Commentary: Is Collective Administration of Copyrights Justified by the Economic Literature?

• Author: Ariel Katz
• Pages: 449-468

449

Commentary: Is Collective Administration

of Copyrights Justif‌ied by the Economic

Literature?

Ariel Katz2

A. INTRODUCTION

A good starting point for any reasoned policy-oriented discussion of

the merit s of collective ad ministrat ion of copyright a re that the follow-

ing premises, in a liberal market-based economy, market competition is

the rule, and, as a corollary, monopoly is the exception. Prices and other

terms of trade are best determined by ma rket players, not by govern-

ment agencies. W hile accepting such premises does not preclude the

possibility that in some situations fully competitive conditions wil l not

function as well as expected — and intellectua l property rights, prop-

erly designed, are an exa mple of a solution to such situations — these

premises imply two questions that need to be answered: First, what jus-

tif‌ies replacing a system of competition between copyright owners with

 Professor Jacques Robert presented a pap er in which he argued that the eco-

nomic literature on bund ling of information goods prov ides a novel justif‌i-

cation for the collecti ve administration of copyr ights and made a few other

recommendations relatin g to collective adminis tration of copyright. is com-

ment critically e xamines this bund ling argument as well as t he other recom-

mendations.

 Assistant Profes sor and Innovation Chair in E lectronic Commerce, Faculty of

Law, University of Toronto.

 450

a system under which no such competition exists? Or in other words,

what justi f‌ies augmenting the market power of copyright holders be-

yond the level conferred upon them in a competitive market by virt ue

of their exclusive rights? Second, do markets for copyrighted works ac-

tually fai l such that society is better of‌f by shif ting from a paradigm of

competition to a paradigm of regulated monopolies?

In recent work I have questioned the various justif‌ications (most

of which pertai n to some form or another of transaction cost s) for the

paradigmatic form of col lective copyright management: performing

rights organizations (PROs). In one article, I argued that the case for

PROs is not as straightforward as it is assumed to be. I showed t hat

many of the underlying cost ef‌f‌iciencies that are attributed to PROs are

usually simply assumed and, in many cases, could be equally achieved

under less restrict ive arrangements. In a companion article, I studied

the ef‌fect of new t echnologies on the case for colle ctive administ ration

and demonstrated how, by lowering many of the transaction costs that

previously pur ported to justify the practice, new digital technologies

further undermine the justif‌ication for collective administration. In

his current paper, Professor Robert, while not i n total disagreement

with my views, maintains nonetheless that the economics of bund ling

provide the requisite justif‌ication for the practice. He also doubt that

technologic al adva nces would improve the c ompetition l andscape in

this area and generally foresees a much greater role for collective ad-

ministration. He comments on the optimal number of collectives and

on t heir operational ef‌f‌iciency. My comment will focus primarily on

Professor Robert’s bundling justif‌ication, and to a lesser extent on the

other points and recommendations that he ma kes. Structurally, I will

follow Professor Robert’s order of recommendations.

 A. Katz, “e Potential D emise of Another Natural Monopoly: Ret hinking the

Collective Adm inistration of Performing R ights” ()  Journal of Competi-

tion Law and Economics  [“e Potentia l Demise I”].

 A. Katz, “e Potential D emise of another Natural Monopoly: Ne w Technolo-

gies and the Admi nistration of Performing R ights” ()  Journal of Compe-

tition Law and Economics   [“e Potential Demise II”].