that we can deal with `repeat offenders'?
What big regulatory sticks could be designed if more participative enforcement
fails in certain circumstances?”.
Australian Record Industry Association [158]
made a prediction about the consequences of removing parallel import restrictions:
“If the Bill is passed, Australia will see a plethora of `alternative
retail' outlets selling dumped, deleted and counterfeit CDs. These outlets
will rely on the clumsiness of the law. This will be a repeat of what
happened here in 1993 when a loophole was found in the law allowing
bootlegs (unauthorised copies of live performances) to be made and sold
in Australia. Millions were sold. Legitimate retailers were hurt. No
royalties were paid”.
The Attorney General's Department [159] suggested
technology was evolving to make the detection of piracy easier, including:
(i) the International Standard Recording Code (ISRC) information included
on most legitimate CDs as well as management information such as an
industry standard numbering system;
(ii) the Digital Media Management in the European Music Sector (MUSE)
which includes the embedding of an inaudible, indelible signal which
remains in the sound recording following recording, stamping, etc.;
and
(iii) other forms of “watermarking”.
In hearings, the Australian Customs Service [160]
indicated they had no plans to change their “normal order enforcement
operations” [161] to meet the asserted
increased pirated materials that might enter Australia or that pirated
material would increase [162] with passage
of the Bill. The Australian Customs Service [163]
also noted there had only been two (2) notice of objection under the Act
lodged and that even though there was no power to initiate investigations
under the Act there was power to take action under the Commerce (Trade
Descriptions) Act 1905. There was an indication that the sheer amounts
of possible objections might be difficult to deal with [164].
It was also apparent that to effectively detect piracy the Australian
Customs Service relied on intelligence from the industry [165].
To Part 3 of the Democrat's Dissenting Report
Footnotes
[1] see Copyright Amendment Bill (No 2)
1997, Explanatory Memorandum, at page 12.
[2] Prices Surveillance Authority, Report No
35, 13 December 1990, at page 29.
[3] Australian Record Industry Association,
Submission 153, at page 3.
[4] Australian Competition and Consumer Commission,
Submission 159, at page 1. See also Australian Chamber of Commerce and
Industry, Submission 165 at page 1; Mr Christopher Lyndon-Gee, Submission
126, at page 2-3; Woolworths Limited, Submission 160, at page 2; Sanity,
Submission 154, at page 1; Australian Consumers' Association, Submission
166A, at page 18.
[5] Australian Consumers' Association, Submission
166A, at page 36; Woolworths Limited, Submission 160, at page 2; Sanity,
Submission 154, at page 1.
[6] Australian Copyright Council, Submission
164, at pages 4-7.
[7] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at pages 19-23.
[8] Australasian Performing Rights Association,
Submission 145, at page 5.
[9] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at page 19.
[10] Australasian Performing Rights Association,
Submission 145, at page 5.
[11] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at page 16.
[12] International Managers Forum (Australia)
Ltd, Submission 171, at page 6.
[13] J Quiggin, Submission 175, at page 1.
[14] Copyright Law Review Committee, The
importation provisions of the Copyright Act 1968, September 1988,
at page 1.
[15] Prices Surveillance Authority, Report
No 35, 13 December 1990, at page 174.
[16] Prices Surveillance Authority, Report
No 35, 13 December 1990, at page 2.
[17] Prices Surveillance Authority, Report
No 35, 13 December 1990, at page 19.
[18] Prices Surveillance Authority, Report
No 35, 13 December 1990, at page 150.
[19] Prices Surveillance Authority, Report
No 35, 13 December 1990, at pages 150-173.
[20] see Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at Attachment 2.
[21] UK Monopolies and Mergers Commission,
The supply of recorded music, London, 14 April 1994.
[22] UK Monopolies and Mergers Commission,
The supply of recorded music, London, 14 April 1994; see also Australian
Record Industry Association, Submission 153, at Attachment 2; Australian
Music Publishers' Association and Australasian Mechanical Copyright Owners'
Society, Submission 147, at appendix 3
[23] the Australian Competition and Consumer
Commission argue that this price comparison was carried out at a time
when the UK pound sterling was suffering devaluation and that their reported
price differentials would have been doubled to around 20% if the long
term perspective had been taken on the exchange rate: Australian Competition
and Consumer Commission, Submission 159, at page 6.
