The Central Office of Collection and Distribution and Copyrights associations are condemned for Cartel formation

In the trial session of the 20th of March, the Brazilian Administrative Council for Economic Defense – CADE - condemned the Central Office of Collection and Distribution – ECAD (acronym in Portuguese) and six effective associations (with voting rights) which represent copyright holders for cartel formation. ECAD was also penalized for abuse of dominant position by creating entry barriers to the entry of new associations in the market. The fines imposed amounted to approximately BRL 38 million (around USD 19 million).

ECAD and the six associations were convicted for setting jointly amounts to be paid for the public performance of musical works, literary musical works and phonograms. According to the reporting commissioner of the case, Elvino Mendonça de Carvalho, the Copyright Law (Law no. 9.610/98) allows ECAD to control the activity of collection and distribution of copyright, but does not provide for its capacity to establish their prices.

The reporting commissioner also noted that the condemned practices are harmful to competition and to society as a whole. "Free price negotiation would hinder a possible practice of abuse of market power, given that the pricing would be more responsive to users´ needs and would be more economically efficient."

CADE considered as evidence of price fixing the charge tables that were divided as per user type, available on ECAD’s website. Additionally, it is possible to find on their website the criteria for price calculation and those for the collection of copyrights fees. Finally, the council considered in its decision the minutes of general meetings held by ECAD, during which price fixing between associations were discussed.

ECAD was also condemned for creating barriers to new entries in the market by hindering the formation and operation of new associations. According to the reporting commissioner, ECAD internal regulations states "disproportionate and unfair" requirements to the affiliation of new associations, i.e. minimum percentages of the number of members and of ownership of intellectual property.

For cartel formation and the abuse of dominant position in the market, ECAD has to pay a fine of about BRL 6.4 million (around USD 3.2 million). Each association was fined BRL 5.3 (around USD 2.7 million) for cartel formation.

The investigation (Administrative Proceeding no. 08012.003745/2010-83) started in 2010, based on a complaint made by the Brazilian Association of Paid Television.