South Afican Music Performance Rights Association v Foschini Retail Group (Pty) Ltd (50/2015) [2015] ZASCA 188; [2016] 2 All SA 40 (SCA) (30 November 2015)

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South Afican Music Performance Rights Association v Foschini Retail Group (Pty) Ltd (50/2015) [2015] ZASCA 188; [2016] 2 All SA 40 (SCA); 2015 BIP 424 (SCA) (30 November 2015)

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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 50/2015
In
the matter between:
THE
SOUTH AFRICAN MUSIC PERFORMANCE
RIGHTS
ASSOCIATION
APPELLANT
and
FOSCHINI
RETAIL GROUP (PTY) LIMITED
AND
9
OTHERS

RESPONDENT
Neutral
citation
:
SAMPRA
v Foschini Retail Group (Pty) Ltd
(50/2015)
[2015] ZASCA 188
(30
November 2015)
Coram
:

Mpati P and Mhlantla, Pillay, Swain and Zondi JJA
Heard
:

17 November 2015
Delivered:
30
November 2015
Summary:
Determination
by Copyright Tribunal of royalty payable in terms of s 9A read with
s
30
(b)
3>
,
33(3) and
33
(5) of the
Copyright Act 98 of 1978
– jurisdiction
of tribunal – established by absence of agreement between user
and owner of copyright protected music
as to amount of royalty –
tribunal to be satisfied on all of evidence that claim of user to a
reduced royalty well-founded
in terms of
s 33(5)
– no onus upon
user to prove this – determination of reasonable royalty –
reference to comparable royalties payable
in foreign jurisdictions.
Order
On
appeal from:
The
Copyright Tribunal (Phatudi J, sitting as the Tribunal).
1.
The appeal is
upheld to the extent of the order contained in para 2 below.
2.
The order of the Copyright Tribunal contained in para 79.1, read with

para 76 of the judgment of the Copyright Tribunal, is set aside and
substituted with the following order:
a)
The following tariff is declared to have been the reasonable rate of
royalties in terms of
s 9A
of the
Copyright Act 98 of 1978
with
effect from 1 January 2008:
Fees: Size of
Premises (Audible Area in square metres)
Licence Fee per
store per Annum (exclusive of VAT)
Up to 50
R150
51 to 100
R300
101 to 200
R450
201 to 300
R600
301 to 500
R750
501 to 750
R900
751 to 1000
R1050
1001 to 1250
R1200
1251 to 1500
R1350
1501 to 1750
R1500
1751 to 2000
R1650
2001 to 2500
R1800
2501 to 3000
R1950
3001 to 3500
R2100
3501 to 4000
R2250
4001 to 4500
R2400
4501 to 5000
R2550
5001 to 6000
R2700
6001 to 7000
R2850
7001 to 8000
R3000
8001 to 9000
R3150
9001 to 10000
R3300
Every additional 1 to
1000 (above 10000)
R150
b)
The tariff is subject to revision with effect from 1 January every
year in accordance with the Consumer Price Index for the previous

year.
3.
The
respondents are ordered to pay 50 per cent of the appellant’s

costs of the appeal, such costs to include the costs of two counsel.
Judgment
Swain
JA
(Mpati
P and Mhlantla, Pillay and Zondi JJA concurring):
[1]
In
issue in this appeal is the amount to be
paid
as
a royalty by the respondents, a group of 10 retailers, formally cited
as Foschini Retail Group and 9 others (the retailers),
to the
appellant, the South African Music Performance Rights Association
(SAMPRA), to entitle the retailers to play background
music in their
stores. The retailers’ legal obligation to pay a royalty is
located in s 9A(1)
(a)
of the Copyright Act 98 of 1978 (the Act). This section provides that
in the absence of an agreement to the contrary no person
may
broadcast, cause the transmission of, or play a sound recording
without the payment of a royalty to the owner of the relevant