[24] Australian Competition and Consumer Commission,
Submission 159, at page 3; see other examples - submissions by Woolworths
Limited, Submission 160, at page 2; Australian Consumers' Association,
Submission 166A, at page 7; Attorney General's Department, Submission
180, at page 1; A Oxley, Committee Hansard, 6 March 1998, at L&C 209.
[25] Attorney General's Department, Submission
180, at page 6.
[26] see Australian Consumers' Association,
Submission 166A, at page 7.
[27] For example, BBS Kraftfahrzeug Technik
AG v Kabushiki Kaisha Racimes Japan, Case No Heisei 7(wo) 1988, decided
1 July 1997.
[28] for example, A Capling, Submission 168,
at page 4; Australian Record Industry Association, Submission 153, at
page 10.
[29] Australian Recording Industry Association,
Submission 153A, at page 3.
[30] Copyright Amendment Bill (No 2)
1997, Explanatory Memorandum, at page 6.
[31] see US Trade Representative Press Release
97-93 of 27 October 1997: “Should such legislation be passed into
law by the Australian Parliament we would have no choice but to review
our options for responding to this reduction in the level of copyright
protection afforded US copyright interests in Australia”; further,
through domestic laws the US may take unilateral action: see A Capling,
'Trade in intellectual property rights', in B Hocking and S McGuire (eds),
Trade Politics: Environments, Issues, Actors and Processes (Routledge,
London, forthcoming), in A Capling, Submission 168, at page 5.
[32] see for examples, Australasian Performing
Rights Association, Submission 145, at page 5; Australian Music Publishers'
Association and Australasian Mechanical Copyright Owners' Society, Submission
147, at page 19.
[33] see for examples, Australian Music Publishers'
Association and Australasian Mechanical Copyright Owners' Society, Submission
147, at page 15; Australian Record Industry Association, Submission 153,
at page 10.
[34] A Capling, Submission 168, at page 4.
[35] Australian Consumers' Association, Submission
166A, at page 8.
[36] Media Entertainment and Arts Alliance,
Submission 170, at page 8.
[37] A Capling, Submission 168, at page 4.
[38] Prices Surveillance Authority, Report
No 35, 13 December 1990, at page 36.
[39] Copyright Amendment Bill (No 2)
1997, Explanatory Memorandum, at page 5.
[40] see Sanity, letter to Committee dated
16 February 1998; Australian Music Industry Network, Submission 151, at
page 2.
[41] see for example, Senate Hansard, 30 October
1997, at page 8478.
[42] Prices Surveillance Authority, Report
No 35, 13 December 1990, at pages 75-105.
[43] from Table 5.3, Prices Surveillance Authority,
Report No 35, 13 December 1990, at page 76.
[44] from Figure 5.2, Prices Surveillance Authority,
Report No 35, 13 December 1990, at page 78.
[45] Prices Surveillance Authority, Report
No 35, 13 December 1990, at page 5.
[46] Prices Surveillance Authority, Report
No 35, 13 December 1990, at page 192, Appendix J.
[47] comparing Australia and New Zealand on
the same dates there was approximately $1 difference.
[48] Prices Surveillance Authority, Report
No 35, 13 December 1990, at pages 83 and 86 respectively; note the discussion
about price comparisons over time where it is claimed by the Prices Surveillance
Authority that in the US between 1985 and 1989 the average retail price
fell 68% while in Australia between 1987 and 1989 the weighted average
retail price fell 6.5% (at page 94).
[49] Australian Competition and Consumer Commission,
Submission 159, at page 4.
[50] Australian Competition and Consumer Commission,
Submission 159A, at pages 2-4.
[51] Australian Competition and Consumer Commission,
Submission 159A, at pages 3-4.
[52] Australian Music Retailers Association,
Submission 150, at page 5.
[53] Australian Competition and Consumer Commission,
Submission 159A, at page
[54] Australian Consumers' Association, Submission
166A, at page 33.
[55] Australian Consumers' Association, Submission
166A, at page 34.
[56] Australian Competition and Consumer Commission,
Submission 159, at page 4.
[57] Australian Consumers' Association, Submission
166A, at page 12.
[58] Australian Consumers' Association, Submission
166A, at page 12.
[59] Australian Competition and Consumer Commission,
Submission 159, at Appendix 3.
[60] see for example, Australian Music Retailers
Association, Submission 150, at pages 7-8; Country Music Association of
Australia, Submission 48, at pages 14-17; Australian Record Industry Association,
Submission 153, at page 3;
[61] Australian Record Industry Association,
Submission 153, at page 3.
[62] Australian Record Industry Association,
Submission 153, at page 5 and Attachment 4.
