SWD IA on the EU copyright modernization – impacts of second option for fair remuneration of authors and performers

Imposing transparency obligations on the contractual counterparty of creators

The reporting obligation would greatly decrease the information asymmetry as creators would receive the relevant information on the uses of their works and the corresponding revenues. As a direct impact, the enforcement of contracts would become much easier and effective, particularly in the case of royalty-based remuneration arrangements because the correct payment of remuneration could be verified.

Having information on the specific modes of use would ultimately bring transparency to the scope of the contracts and would highlight the difference between different rights and modes of exploitation which may be taken into account by creators for future negotiations.

This option would therefore have a significant indirect impact without a disproportionate intervention in the contractual freedom of the parties. It is important to note that the implementation of the reporting obligation may lead to disagreements between the parties as to the revenues and remuneration.

Labour-related costs linked to reporting are very difficult to estimate as they would, among other things, depend on the type and the number of works, the complexity of the authorship and on the number of actors from which the information has to be gathered.

The administrative burden would decrease with time as it would become part of the “business as usual” process. From MS where similar transparency obligations are already in place, no disruptive effect of such measures has been reported.

Thanks to the proportionality provisions built in Option 2, contractual counterparties may not be obliged to provide information to minor contributors to a work, thus reducing the number of reports. In addition, in the case of works generating little to no revenues, the proportionality provision would allow MS to adjust the obligation in a manner that ensures a proportionate burden for contractual counterparties.

The reporting obligation could be more burdensome for smaller companies (e.g. a small publisher or record label) as they have fewer resources. At the same time, they also manage less works and they would need to provide a smaller number of reports to fewer creators.

Transparency remains however essential for creators who assign their rights to SMEs. The possible administrative costs are justified in view of the fact that the business of these companies is based on the exploitation of the copyright of the individual creators.

The possibility of providing an exemption for micro enterprises was considered, however, taking into account the predominance of micro enterprises in the creative industries (above 90 % in some sectors), establishing such an exemption would result in the transparency obligation applying to a very limited number of contractual counterparties which would defeat the purpose of the intervention. It is to note that the majority of existing national provisions on transparency do not provide for an exemption or a lighter regime for SMEs.

This option would positively affect copyright as a property right by improving the creators’ bargaining position and contributing to a better enforcement of their rights. This in turn would support their freedom of expression through artistic creation. Transparency would make any offers within and between MS comparable and creators would exercise their freedom of movement between MS more easily.

On the other hand, Option 2 would introduce constraints on the right to conduct a business of contractual counterparties insofar as the production of reporting statements would constitute an additional administrative burden. The reporting obligation introduced by Option 2 would only have a limited and proportionate impact on contractual freedom as this ex-post instrument would not affect formulation of the terms of the contracts.