copyright.
[1]
[2]
The
obligation to make payment of the royalty to SAMPRA arises from its
legal status as an accredited representative collecting
society to
administer its members’ rights to receive payment of these
royalties.
[2]
The sole member of
SAMPRA is the Recording Industry of South Africa (RISA), which
represents members of the recording industry,
in the form of the
record companies which produce sound recordings and own the copyright
in these sound recordings.
[3]
The
amount of the royalty payable (the tariff) is in terms of s 9A(1)
(b)
of the Act, to be determined by agreement between the user of the
sound recording, the performer and the owner of the copyright,
or
between their representative collecting societies. In the absence of
an agreement s 9A(1)
(c)
of the Act provides that the user, performer, or owner may refer the
matter to the Copyright Tribunal (the tribunal), or they may
agree to
refer the matter for arbitration, in terms of the
Arbitration Act 42
of 1965
to resolve the dispute.
[4]
The
retailers and SAMPRA were unable to reach an agreement on the amount
of the tariff set by SAMPRA and payable by the retailers
to SAMPRA.
The retailers accordingly referred the matter to the tribunal for
determination. As will be seen, a referral of the
dispute to the
tribunal reveals difficulties in the interpretation of the powers of
the tribunal as set out in chapter 3, and more
specifically, ss 30
and 33 of the Act. This has given rise to competing submissions by
the parties on the tribunal’s jurisdiction
and powers,
fundamental to the outcome of this appeal. Consequently, although the
parties are
ad
idem
that the essential inquiry before the tribunal in terms of s 33(5)
(b)
of the Act was to determine a tariff which was ‘reasonable in
the circumstances’, they are however not in agreement
as to
whether the retailers bear the onus of proving this issue. A further
area of disagreement is whether the tribunal only acquired

jurisdiction to determine the dispute, once it was satisfied that the
tariff was unreasonable.
[5]
The
retailers and SAMPRA, with the objective of showing that the tariff
which they respectively espoused, was reasonable in the

circumstances, placed a great deal of evidence before the tribunal.
In the result, Phatudi J in his capacity as a commissioner
of
patents,
[3]
sitting as the
tribunal,
[4]
determined that in
the circumstances a reasonable tariff lay somewhere between the
respective amounts proposed by the retailers
and set by SAMPRA. The
tariff awarded exceeded that proposed by the retailers, but was less
than that set by SAMPRA. SAMPRA accordingly
applied for and was
granted leave by the tribunal, to appeal to this court against the
tariff awarded, as well as the costs order
granted in favour of the
retailers. The retailers did not challenge the tariff awarded by way
of a cross-appeal.
[6]
Before
dealing with the central submissions of SAMPRA as contained in its
heads of argument before this court, it is necessary to
briefly deal
with entirely new submissions advanced by counsel for SAMPRA at the
hearing of the appeal which had their origin in
competition law.
Counsel for the retailers correctly pointed out that the hearing
before the tribunal was not conducted on the
basis of competition law
principles. In addition, the criticism levelled at the evidence of
the retailers’ main expert witness
Prof Ross, which was that he
failed to have regard to competition law principles, it was
submitted, was unfair. This was because
Prof Ross, who was called as
an economist, never had an opportunity to deal with any of these
criticisms. Counsel for SAMPRA contended,
however, that the
submissions were made in law and related to the application of the
Act. It is quite clear, however, that at no
stage during the lengthy
proceedings before the tribunal were principles of competition law
referred to, or applied. The evidence
led by the parties did not have
as its objective the proof of any principles of competition law. If
from the outset the dispute
between the parties had been framed in
the context of competition law principles, there is ground for
thinking that further, or
other, evidence
,
would have been produced by the parties. The issue was not
investigated or canvassed before the tribunal.
[5]
To apply these principles now would alter the whole basis upon which
the parties approached and dealt with the central dispute
between
them. It would be unfair to allow this now.
[7]
Central
to SAMPRA’s case on appeal are two propositions:
(a)
The retailers as applicants before the tribunal bore a duty, in terms
of the legislative framework, to satisfy the tribunal that their
claims regarding the unreasonableness of the tariff set by SAMPRA