[63] Australian Record Industry Association,
Submission 153, at pages 5-6.
[64] Australian Record Industry Association,
Submission 153, at page 14.
[65] R Bewley, Committee Hansard, Tuesday 3
February 1998, at L&C 22.
[66] R Bewley, Committee Hansard, Tuesday 3
February 1998, at L&C 24.
[67] Woolworths Limited, Submission 160, at
page 1; S Lewis, Australian Financial Review, 18 February 1998, at page
3 reported concern by Adrian Fitz-Allen of Sony Music Entertainment (Australia)
Limited that data provided to the Committee may have been wrong, because
the Woolworths submission “contained incorrect information on the
actual cost components of sound recordings”; see also PolyGram Pty
Ltd, letter to Committee, 20 February 1998 and Sony Music Entertainment
(Australia) Limited, letter copied to Committee, 6 February 1998.
[68] P Dwyer, Submission 176, at page 2.
[69] Australian Music Retailers Association,
Submission 150, at page 7.
[70] this is mechanical royalties (9.3% of
PPD) and artist royalties (18% of PPO less packaging) respectively.
[71] Standard full and premium release prices
respectively.
[72] International Managers Forum (Australia)
Ltd, Submission 171, at page 7.
[73] Australian Competition and Consumer Commission,
Submission 159, at page 4.
[74] R Bewley, Submission 187, at page 2.
[75] The HHI is the “sum of the squared
market shares and so is bounded above by one in the case that there is
only one firm with a share of one. If there are two firms of equal size,
HHI = 0.52 = 0.5, three firms of equal size produces HHI = (1/3)2 + (1/3)2
= (1/3)2, etc.. Thus, the inverse of HHI, (ie. 1/HHI) is interpreted as
the equivalent number of firms of equal size that has the same market
concentration as the industry in question”: R Bewley, Submission
187, at page 2.
[76] Prices Surveillance Authority, Report
No 35, 13 December 1990, at page 193 for a listing of inquiry reports.
[77] see R Bewley, Submission 187, at page
3.
[78] R Bewley also note there were other indicators
of competition, such as barriers to entry, substitutability, brand loyalty
and choice: R Bewley, Submission 187, at page 3.
[79] Australian Music Retailers Association,
Submission 150, at pages 5 and 9; this submission also suggests there
is an ongoing price war in the US market which has driven down prices,
but in the process is causing an industry crisis, at page 7.
[80] Australian Music Retailers Association,
Submission 150, at page 6.
[81] Australian Music Retailers Association,
Submission 150, at page 9.
[82] Australian Music Retailers Association,
Submission 150, at page 9.
[83] Australian Consumers' Association, Submission
166A, at page 21.
[84] Australian Consumers' Association, Submission
166A, at page 31.
[85] Southern Cross, Submission 173, at page
3.
[86] Prices Surveillance Authority, Report
No 35, 13 December 1990, at pages 140-144; see also Australian
Consumers' Association, Submission 166A, at pages 10 and 13;
[87] Australian Competition and Consumer Commission,
Submission 159, at page 6 notes the ABS Business of Music 1995-96 publication
as referring to seven largest businesses in the music industry as reflecting
the recent entry of MCA/Universal into the Australian market.
[88] Australian Competition and Consumer Commission,
Submission 159, at page 6; Australian Consumers' Association, Submission
166A, at page 13 states “Even though 60-70% of titles may be theoretically
available - ordering them through the indent service is slow, cumbersome
and usually expensive”.
[89] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at page 11.
[90] also supported by other submissions: for
example, International Managers Forum (Australia) Ltd, Submission 171,
at page 7.
[91] Australian Music Retailers Association,
Submission 150, at page 3; see also Australian Record Industry Association,
Submission 153, at page 8.
[92] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at page 11; Australian Record Industry Association, Submission
153, at page 8; Australian Music Retailers Association, Submission 150,
at page 10.
[93] Australian Competition and Consumer Commission,
Committee Hansard, 3 February 1998, at L&C 15-16.
[94] Australian Record Industry Association,
Committee Hansard, 3 February 1998, at L&C 38-39.
[95] Australian Music Publishers' Association
Limited, Committee Hansard, 4 February 1998, at L&C 83.
[96] Prices Surveillance Authority, Report
No 35, 13 December 1990, at page 56.
[97] Shock Records Pty Ltd, Submission 90,
at page 5.
[98] Australian Music Retailers Association,
Submission 150, at page 5.
[99] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at page 11.
