[d@DCC] Competition Bureau - Information Request (music, payola, DRM)

[Russell McOrmond]

Dear Ms. Lambert,

   Thank you for your reply.  It is very helpful, and I will spend more 
time later analyzing the references you sent.


   I am wondering if the Private Copying regime was considered in your 
analysis of the music marketplace.  This is a levy that is collected on 
the import and manufacture of "audio recording media", and then 
distributed to music publishers and the recording industry based on radio 
airplay and soundscan music sales.  The issue with airplay is not whether 
there is competition in the market for access to radio as a music 
distribution mechanism, but how airplay is being used as a marketing tool, 
as a method to manipulate market statistics (for lobbying and other 
purposes), and as a way to gain unfair access to the CPCC levy.

   I realize you are using the word "firm", but I can't believe that there 
is a loophole in Canada's competition policy where a small number of 
dominant players can work together to fix a marketplace as a way to get 
around Canadian competition policy.  With music we have a small number of 
major labels represented by CRIA who control 95% of the market, but who 
have far less than 5% of Canadian musicians signed to them.

   In the case of Internet distribution there are additional competition 
problems, as the major labels represented by CRIA are using the tied 
selling of DRM (Digital Restrictions Management) to tie the access of 
content purchased through so-called "legal" download sites like 
Puretracks, Archambaultzik, and Napster Canada to the additional purchase 
of Microsoft Media access technology.  The "portable devices" and "digital 
devices" (including home computers) you mention must contain Microsoft 
technology in order to access content "purchased" from these services.

   Those of us who are not customers of Microsoft (I work in a competing 
software sector) must either circumvent the digital tie (a technique Bill 
C-60 will make illegal in Canada, and is already illegal in other 
countries who have ratified the 1996 WIPO treaties), or be non-consumers 
of music downloads from the labels that control over 95% of the market. 
While I am quite happy to boycott these labels, other music consumers will 
not be as motivated and will feel forced to purchase Microsoft software in 
order to access CRIA content.

   The only major "competitor" is Apple which ties the access to iTunes 
distributed content to the use of Apple access software.  This is a 
wildcard in the market as the major labels often see Apple and iTunes as a 
competitor to their control.

   I only use pro-competitive Free/Libre and Open Source Software (Free as 
in Free Market), and thus am also a non-consumer of Apple products.  I 
have no interest in purchasing music that is tied to the use of any 
software vendors product.  I believe there are competition policy issues 
regardless of whether it is Apple and/or Microsoft that is granted a 
market monopoly/duopoly on authorized access technologies for content.

   All these anti-competitive techniques are inter-related. I do not 
believe that there is a healthy market for competition through 
alternative means given market control for one distribution mechanism is 
being leveraged to control other mechanisms.

(Enclosed below for our public list is your letter, with email and other 
information removed to avoid SPAM)

-- 
  Russell McOrmond, Internet Consultant: <http://www.flora.ca/>
  2111+ Canadians oppose Bill C-60 which protects antiquated Recording,
  Motion Picture and "software manufacturing" industries from change...
  http://KillBillC60.ca    Sign--> http://digital-copyright.ca/petition/

---------- Forwarded message ----------
Date: Mon, 15 Aug 2005 10:33:25 -0400
From: "Lambert, Christine: #CB - BC"
Subject: Competition Bureau - Information Request


Hello Mr. McOrmond,

Thank you for your recent inquiry to the Competition Bureau.  As you 
requested, I will address both of your inquiries in the following e-mail.

First, as to your inquiry regarding the legality of "payola", that is the 
practice of offering bribes on radio stations and their employees in order 
to get music on the air, your concern does not raise an issue from a 
competition law standpoint.

There is a three-part test that must be met in order for the Competition 
Act to apply, more specifically for the civil abuse of dominance 
provisions to come into play.  The Act will only apply in cases where 1) a 
firm that is in a dominant market position; 2) has engaged in a practice 
of anti-competitive acts; 3) with the result that competition has been or 
is likely to be prevented or lessened substantially in a market.

Nowadays, music can be listened to through various means (i.e. internet, 
portable devices, digital devices).  The fact that certain radio stations 
are being offered cash and perks in exchange for airtime, although these 
practices do diminish fair competition in the music industry to some 
extent, they will not substantially lessen competition in the music 
industry.  For more details concerning the Bureau's approach to 
enforcement, I refer you to the Abuse of Dominance Guidelines which can be 
found on the Bureau's website ( 
<http://strategis.ic.gc.ca/pics/ct/aod.pdf> ).

Secondly, with regards Bill-60, the Competition Bureau is, in fact, aware 
of the possible consequences that may arise from this Bill.  Rest assured, 
the Bureau is currently looking into these competition issues.

There is very little case-law relating to section 77.  Tele-Direct is the 
leading case on tied selling.  Additional cases include : BBM, Nutrasweet, 
Xerox, Chrysler.  These cases may be found on the Competition Tribunal's 
website : (http://www.ct-tc.gc.ca/english/SearchCases.asp?x=67) as well as 
on the Canadian Legal Information Institute website : 
(http://www.canlii.org/index_en.html)

I hope this information is satisfactory for you, but do not hesitate to 
contact me again if you require more information.

Sincerely,

Christine Lambert
__________________________
Christine Lambert
Agente du droit de la concurrence / Competition Law Officer
Gouvernement du Canada / Government of Canada
Bureau de la concurrence / Competition Bureau
50, rue Victoria / 50 Victoria St.
Gatineau, Québec K1A 0C9
http://www.cb-bc.gc.ca