The Competition Commission of India (“CCI”) entrusted with the job of maintaining healthy competition and curbing abuse of monopoly in the market place was tasked with examining the actions of Super Cassettes Industries (“T Series”). The Informant/Complainant in this matter was HT Media Limited which runs Fever 104 FM a radio station and T Series is music label from whom they were licensing the music. (For more on copyright and music licences click here).

The Informant approached the CCI in 2011 alleging that T Series was abusing their dominant position in the market by charging excessive licensing fees and making it mandatory to sign a contract for minimum commitment charges (MCC) per radio station regardless of whether their songs were played or not. T Series did try stopping the CCI by filing a Writ Petition with the Delhi High Court claiming that fixing of licensing fees was the domain of the Copyright Board and that the CCI did not have jurisdiction. However the Court held that the CCI had enough scope to analyse if there was any abuse of dominance without getting into fixing the fees.

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Based on the investigation report of the Director General and the submissions of both sides the CCI reviewed the following issues.

What is the relevant market?

To determine if T Series was a dominant player in the market, the Commission had to determine what the market was – was it all media playing the licensed music like TV, Radio, Value Added Services (VAS – that are provided by telephone service providers etc); Once the Commission had decided that it was only the Radio, they looked at whether it would cover FM and AM, and if it would include Private FM Channels along with All India Radio (AIR – the Government’s station). Since AIR was the only radio station allowed to provide news and current affairs and all other private stations could only play music, AIR was excluded from the relevant market. The final aspect for consideration was whether all private FM stations were included or only the ones who played Bollywood music (around 80 percent). The Commission decided that of the 240 private FM channels available only the 80 percent which played Bollywood music was the relevant market for the analysis.

Is T Series dominant in the market?

Once the market had been identified to determine if T Series was in a position of dominance, the Commission reviewed a series of factors. On the issue of market share, the Commission found that T series had a market share of 50 percent with regard to revenue when compared to the other players like Yash Raj Films (YRF), Sony, SaReGaMa and even copyright societies like PPL. Moreover approximately 25 to 60 percent of the songs played on the radio were licensed from T Series. The Commission also took note of the fact that PPL which is a copyright society collects the licensing fee for over 200 artists and distributes it amongst them as opposed to T Series which was a single entity. With regard to the size and resources of T Series, the Commission took note of the fact that T Series’ turnover was over 400 crores (USD 66 Million) which was 4 times that of its competitors. More importantly T Series was on average able to buy the rights to the music for 48 Bollywood movies a year as opposed to 10 – 11 of their competitors and the movies as well were all of ‘bankable stars’ like Sharukh Khan, Salman Khan and Amir Khan. On the final aspect of the dependence of the consumers on the enterprise, the Commission found that of the Top 100 songs played on the radio T Series owned 58 percent of the songs! With all these aspects looked into the Commission found it rather easy to determine T Series was in fact a dominant force in the market.

Has T Series abused its dominant position in the market?

The final issue looked into was whether T Series had taken advantage of its dominant position by indulging in practices which were unfair to its competition. According to the Informant, T Series was charging them INR 661 per needle hour as broadcasting license fee, INR 559 per needle hour as performance license fee and INR 261,667 (USD 3600) per station per month as part of their MCC. The commission looked at each of the three aspects individually:

Broadcast Licensing fee – The broadcast licensing fee is the licensing fee charged by the owner of the sound recording. According to the investigation in the market, there were three rates being charged – PPL on the basis of an order by the Copyright Board was charging INR 404 per needle hour; Competitors like YRF were charging INR 400 – 450 per needle hour; finally T Series was charging INR 661 per needle hour. The commission admitted to the difficulty in determining if the pricing was excessive only on the basis that T series charged higher than the others since they claimed to factor in the loss of sales of physical copies (I haven’t bought a CD in a while), that they had to spend a considerable amount in acquiring the copyright for the top songs, and more importantly on occasions after paying heavily for the rights, they incurred a loss if the songs failed. With all these taken into account the Commission held that the licensing fee of INR 661 per needle hour was not excessive.

Performance License fee – In any sound recording or song, there are the rights to the sound recording as a whole and the literary rights to the lyrics and musical rights with regard to the music. When a person licenses the sound recording the underlying rights still remain independent. In the market though, PPL, and T Series’ competitors charge only the broadcast fee for the sound recording and not the performance fee for the underlying rights. However T series was charging both. At present the Supreme Court is yet to decide on whether both can be charged or only broadcasting fee. Moreover in the agreement, that is between T Series and the Informant it was stated that the fees would be paid at the moment and if a Court fixes an amount that amount would apply. Since the matter is sub judice the Commission didn’t decide on whether the inclusion of this fee was excessive.

Minimum Commitment Charges (MCC) – While the two licensing fees amounted to INR 1260 per needle hour, T Series in their contract made sure that a minimum of INR 250,000 as the minimum charge that had to be paid, which amounted to approximately 198 needle hour’s per month. This ensured that 198 hours a month of T series music was paid for regardless of whether it was played or not. More importantly, if the Informant did in-fact play that many hours it amounted to playing more of T series songs as compared to its other competitors. The informant in this case had four radio stations and for the ones in Mumbai, Delhi and Kolkata together had to pay INR 650,000 (USD 11,000) per month regardless of whether they played the licensed music or not and more importantly by making a minimum commitment as high as it was, T Series was edging out other players in the market. The Commission found this to be an abuse of dominance.

Order

After reviewing the facts in arguments, the CCI did hold that T series was a dominant player in the relevant market and by the inclusion of the MCC which was mandatory, was in fact abusing their position. T Series has been directed to stop including MCC’s and suitably modify all their existing ones. The Commission also decided to impose a penalty of 8 percent of the average turnover of 35 crores (from licensing to Private FMs) which amounted to INR 2,83,28,000 (USD 475,000).

Competition Law and Intellectual Property are on occasions at loggerheads with each other. IP provides exclusive rights and a monopoly and the Competition law seeks to level the playing field. The issues in this judgement were well analysed and the order reasoned, and although it extended to 93 pages, it gives the reader a wonderful insight into the working of a radio station, and licensing of copyright in music in India!