[100] M Davison, Submission 81, at page 4.
[101] C Lyndon-Gee, Submission126, at page
2; Committee Hansard, 3 February 1998, at pages L&C 49-51; it is noteworthy
that Christopher Lyndon-Gee was more interested in wide dissemination
of his music than royalties.
[102] Prices Surveillance Authority, Report
No 35, 13 December 1990, at page ix.
[103] Australasian Performing Rights Association,
Submission 145, at page 3.
[104] Australian Record Industry Association,
Submission 153, at page 1.
[105] Australian Competition and Consumer
Commission, Submission 159, at page 2.
[106] Australian Copyright Council, Submission
164, at pages 6-7.
[107] see also Australian Music Publishers'
Association and Australasian Mechanical Copyright Owners' Society, Submission
147, at page 17, which also notes countries with ineffective copyright
laws;
[108] see also Media Entertainment and Arts
Alliance, Submission 170, at page 8.
[109] see also Australian Music Publishers'
Association and Australasian Mechanical Copyright Owners' Society, Submission
147, at page 16, which notes the licence may be a statutory or compulsory
licence, such as that set out in Section 55 of the Act.
[110] see also Australian Music Publishers'
Association and Australasian Mechanical Copyright Owners' Society, Submission
147, at page 17; Prices Surveillance Authority, Report No 35, 13 December
1990, at page 158, notes that it would be “unfair competition”
if imports were allowed from a country where copyright had expired.
[111] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at page 18.
[112] Media Entertainment and Arts Alliance,
Submission 170, at page 8.
[113] Copyright Amendment Bill (No. 2)
1997, second reading speech, House Hansard, 20 November 1997, at page
10971.
[114] Australian Copyright Council, Submission
164, at page 7; see also Australian Record Industry Association, Submission
153, at pages 1 and 8.
[115] Australian Record Industry Association,
Submission 153, at page 8.
[116] Australian Recording Industry Association,
Submission 153A, at page 9.
[117] Australian Recording Industry Association,
Submission 153A, at page 9.
[118] Australian Record Industry Association,
Submission 153, at page 1.
[119] Australasian Performing Rights Association,
Submission 145, at page 3; see also Media Entertainment and Arts Alliance,
Submission 170, at page 8; Country Music Association of Australia, Submission
48, at pages 4-8;
[120] Media Entertainment and Arts Alliance,
Submission 170, at page 5, which notes that performers would receive no
attribution in recordings.
[121] Australian Copyright Council, Submission
164, at pages 4-5.
[122] Australian Copyright Council, Submission
164, at pages 4-5.
[123] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at pages 8-9; this submission was supported by International Managers
Forum (Australia) Ltd, Submission 171, at page 6.
[124] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at page 10.
[125] The price if the record was subject
to a controlled composition clause.
[126] see for example, Australasian Performing
Rights Association, Submission 145, at page 3.
[127] Australasian Performing Rights Association,
Submission 145, at page 4.
[128] Media Entertainment and Arts Alliance,
Submission 170, at page 9.
[129] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at page 11.
[130] Australian Music Publishers' Association
and Australasian Mechanical Copyright Owners' Society, Submission 147,
at page 11.