were well-founded. The tribunal’s jurisdiction to determine a
reasonable tariff would only be activated once the retailers
had
satisfied the tribunal that their claim of unreasonableness was
well-founded.
(b)
Only then would the tribunal be empowered to determine a reasonable
tariff
after the retailers had adduced sufficient evidence of
‘circumstances’ applicable to them, which would enable
the tribunal
to determine a tariff which was ‘reasonable in the
circumstances’.
[8]
SAMPRA
then submits that the retailers did not adduce sufficient evidence in
support of their claims regarding the unreasonableness
of the tariff
and of the ‘circumstances’ to enable the tribunal to
determine a reasonable tariff. In particular, the
retailers were
obliged to lead evidence of the rand value they derived from the use
of sound recordings in their businesses, which
was essential to a
determination by the tribunal of the reasonableness of the tariff in
the particular circumstances of the retailers.
SAMPRA submits that
the significance of this evidence lies in the essential inquiry of
whether the rand value the retailers derived
from the use of sound
recordings, is disproportionately lower than the tariff set by
SAMPRA.
[9]
In
the result, SAMPRA submits that the appeal should be upheld, the
tariff determined by the tribunal be set aside and replaced
by the
tariff set by SAMPRA, due to the retailers’ failure to satisfy
the tribunal that their claims regarding the tariff’s

unreasonableness were well-founded. In the alternative, SAMPRA
submits that the matter ought to be remitted to the tribunal in
terms
of s 36(3)
(b)
of the Act, with specific instructions for the conduct of a proper
inquiry with particular emphasis on evidence being placed before
the
tribunal by the retailers, to show that the value derived by each of
the retailers from the use of sound recordings is disproportionately

low when compared with the tariff. This procedure is advanced on the
basis that in the absence of this evidence, there is insufficient

evidential material available to this court on appeal to make its own
determination of what a reasonable tariff would be. SAMPRA
adds that
it is accordingly unwilling to consent to this court substituting its
own determination in place of the tribunal’s
tariff, in the
name of expediency.
[10]
The
retailers’ responses to these submissions are that:
(a)
All that is necessary to activate the tribunal’s jurisdiction
is
the absence of agreement on the amount of the tariff between the
retailers and SAMPRA. There is no additional onus on the retailers
to
satisfy the tribunal that the tariff is unreasonable, in order to
activate the tribunal’s jurisdiction to determine a
reasonable
tariff.
(b)
The requirement in s 33(5) of the Act that the tribunal may make an
order
declaring that an applicant ‘is entitled to a licence on
such terms and conditions and subject to the payment of such charges

(if any) as the tribunal may . . . determine to be reasonable in the
circumstances’ if the tribunal is ‘satisfied that
the
claim of the applicant is well-founded’ does not place an onus
upon the retailers to satisfy the tribunal on this issue.
(c)
The retailers placed sufficient evidence before the tribunal to
satisfy
it that the tariff set by SAMPRA was unreasonable and to
enable the tribunal to set a tariff that was reasonable in the
circumstances.
The retailers denied that they were obliged to lead
evidence to establish the rand value they derived from the use of
sound recordings
in their businesses. They accordingly denied that
there are any grounds for a remission of the matter to the tribunal
in terms
of s 36(3)
(b)
of the Act, with an order compelling
them to obtain and lead evidence on this issue.
[11]
The
following issues accordingly arise for decision:
(a)
Does the jurisdiction of the tribunal only arise once the party
referring
the matter to the tribunal has discharged an onus of
satisfying the tribunal that the tariff is unreasonable, or does this
arise
when agreement cannot be reached between the user (the
retailers) and the owners of the relevant copyrights (represented by
SAMPRA)
on the amount of the tariff?
(b)
If the jurisdiction of the tribunal is established by an absence of
agreement
between the parties on the tariff, is the party referring
the matter to the tribunal required to satisfy the tribunal that
their
‘claim’ that the tariff is unreasonable is
‘well-founded’ by the discharge of a formal onus, or is
the
tribunal simply required to be satisfied on this issue, on all of
the evidence placed before it?
(c)
Was sufficient evidence placed before the tribunal for it to be
satisfied
that the claim of the retailers was well-founded either on
the basis that the retailers discharged any onus resting upon them,
or alternatively, on the basis that sufficient evidence was placed
before the tribunal, for it to be satisfied on this issue? If
not,
should this matter be referred back to the tribunal with directions
that the retailers obtain and place before the tribunal
evidence of
the rand value derived by them from the use of sound recordings on
their premises?
(d)
If sufficient evidence was placed before the tribunal was, the tariff
determined by the tribunal reasonable in the circumstances? If not,
what is a reasonable tariff in the circumstances?
The
jurisdiction of the Tribunal
[12]
A
consideration of the contentions of the parties as to the
jurisdiction of the tribunal requires a consideration of the
provisions
of ss 9A, 30, 31 and 33 of the Act. At the outset, it
should be noted that this court in
National
Association of Broadcasters v South African Music Performance Rights
Association & another
[2014] ZASCA 10
;
2014 (3) SA 525
(SCA) para 57 stated the following:
‘
It
is necessary at the outset to say something concerning the rather
tortuous statutory scheme in terms of which the tribunal derives
its
power. As pointed out by Dean in
Handbook
of South African Copyright Law
,
[6]
the factual matrix set out in ch 3 of the Act has to be read “
mutatis
mutandis
to accommodate the adjudication of disputes arising out of s 9A”.
This means that one has to strain to make these provisions
compatible
with those of s 9A more particularly those of s 9A(1)
(b)
and (2)
(c)
.
Put simply, the licensing-scheme provisions are applied to the
determination of the royalty rate. That notwithstanding, the learned

