Spanish Competition Authority publishes report evaluating Draft Ministerial Order establishing the methodology for determining new general tariffs for IP Collective Management Organizations Law 21/2014, dated 4 November 2014, amending the Spanish Copyright Act (hereinafter, the "Copyright Reform") introduced the following seven criteria which Collective Management Organizations ("hereinafter, "CMOs") are legally required to take into account when establishing general tariffs for the use of their repertoires: 1. The degree of effective use of the repertoire in all user activity. 2. The intensity and relevance of the use of the repertoire in the user's overall activity. 3. The breadth of repertoire of the management entity. 4. The income earned by the user through the commercial exploitation of the repertoire. 5. The economic value of the service provided by the management entity in order to effectively apply its fees. 6. The tariffs established by the management entity with other users for similar means of exploitation of works. 7. The tariffs established by counterpart management entities in other Member States of the European Union for the same type of use, whenever a similar basis of comparison exists. A “Draft Ministerial Order establishing the methodology for determining new general tariffs for IP Collective Management Organizations” (hereinafter, “DMO”), has been published developing each of the legally provided criteria for establishing CMO tariffs. As part of its approval process the National Commission on Markets and Competition (hereinafter, the "CNMC") must carry out an assessment of the DMO. The CNMC report evaluating the DMO was approved on 8 October 2015 and made public on the CNMC website on 4 November 2015 (hereinafter, the "CNMC Report"). Generally speaking, the CNMC recommends a complete redrafting of the DMO in order to avoid inconsistencies and unify the drafting of several rules provided therein, so that they are in line with the Copyright Reform. The CNMC Report points out that historically the two main problems which have existed in Spain in relation to CMO tariffs have been the lack of equity in tariffs and discrimination among different users. It then goes on to specifically state that "if the principle objective of the DMO was to introduce simplicity and clarity in the CMO tariffs, the objective is far from accomplished." The CNMC Report points out the following shortfalls: Uncertainties exist regarding the differences between criteria for establishing tariffs and variables of control. The content is laid out in a complex manner. There are inconsistencies among articles within the DMO itself. In addition to these general observations, the CNMC Report also made specific recommendations regarding the following points regulated in the DMO, among others: Need for comparison of Spanish CMO tariffs with those established by CMO counterparts in other EU Member States. Lack of clarity regarding the concept of "effective use of repertoire". Over-reliance on the income earned by users through the exploitation of the CMO's repertoire as a criteria for establishing new tariffs. Excessive limitation on the ability of users to claim tariffs applied to third parties for online exploitation of works. While it is apparent that the DMO leaves much room for improvement, it is still unclear how much, if any, of the CNMC's analysis and recommendations will be taken into account by the Spanish Ministry of Culture given that this is a non-binding report and an additional agreement from the Government Commission for Economic Affairs is needed prior to the Ministerial Order's final approval. For more information, please contact Jose Maria Mendez and Naiara Elizagarate.