Copyright (Regulation of Relevant Licensing Bodies) Regulations 2014

Viscount Younger of Leckie Excerpts

Wednesday 26th March 2014 Grand Committee

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[Viscount Younger of Leckie]

That the Grand Committee do consider the Copyright (Regulation of Relevant Licensing Bodies) Regulations 2014.

Relevant document: 23rd Report from the Joint Committee on Statutory Instruments

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie) (Con)]

My Lords, the relevant licensing bodies—or collecting societies as they are better known—are already self-regulating and using codes of practice based on minimum standards set by the Government. The purpose of this legislation is to support their self-regulation and ensure that this good practice continues. It allows the Secretary of State for Business, Innovation and Skills to remedy any problems or gaps that may emerge in self-regulation. These gaps would emerge if a collecting society started to deviate from the minimum standards; for example, if it had no proper complaints procedure or did not make provision for an independent ombudsman for its members and users.

Collecting societies are the organisations that copyright owners use to license their rights and collect their royalties. They are an economically significant sector. The nine or so collecting societies in scope of these regulations together collect around £1 billion per year and have nearly 400,000 members. Their role is valuable; indeed, they are central to the monetisation of copyright. They bring together rights holders and users efficiently, are instrumental in ensuring that income is received by rights holders and facilitate legal access to copyright works.

These regulations have their genesis in the Hargreaves recommendation that collecting societies,

“should be required by law to adopt codes of practice”.

This recommendation was made against a background of concerns about the operation of some collecting societies. These concerns were often reflected in correspondence to Ministers—indeed, I have seen some myself—as well as in meetings with trade and representative bodies. They ranged from the levels of transparency for members to complaints by licensees about unfair practices and heavy-handed licensing tactics.

Complainants, many of whom were small businesses, were often especially frustrated because they had no choice to shop elsewhere for their copyright material if dissatisfied. This is because most collecting societies tend to be monopolies or quasi-monopolies. The regulations that have been laid before this House complete the system of co-regulation that the Government have been developing with stakeholders over the past couple of years.

Many of your Lordships may recall the extensive debate in this House during the passage of the Enterprise and Regulatory Reform Act. I emphasised our preference for self-regulation then and I do so again now. We want collecting societies to run themselves to the highest possible standards. The sector is doing this and must be congratulated on its progress. Most collecting societies now have self-regulatory codes of conduct. Noble Lords should be assured that statutory intervention is, and must be, a last resort.

--- Later in debate ---

[Lord Stevenson of Balmacara]

My Lords, I was making two points about issues contextual to the order. One was the question of whether the CRM directive would have an impact and, if so, whether the Minister could outline either how well his proposals in the draft SI fit into it or any gaps that he has already perceived in it. A monitoring period before the regulations will take place in 2016, just at the time that the CRM directive will be introduced. We therefore need to be careful that we are not overburdening the industry or those who draft the orders by having to do all that at the same time.

My second point was an issue which we raise from time to time in debates on intellectual property, which is the progress of the Copyright Hub and the impact that this secondary legislation could or would have on the operation of the hub. I suspect and hope that they have been designed to be complementary, but the issues of collecting societies fit closely with those who are operating the hub. The hub, which is trying to widen access, clearly has interesting feedback into the work of the collecting societies.

My other points have largely been touched upon. It would be helpful to have some comments on the question asked by the noble Lord, Lord Razzall, about the timescale. On the question of how penalties will apply, I note that in the impact assessment on the statutory instrument we are told that during the consultation, there was consideration of whether fees should apply to the organisations only—as has been said, some of them are quite small and voluntary—or whether it would also apply to the individual offices of those operations. It is not clear to me from reading the regulations which way that has come out. If it is the latter, issues were raised during the consultation. The report states that the relevant licensing bodies objected to the provisions for sanctions against offices, but the provision has not been amended because of the overwhelming evidence from an earlier consultation and the desire of the Government to have robust protection in place for those who deal with the relevant licensing bodies, especially as they often have the choice to shop elsewhere. Again, I want clarity about who could be subject to the fees and how that could operate in practice.

Finally, I put it on record that although we support this operation, it is intriguing to us that the policy adopted is effectively to legalise a number of monopolies operating in this area. In any situation where monopolies are recognised, there is a sense in which competition must be the right answer. Here, we are choosing a different route because it is understood that the processes going on in the collecting society area are different in both quantum and quality to those which might apply under a more vigorous competition arrangement. That having been said, we should recognise that that is what is happening. These bodies cannot have competition. They will be operating as monopoly suppliers of copyright licences in particular circumstances. Although, on behalf of the Opposition, I am happy to support the proposal, we think that we have to keep that point in mind.