[131] see Country Music Association of Australia,
Submission 48, at page 3; composers/authors and songwriters - M
Irik, Submission 1, at page 3; A Bressanelli, Submission 3, at page 1;
H Sea, Submission 4, at page 1; T Gaze, Submission 6, at pages 1-2; P
Pompor, Submission 7, at pages 1-2; Moonlight Cactus Music, Submission
8, at page 1; W Porter, Submission 9, at page 1; N Buitenhuis, Submission
10, at page 1; D Ashdown, Submission 11, at page 1; C Hodson, Submission
12, at page 1; T Hall, Submission 13, at page 1; P Brady, Submission 14,
at page 1; P Donovan, Submission 15, at page 1; P Fitz-Patrick, Submission
16, at page 1; W Moeller, Submission 17, at pages 1-2; A Thompson, Submission
18, at page 1; Screamfeeder, Submission 19, at pages 1-2; E Hargreaves,
Submission 21, at pages 1-2; G Rodger, Submission 22, at page 1; J Fielding,
Submission 23, at page 1; A Adair, Submission 24, at page 1; A Tomlin,
Submission 25, at page 1; A Wilson, Submission 26, at page 1; R Dryden,
Submission 27, at page 1; J Harris, Submission 28, at page 1; L Macpherson,
Submission 30, at pages 1-2; R Bulpin, Submission 33, at pages 1-2; N
Roberston, Submission 35, at pages 1-3; M Hyde, Submission 36, at page
1; G Shearston, Submission 37, at pages 1-2; K Auldist, Submission 40,
at page 1; J Aschmann, Submission 41, at pages 1-2; P Borradaile, Submission
42, at page 1; C Young, Submission 43, at page 1; W Menz, Submission 44,
at page 1; M Gowen, Submission 45, at page 1; A Wrenn, Submission 46,
at page 1; D Eadie, Submission 51, at page 1; J Ley, Submission 52, at
page 1; P Campbell, Submission 53, at pages 1-2; E Hughes, Submission
54, at page 1; A Ghita Prey, Submission 55, at page 1; D Veall, Submission
56, at pages 1-2; K Francis, Submission 57, at page 1; T Johnson, Submission
58, at page 1; R Kimberley, Submission 59, at page 1; K McKenzie, Submission
61, at page 1; S Foster, Submission 62, at pages 1-3; C Coulouris and
M Azzopardi, Submission 63, at page 1; R Stagg, Submission 64, at pages
1-2; V Prtenjaca, Submission 65, at pages 1-2; J Watson, Submission 69,
at pages 1-2; R Edwards, Submission 70, at page 1; F Honeyman, Submission
71, at page 1; S Meyers, Submission 72, at page 1; S Hampsey, Submission
73, at page 1; P Harvey, Submission 74, at page 1; K Lloyd, Submission
75, at page 1; C Shine, Submission 76, at page 1; B White, Submission
77, at pages 1-2; K Hunt, Submission 80, at page 1;J Litchfield, Submission
85, at pages 1-2; M Thomas, Submission 86, at page 1; G Hamilton, Submission
88, at pages 1-3; O Waters, Submission 91, at page 1; R Saunders, Submission
92, at page 1; J Cope, Submission 93, at page 1; S Harris, Submission
94, at page 1; P McGowan, Submission 95, at page 1; M Hart, Submission
97, at page 1; B Hart, Submission 98, at page 1; N Downey, Submission
99, at page 1; B Mackney, Submission 100, at page 1; C Newsome, Submission
103, at page 1; S Bester, Submission 104, at page 1; G Smith, Submission
105, at pages 2-4; S Barnes, Submission 109, at pages 1-3; L O'Neill,
Submission 111, at page 1; R Wilson, Submission 113, at pages 1-2; J Campano,
Submission 115, at pages 1-2; D Johnson, Submission 118, at page 1; P
Guazzelli, Submission 121, at pages 1-2; Society of Australian Songwriters,
Submission 131, at pages 1-2; The Love Dogs, Submission 132, at pages
1-2; E McCusker, Submission 133, at page 2; S Mancuso, Submission 134,
at pages 1-2; R Carpenter, Submission 135, at pages 2-3; C Lewis, Submission
136, at page 1; S McGlaughlin, Submission 139, at page 1; P Farnan, Submission
146, at pages 1, 6-9 and 12; B McMullen, Submission 155, at page 1; D
Sciacca, Submission 156, at page 1; Floodboy, Submission 157, at page
1; M Szabo, Submission 161, at page 1; M Woodward, Submission 162, at
page 1; Tamworth Songwriters' Association Inc., Submission 163, at pages
1-2; P Proud, Submission 38, at page 1; P Bennett, Submission 39, at page
1; J Allan, Submission 49, at page 1; H Poulsen, Submission 50, at page
1; J Raglus, Submission 60, at page 1; D Dee, Submission 66, at page 1;
Brenton Manser, Submission 79, at page 1; E Bogle, Submission 84, at pages
1-2; A Pool, Submission 96, at page 1; A Bloke, Submission 107, at page
1; P Sculthorpe, Submission 108, at page 1; E Duemin, Submission 114,
at pages 1-2; Nightlight Music Group Pty Ltd, Submission 120, at page
3; G Macainsh, Submission 123, at page 2; J Gronow, Submission 124, at
page 1; C Kenna, Submission 141, at page 1; Australian Music Industry
Network, Submission 151, at page 10; G Mack, Submission 158, at page 1;
F Horne, Submission 169, at pages 1-3; E Hawke, Submission 174, at page
1; D Holmes, Submission 183, at page 1 - small companies - Streetwise
Music Australia Pty Ltd, Submission 20, at pages 1-2; London Music Group,
Submission 34, at page 1; R Jeans, Submission 68, at pages 1-2; P Cussen,
Submission 112, at page 1; Larrikin Music Publishing Pty Ltd, Submission
117, at page 2; Dryden Music, Submission 22, at page 1; Roadrunner Records,
Submission 128, at page 1; Rajon Entertainment Pty Ltd, Submission 140,
at pages 1-2 - music publishers - Boosey & Hawkes, Submission
47, at pages 1-2; Rondor Music (Australia) Pty Ltd, Submission 78, at
pages 1-2; MCA Music Publishing, Submission 89, at pages 1-2; Warner/Chappell
Music Australia Pty Ltd, Submission 106, at pages 1-2; Caama Music, Submission
110, at pages 1-2 -others - P Maxian, Submission 87, at page 1;
M Lass, Submission 101, at pages 1-7; Songlines Music Aboriginal Corporation,
Submission 119, at page 1; Australian Songwriters Association Inc., Submission
137, at page 1; Mushroom Music Pty Ltd, Submission 148, at pages 2-3;
Mushroom Records Pty Ltd, Submission 172, at page 2; South Australian
Music Industry Association, Submission 181, at page 3; Musicians' Union
of Australia, Submission 182, at page 3.