author rightly points out that to adopt a different view would render
the provisions of s 9A nugatory – a consequence that
should be
avoided. Section 33(5)
(b)
therefore applies mutatis mutandis and requires the tribunal, when it
is determining a royalty rate, to make such order as it may

“determine to be reasonable in the circumstances”.’
[13]
In
National
Association of Broadcasters
only the calculation of the ‘needletime’ tariff was in
issue. However, the ‘tortuous statutory scheme in terms
of
which the tribunal derives its power’ is equally apparent when
the jurisdiction of the tribunal is considered.
[14]
The
relevant portion of s 9A of the Act provides as follows:
‘
9A.
Royalties
–
(1)
(a)
in the absence of an agreement to the contrary, no
person may broadcast, cause the transmission of or play a
sound
recording as contemplated in s 9
(c)
,
(d)
or
(e)
without payment of a royalty to the owner of the relevant copyright.
(b)
The
amount of any royalty contemplated in paragraph
(a)
shall be determined by an agreement between the user of the sound
recording, the performer and the owner of the copyright, or between

their representative collecting societies.
(c)
In
the absence of an agreement contemplated in paragraph
(b)
,
the user, performer or owner may refer the matter to the Copyright
Tribunal referred to in section 29(1) or they may agree to
refer the
matter for arbitration in terms of the Arbitration Act, 1965 (Act No
42 of 1965).’
[15]
The
relevant portions of s 30 of the Act provide as follows:
’
30.
General
provisions as to jurisdiction of tribunal
–
Subject
to the provisions of this Chapter, the function of the tribunal shall
be to determine disputes arising between licensing
bodies, or other
persons from whom licences are required and persons requiring
licences, or organisations claiming to be representatives
of such
persons, either –
(a)
on
the reference of a licence scheme to the tribunal; or
(b)
on
the application of a person requiring a licence either in accordance
with a licence scheme or in a case not covered by a licence
scheme.’
[16]
The
relevant portions of s 33 provide as follows:
’
33.
Applications
to tribunal
–
(1)
. . . .
(2)
Any person who claims that in a case covered by a licence scheme the
licensing
body operating the scheme has refused or failed to grant
him a licence in accordance with the provisions of the scheme or to
procure
the grant to him of such a licence, may apply to the tribunal
for an order under this section.
(3)
An application for such an order may also be made by any person who
claims
that he requires a licence in a case not covered by a licence
scheme, and either –
(a)
that
a licensing body or person has refused or failed to grant the licence
or to procure the grant thereof, and that in the circumstances
it is
unreasonable that the licence should not be granted; or
(b)
that
any charges, terms or conditions subject to which a licensing body
proposes that the licence should be granted are unreasonable.
(4)
. . . .
(5)
On any application under subsection (2) or (3) the tribunal shall
give
the applicant and the licensing body in question and every other
party to the application an opportunity of presenting his case,
and
if the tribunal is satisfied that the claim of the applicant is
well-founded, it shall make an order declaring that, in respect
of
the matters specified in the order, the applicant is entitled to a
licence on such terms and conditions and subject to the payment
of
such charges (if any) as the tribunal may –
(a)
in
the case of an application under subsection (2), determine to be
applicable in accordance with the licence scheme; or
(b)
in
the case of an application under subsection (3), determine to be
reasonable in the circumstances.’
In
the present case the parties are
ad idem
that the disputed
tariff does not form part of a ‘licence scheme’ in terms
of the Act. Consequently, only the provisions
of s 30
(b)
and s
33(3) read with s 33(5)
(b)
of the Act are relevant in
assessing the jurisdiction of the tribunal in connection with a
referral to it, in terms of s 9A of
the Act.
[17]
The
problem of reconciling the provisions of these sections in order to
determine the jurisdiction of the tribunal is immediately
apparent.
Whilst s 9A provides for the referral of ‘the matter’ by
either ‘the user, performer or owner’
to the tribunal, in
the absence of agreement as to ‘the amount of any royalty’,
s 30 provides that the tribunal has
jurisdiction to ‘determine
disputes’ arising between ‘persons from whom licences are
required and persons requiring
licences’ on ‘the
application of a person requiring a licence’. To resolve the
apparent anomaly Prof Dean suggests
that s 30 should be interpreted
as though owners and performers holding performers’ rights
should be regarded as ‘other
persons from whom licences are
required’ and users should be regarded as ‘persons
requiring licences’.
[7]
I
agree with this solution. On this basis a referral to the tribunal in
terms of s 9A by a ‘user’ being a person ‘requiring