[Viscount Younger of Leckie]

My Lords, I thank all noble Lords who have taken part in this short debate for their valuable and broadly supportive comments.

We intend to use these powers where self-regulation fails, as has been mentioned. This power is light touch, as my noble friend Lady Buscombe mentioned, and is important to guarantee minimum standards. These powers are proportionate and designed to act as a deterrent. I think there is general agreement in the Committee on that.

We recognise that collecting societies play an important role in facilitating legal access to copyright works. They bring together rights holders and users to enable them to do business efficiently. The Government have worked with the collecting societies to develop the co-regulatory framework so that they continue to operate effectively, while ensuring that there are protections in place for their members and licensees.

I should like to emphasise again that the Government’s preferred option is self-regulation. This is why these regulations are designed to allow licensing bodies to remedy matters themselves in the first instance before recourse to statutory intervention. We are confident that collecting societies can self-regulate effectively. However, when needed, these regulations will provide robust, proportionate measures.

The regulations also contain provision for financial penalties, which are designed to deter non-compliance. They can be used only should self-regulation fail. This gives members and licensees the comfort of knowing that the standards that are set out in the collecting societies’ self-regulatory code of practice are guaranteed.

I hope that I have made it clear that the Government are serious about self-regulation and it is important that collecting societies have every opportunity to put their own house in order. Equally important, if they fail to do so there should be no way to avoid the consequences. If the Secretary of State is concerned about a collecting society’s behaviour, there is an opportunity for him to act, using the three-step process in the regulations. The fallback position is to impose a statutory code if collecting societies have not taken up that opportunity. While it appears unlikely at the moment that that point will be reached, it is important that the statutory power is available so that there is a deterrent to ensure that collecting societies face consequences if they do not act in a proper manner.

My noble friend Lord Razzall raised a number of points relating to a letter received by the PRS. I will attempt to answer them. The first issue was on information and timing. The collecting society concerned should have all the relevant information to hand anyway, and therefore be able to meet the 14-day deadline. The timeframe for supplying information to the statutory licensing code ombudsman and code reviewer are included in the regulations to ensure that any investigation can be conducted as swiftly and efficiently as possible. The licensing code ombudsman will require information to effectively investigate disputes between a collecting society and the licensee or member. The code reviewer’s power relates to the information needed in order to undertake an effective review of the codes of practice adopted by collecting societies and their compliance with their provisions. If a collecting society has concerns about meeting the deadline, it is open to it to notify the licensing code ombudsman or code reviewer as soon as possible. Finally, where the collecting society concerned can show that it has made every effort to comply with any request, the Secretary of State can take these arguments into consideration when deciding whether to impose a financial penalty. If such a penalty is imposed, there remains the option to appeal against its imposition and the amount. I rather laboured that answer but I hope it provides a full response to my noble friend.

My noble friend also raised the issue of cost recovery. Where the Secretary of State has incurred costs by having to intervene, it is right that he should be able to cover the costs of that intervention, but they should not be borne by the taxpayer. Where a collecting society has had a statutory code imposed on it and/or has failed to appoint an ombudsman or code reviewer, as required, the associated costs of regulation should be borne by the collecting society concerned. Where the Secretary of State needs to appoint a statutory ombudsman or code reviewer when the self-regulatory appointment has failed, it is right that all the collecting societies which will use the new system should bear the costs of that appointment and any ongoing costs. I should state that this would have gone way down the line before that point was reached, so it would be in extremis that this provision would be realised.

My noble friend Lord Razzall raised the issue of the legal basis. The gist of his question was: what legal power enables the Secretary of State to request information from collecting societies under Regulation 9? The provisions in Schedule A1 to the Copyright, Designs and Patents Act 1988 allow for the Secretary of State to request information, as outlined in Regulation 9.

Paragraph 7(1)(a) includes the power to make incidental, supplementary or consequential provisions and paragraph 5(3)(a) allows for provisions for determining whether there has been a failure to comply with the requirement of a code of practice. The provisions in Regulation 9 will enable the Secretary of State to request the information necessary to enable them to discharge their duties equitably under the regulations.