FIGHT FOR MUSIC RIGHTS
Competition tribunal hears complaint that record labels, publishers are interfering with a company specializing in public domain releases.
An Ontario-based record label specializing in records featuring older, out-of-copyright performances from popular artists such as the Beatles, this week filed a complaint with the Canadian Competition Tribunal against some of the world’s leading record labels and music publishers.
Stargrove Entertainment alleges that a who’s who of the Canadian music industry is violating the law by refusing to deal, engaging in illegal price maintenance and exclusive dealing. It is seeking an order requiring the companies to provide the necessary licence so that it can continue to produce and sell public domain records.
The Stargrove complaint explores how the music industry has done seemingly everything in its power — including posting false reviews, pressuring distributors and lobbying government officials — to stop the sale of competing records. The complaint notably identifies Universal Music Canada as a key player in the alleged activities. The company did not respond to repeated requests for comment.
At issue are three alleged violations of Canadian competition law. First, Stargrove argues that there is a violation of “refusal to deal” because rights holders are denying it mechanical licences on the usual trade terms.
The company notes that these licences are “normally granted as a matter of course.”
Second, it argues violation of the illegal price-maintenance provisions since the denial of licences is designed to keep the company out of the market and maintain market share and higher pricing.
Third, it argues a violation of exclusive dealing, pointing to Universal Music’s pressure on distributors and posting of false reviews about Stargrove records.
While the legal issues will unfold at the Competition Tribunal in the months ahead, the evidence in- cluded in the complaint paints a picture of an industry desperate to keep low-priced, consumer-friendly alternatives out of the market, aided by a Conservative government willing to grant longer rights without public consultation or comment.
Contrary to industry claims that there is little commercial interest in older, public domain records, the application includes evidence showing Stargrove records outselling their more established competition. For example, in its first week in Walmart Canada, one of the company’s Beatles releases was the topselling CD for the entire retail giant.
In response to the perceived Stargrove threat, the record labels and music publishers tried to shut down the company’s distribution chain. Several rights holders refused to grant mechanical licences, resulting in the cancellation of some new public domain CDs.
The complaint also alleges that Universal Music Group began fab- ricating negative reviews of the Stargrove CDs on the Walmart site. In fact, it states that a Universal Music account manager admitted creating the negative reviews and urged other employees to do the same.
Meanwhile, Universal Music allegedly wrote to Stargrove’s distributor to ask how it could partner “to resolve the public domain issue.”
In addition to the business pressures and false reviews, Universal Music Group began lobbying the Canadian government to change the law by extending the term of copyright for sound recordings, thereby delaying many new public domain records for decades, according to the complaint.
The complaint notes that Stargrove was advised of the lobbying effort as early as December 2014.
The Conservative government gave Universal Music what it wanted in April 2015, as the budget included a sound-recording copyright term extension for an additional 20 years. As a result, Canadian consumers will now pay higher prices for some music with less choice.
The latest legal move by Stargrove offers some hope that at least existing public domain records might eventually make their way into the Canadian marketplace, while appearing to pull back the curtain on the efforts of the industry to stop low-cost competitor products from seeing the light of day. Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can be reached at mgeist@uottawa.ca or online at michaelgeist.ca.