a licence’ and who has not reached agreement with the ‘owner’
being the ‘person from whom a licence is
required’ should
be interpreted as an application in terms of s 30
(b)
of the Act. In the same way as the provisions of s 33(5)
(b)
were held in
National
Association of Broadcasters
to apply
mutatis
mutandis
to a referral in terms of s 9A, so should the provisions of s 30,
with the same objective, namely to prevent the provisions of
s 9A
being rendered nugatory.
[18]
If
a referral to the tribunal by a user in terms of s 9A, is an
application to the tribunal in terms of s 30
(b)
of the Act, this would also constitute an application ‘by any
person who claims that he requires a licence’ in terms
of s
33(3). The claim advanced in terms of s 33(3)
(b)
would be that the ‘charges, terms or conditions subject to
which a licensing body proposes that the licence should be granted

are unreasonable’.  Because the provisions of s 33(5) are
expressly made applicable in terms of the Act to an application
under
s 33(3), this reasoning also accords with the decision in
National
Association of Broadcasters
.
Consequently, the tribunal dealing with a referral in terms of s 9A,
has to be satisfied that the claim of the applicant (being
the user
or person requiring a licence) is ‘well-founded’ and if
satisfied may determine what ‘charges, terms
or conditions’
subject to which a licence should be granted, are reasonable.
Accordingly, I do not agree with the submission
of the retailers,
that they do not make any ‘claim’ falling strictly within
s 33(3), which would render the provisions
of s 33(5) applicable.
[19]
It
is against this analysis of the relevant sections of the Act that the
submissions of the retailers and SAMPRA as to the jurisdiction
of the
tribunal must be considered. As noted, the retailers submit that the
jurisdiction of the tribunal is located in s 9A, whereas
SAMPRA
submits it is located in s 33(5) of the Act. The retailers submit
that once they, as ‘the user’ and SAMPRA,
as ‘the
owner’, were unable to reach agreement on the tariff payable,
the retailers were entitled to refer the dispute
to the tribunal for
determination. In other words, all that is necessary for the
jurisdiction of the tribunal to be established
is a failure to reach
agreement on the amount of the tariff.
[20]
As
noted, SAMPRA submits, however, that the tribunal’s
jurisdiction to determine a reasonable tariff is only activated in

