CJEC, October 25, 1979, No 22-79

THE COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES,

1 By a judgment of 12 December 1978, which was received at the Court on 5 February 1979, the Cour de cassation of France referred to the Court, pursuant to Article 177 of the EEC Treaty, a question on the interpretation of Article 86 of that treaty.

2 That question was raised in the course of proceedings between the Société des Auteurs, Compositeurs et Editeurs de Musique (SACEM), on the one hand, and the société anonyme Greenwich film production and the société des editions Labrador, on the other.

3 The file shows that SACEM instituted proceedings against Greenwich before the Tribunal de grande instance, Paris, for payment of royalties in respect of the public performance of the music for two films and that Greenwich, in the course of the proceedings, caused Labrador to be joined as a third party in order to obtain from it the reimbursement of any sums which it might be required to pay to SACEM. The tribunal found that the composers of the music for the two films in question were members of SACEM and had assigned to the latter the exclusive right throughout the entire world to authorize or prohibit the public performance of their works. It also found that Greenwich, in order to obtain the services of the two composers in relation to the two films which it was producing, had concluded contracts with Labrador, which was itself a member of SACEM and the publisher of the music of the two composers. The tribunal also established that Greenwich claimed to own the copyrights in the music for the two films, having acquired those rights from Labrador which had obtained them directly from the composers ; and finally that the two composers had joined SACEM before the contracts between Greenwich and Labrador were concluded.

4 It is further clear from the findings made by the tribunal that, with regard to royalties payable in respect of the public performance of film music, a distinction must be drawn between territories where SACEM collects fees directly and territories where it does not. In accordance with the wording employed by SACEM the latter territories are termed non-statutory countries. SACEM's claim relates exclusively to royalties payable in respect of public performance in non-statutory countries. An agreement was concluded between Greenwich and Labrador to the effect that if Greenwich were obliged to pay to SACEM sums in respect of the composer's and publisher's rights for such territories the sum constituting the publisher's share would be fully reimbursed by Labrador.

5 On the basis of those findings of fact the tribunal ordered Greenwich to pay the sums due to SACEM in respect of the public performance of the music for the two films in question in the non-statutory countries. It appointed an expert to ascertain the exact amount of such sums. The tribunal considered with regard to the third-party claim that Labrador must reimburse to Greenwich the publisher's share of the sums which Greenwich was bound to pay to SACEM.

6 Greenwich appealed against that judgment on the ground that SACEM's conduct, in paricular its requirement that the two composers, in accordance with its documents of association in force at the time, should execute a general assignment of all categories of rights throughout the entire world, constitutes an abuse of a dominant position on the market. Such conduct must accordingly be considered to be prohibited under Article 86 of the EEC treaty and also under Article 59a of the French order of 30 June 1945.

7 the cour d'appel dismissed the complaint based on infringement of Article 59a of the order of 30 June 1945 on the grounds that no proof or evidence had been provided that SACEM's activities have (or had) as their object or could have (or could have had) as their effect to impede the operation of the market and that decisions and judgments issued in European matters but not concerning SACEM are clearly of no assistance in the application of French domestic law.

8 With regard to the complaint based on infringement of Article 86 of the Treaty the Cour d'appel considered first of all that, if it had to adjudicate on the merits of that point, it would have to dismiss it on the same grounds as those set out in connexion with Article 59a of the order of 30 June 1945. However, since the admissibility of that complaint was disputed by SACEM, the Cour d'appel considered that that point must be settled first. In that connexion the Cour d'appel considered that the dispute, which involves French undertakings, concerns the pecuniary consequences of contracts for the assignment or exploitation of the sound-track of films which are implemented exclusively outside the territory of the Community (it is common ground that the non-statutory countries are all non-Community States). The Cour d'appel concluded from this that it has been neither established nor argued that the situation arising from such contracts is capable of affecting trade between Member States and that the Community provisions are accordingly irrelevant to the dispute between the parties.

9 Greenwich, in its appeal on a point of law to the Cour de cassation, has contested that last decision on the basis of a single argument by which it maintains that Articles 86 and 177 of the treaty have been infringed. The Cour de cassation has stayed the proceedings and requested the Court of Justice to deliver a preliminary ruling on the application of Article 86 of the Treaty in relation to the performance in non-member countries of contracts entered into in the territory of a Member State by parties within the jurisdiction of that State.

10 It is clear from the foregoing that at the present stage of the procedure the Courts seised of the substance of the matter have not considered the question whether, for the purposes of Article 86 of the Treaty, SACEM may be considered to be an indertaking abusing a dominant position within the common market or in a substantial part of it. However, the question submitted by the Cour de cassation cannot be answered unless it is assumed that that condition is fulfilled. It will be for the French Courts subsequently to establish whether in the present action this is in fact the Case. If abusive practices are exposed, it is also for such Courts to decide whether and to what extent they affect the interests of authors or third parties concerned, with a view to deciding the consequences with regard to the validity and effect of the contracts in dispute or of certain of their provisions.

11 The reply to the question thus defined may be discerned in the previous decisions of the Court of Justice. The Court of Justice, in deciding whether trade between Member States may be affected by the abuse of a dominant position in the market in question, has taken the view that it must take into consideration the consequences for the effective competitive structure in the common market, adding that there is no reason to distinguish between production intended for sale within the common market and that intended for export (judgment of 6 march 1974 in joined Cases 6 and 7-73 Istituto Chemioterapico Italiano and Commercial Solvents Corporation V Commission (1974) ECR 223). There is no reason to restrict that interpretation to trade in goods and not to apply it to the provision of services such as the management of copyrights.

12 In fact, it is well known that in certain Member States the management of composers' copyrights is usually entrusted by composers to associations whose object is to supervise the exercise of such rights and to collect the corresponding royalties of behalf of any composer working within the territory of the Member State in question. It is possible in those circumstances that the activities of such associations may be conducted in such a way that their effect is to partition the common market and thereby restrict the freedom to provide services which constitutes one of the objectives of the Treaty. Such activities are thus capable of affecting trade between Member States within the meaning of Article 86 of the Treaty, even if the management of copyrights, in certain Cases, relates only to the performance of musical works in non-member countries. In considering whether Article 86 is applicable the performance of certain contracts cannot be assessed in isolation but must be viewed in the light of the activities of the undertaking in question as a whole.

13 It is clear from the foregoing that where an association exploiting composers' copyrights is to be regarded as an undertaking abusing a dominant position within the common market or in a substantial part of it, the fact that such abuse, in certain Cases, relates only to the performance in non-member countries of contracts entered into in the territory of a Member State by parties within the jurisdiction of that State does not preclude the application of Article 86 of the Treaty.

Costs

14 The costs incurred by the Government of the Italian Republic and by the Commission of the European communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national Court, the decision on costs is a matter for that Court.

On those grounds,

THE COURT,

In answer to the questions referred to it by the Cour de cassation of France by a judgment of 12 December 1978, hereby rules :

Where an association exploiting composers' copyrights is to be regarded as an undertaking abusing a dominant position within the common market or in a substantial part of it, the fact that such abuse, in certain Cases, relates only to the performance in non-member countries of contracts entered into in the territory of a Member State by parties within the jurisdiction of that State does not preclude the application of Article 86 of the Treaty.