[132] see for example, Australian Record Industry
Association, Submission 153, at page 39.
[133] Media Entertainment and Arts Alliance,
Submission 170, at page 9.
[134] Shock Records Pty Ltd, Submission 90,
at page 3.
[135] Australian Consumers' Association, Submission
166A, at page 22.
[136] Australian Consumers' Association, Submission
166A, at page 21.
[137] Attorney General's Department, Submission
180, at page 7.
[138] Australian Competition and Consumer
Commission, Submission 159, at page 4; see also Ann Capling, Submission
168, at page 3; J Quiggin, Submission 175, at page 4.
[139] Australasian Performing Rights Association,
Submission 145, at page 4; Australian Music Publishers' Association and
Australasian Mechanical Copyright Owners' Society, Submission 147, at
pages 23-26; Country Music Association of Australia, Submission 48, at
page 9; Australian Record Industry Association, Submission 153, at pages
7-8; Boosey & Hawkes, Submission 47, at page 1;
[140] see Australasian Performing Rights Association,
Submission 145, at page 4.
[141] Copyright Amendment Bill (No. 2) 1997,
second reading speech, Hansard, 20 November 1997, at page 10971.
[142] US Embassy, 4 March 1998.
[143] Attorney General's Department, Submission
180, at page 1.
[144] Australian Record Industry Association,
Submission 153, at page 1.
[145] Australian Record Industry Association,
Submission 153, at page 8.
[146] see also Boosey & Hawkes, Submission
47, at page 1.
[147] Music Industry Piracy Investigations,
Submission 142.
[148] Music Industry Piracy Investigations,
Submission 142, at annexure A; see also Australian Record Industry Association,
Submission 153, at pages 7-8.
[149] Music Industry Piracy Investigations,
Submission 142, at Annexure B.
[150] Music Industry Piracy Investigations,
Submission 142, at Annexure B.
[151] Music Industry Piracy Investigations,
Submission 142, at Annexure B.
[152] Australasian Performing Rights Association,
Submission 145, at page 4;
[153] see also Australian Music Publishers'
Association and Australasian Mechanical Copyright Owners' Society, Submission
147, at page 19.
[154] Australasian Performing Rights Association,
Submission 145, at pages 4-5.
[155] Australian Consumers' Association, Submission
166A, at page 23.
[156] see also International Trade Strategies,
Submission 102, at page 2; note Music Industry Piracy Investigations,
Submission 142B, at pages 4-5.
[157] Australian Consumers' Association, Submission
166A, at page 24.
[158] Australian Record Industry Association,
Submission 153, at page 8.
[159] Attorney General's Department, Submission
180, at page 13.
[160] Australian Customs Service, Committee
Hansard, 12 March 1998, at L&C 238-245.
[161] Australian Customs Service, Committee
Hansard, 12 March 1998, at L&C 241.
[162] Australian Customs Service, Committee
Hansard, 12 March 1998, at L&C 242.
[163] Australian Customs Service, Committee
Hansard, 12 March 1998, at L&C 238 and 240.
[164] Australian Customs Service, Committee
Hansard, 12 March 1998, at L&C 242; Music Industry Piracy Investigations,
Submission 142B, at pages 1-3.
[165] Australian Customs Service, Committee
Hansard, 12 March 1998, at L&C 244.