terms of s 33(5) once the retailers satisfy the tribunal that their
claim is well-founded, that the charges subject to which a
licence
will be granted are unreasonable and thereafter present evidence of
‘circumstances’ applicable to them which
will enable the
tribunal to determine a tariff that is ‘reasonable in the
circumstances’.
[21]
For
reasons which will become apparent later in this judgment, when the
issue of the onus is addressed, it is clear that the submission
by
SAMPRA conflates the discrete issues of the tribunal’s
jurisdiction and the issue of whether there is an onus resting
upon a
party to the dispute. It is clear that in terms of s 9A all that was
required before ‘the matter’ could be referred
to the
tribunal was the absence of an agreement between ‘the user’
being the retailers and SAMPRA, as ‘the owner’,
as to
‘the amount of any royalty’ payable ‘to the owner
of the relevant copyright’. Once the absence of
an agreement
was established the jurisdiction of the tribunal to determine the
dispute in terms of s 30, read with s 33(3) and
33(5), of the Act was
established.
The
issue of the onus
[22]
Section
33(5) provides that the tribunal shall make an order declaring that
the applicant is entitled to a licence on such terms
and conditions
and subject to the payment of such charges (if any), as the tribunal
may determine to be reasonable in the circumstances,
‘if the
tribunal is satisfied that the claim of the applicant is
well-founded’.
[23]
As
we have seen the ‘claim of the applicant’ to a licence is
advanced by way of an application in terms of s 30
(b),
read
with ss 33(3) and 33(5), as a result of the referral in terms of s
9A. This referral has as its foundation an allegation that
the
charges, terms or conditions, subject to which the licensing body
will grant the licence, are unreasonable. It is clear that
before the
tribunal will direct the licensing body to issue a licence to the
applicant, on terms and conditions and subject to
charges which it
determines ‘to be reasonable in the circumstances’, it
must be ‘satisfied that the claim of
the applicant is
well-founded’.
[24]
For
the tribunal to be satisfied that the claim of the applicant is
‘well-founded’ it must have a foundation in fact
or
reason, based on good grounds or evidence.
[8]
There are, however, two possible interpretations of the statutory
requirement that the tribunal must be ‘satisfied’.
Either
the onus is on the claimant to satisfy the tribunal, or there is
simply a requirement that the tribunal be satisfied on
this issue on
all of the evidence. In the latter instance there can be no
suggestion that the claimant must satisfy the tribunal
by the
discharge of a legal onus of proof. In the former instance, however,
the claim must be proved by the claimant by the discharge
of the
requisite onus of proof, to the satisfaction of the tribunal.
[25]
The
retailers submit that the strict application of an onus is ‘simply
inapposite’ to a referral in terms of s 9A of
the Act where the
proceedings come before the tribunal by virtue of an ‘absence
of an agreement’, and not by virtue
of any ‘claim’
made by the retailers in terms of s 33(3). However, in the light of
the construction placed upon the
relationship of ss 9A, 30, 33(3) and
33(5) in the Act, as set out above, there can be no valid distinction
drawn, for purposes
of the presence or absence of an onus.
[26]
The
retailers also submit that the imposition of such an onus upon
referrers such as the retailers, would confer undue protection
in
respect of the monopolistic price demanded by SAMPRA and would unduly
limit the role and function of the tribunal. SAMPRA, in
turn, submits
that the imposition of an onus is supported by the purpose of the
legislation, as well as the nature of the rights
possessed by the
copyright owners. It argues that the Act creates exclusive rights in
sound recordings for specific usage categories
and thereby
establishes a monopoly in respect of each sound recording, in the
hands of the copyright owner. This was aimed at the
promotion,
proliferation and just remuneration of the creative endeavours of the
copyright owners, as well as the stimulation of
the local music
industry. It submits that this has been done against a backdrop of
deprivation and injustice and in order to transform
the economic
conditions of South African musicians.
[27]
As
regards the nature of the rights, SAMPRA submits that the copyright
granted to owners in respect of sound recordings is property
that
enjoys protection under the Constitution. The power accorded to the
tribunal to compel a copyright owner to grant a licence
to a user, it
is submitted, is akin to a deprivation of property and comparable to
expropriation. The retailers contend, however,
that the Act as
amended conferred protection upon copyright owners which they did not
possess before, to prevent the playing of
their sound recordings in
public without their consent. Consequently, the compulsion to grant a
licence subject to the payment
of a tariff does not constitute a
deprivation of property. In the light of the conclusion reached below
on the interpretation of
the Act, it is not necessary to decide the
validity of these submissions.
[28]
It
is clear that the primary purpose in the Act, as provided for in s
9A, is for the parties to reach agreement on the amount of
the tariff
payable. As an alternative to a referral to the tribunal when
agreement cannot be reached, the parties may refer the
matter to
arbitration in terms of the
Arbitration Act 42 of 1965
. The object is
to facilitate the resolution of disputes without resort to formal
legal procedures. However, if the user of copyright
protected music
bears a formal onus of proving that the claim is well-founded, that
the tariff demanded by the owner of the copyright
is unreasonable,
there would be little or no incentive for the owner to reach
agreement with the user, or agree to a referral of
the dispute to
arbitration. This is because a referral of the dispute to the
tribunal would hold the considerable advantage to
the owner of
requiring the user to discharge this onus. Such an interpretation
would undermine the apparent purpose of
s 9A
, which is for the amount
of the tariff to be resolved by agreement.
[9]
That this is not a hypothetical danger is illustrated by the facts of
this case. Mr Lister, on behalf of SAMPRA, stated that –
‘
.
. . the phrase “take it or leave it”, is one that does
not embarrass me in the least, having been the primary negotiator.
We
have said take it or leave it many many times, in exactly the same
way as yesterday Mr Rechardt said the Australian court I
think said
tough, because it is take it or leave it, meaning if you do not want
it, then do not play it. If you are objecting to
the tariff, let us
get to the copyright tribunal.’
On
the take it or leave it approach he stated:
‘
.
. . if any retailer felt that they did not want to pay it, there is
no way that we would reduce it or discount it. Obviously if
we had
found a wide scale rejection, we might have changed that stance. But
we did not. We did not find that wide scale rejection’.
Mr
Du Plessis also said ‘there is the very clear provisions of the
Copyright Act which
says that once we have proposed a tariff that can
be referred to the copyright tribunal’. This was said in the
context of
his view that SAMPRA could speak to the retailers for 20
years ‘only to reach the conclusion then after 20 years that we
still cannot see eye to eye’. He said it would be silly to
gauge market response to the proposed tariff before setting it.
Mr
Lister also added that their case had always been that the onus was
on the retailers to show what they do with the music, and
why they do
it, and to prove the value to them of doing so. His attitude to the
dispute is encapsulated in the following statement:
‘Let us not
waste time, money and energy, emotion and relationships on trying to
resolve a dispute that we are not going
to resolve. Let us get it to
the copyright tribunal.’
[29]
In
addition, there are a number of provisions in the Act, as well as the
regulations promulgated in terms of s 29(3)
(a)
of the Act, regulating proceedings before the tribunal, in which an
informal procedure is envisaged. For example section 33(5)
provides
that ‘the tribunal shall give the applicant and the licensing
body in question and every other party to the application
an
opportunity of presenting his case’, which suggests a more
informal procedure aimed at gathering evidence, rather than
the
strict imposition of an onus on one of the parties. This is also
reflected in reg 27 of the Copyright Regulations
[10]
which deals with the procedure at a hearing before the tribunal. This
regulation provides that ‘. . . every party to the
reference or
application shall be entitled to attend the hearing and to address
the tribunal and call oral evidence’. Regulation
31 of the
Copyright Regulations, which deals with the furnishing of evidence to
the tribunal, provides that evidence ‘shall
be given orally or,
if the parties agree or the tribunal so orders, by affidavit, but the
tribunal may at any stage of the proceedings
require the personal
attendance of any deponent for examination and cross-examination’.
In the
context of the informal procedure envisaged by the Act, as well as
the regulations, it would be incongruous to impose a formal
onus of
proof upon a claimant to satisfy the tribunal that its claim is
well-founded.
[30]
Consequently,
all that is required of a claimant is to place evidence before the
tribunal on the issue of whether the claim is well-founded.
In other
words, an evidentiary burden rather than a legal burden of proof. At
the end of the day for the claimant to succeed the
tribunal is
required to be satisfied, on all of the evidence placed before it,
that the claim is well-founded.
Was
sufficient evidence placed before the tribunal for it to be satisfied
that the claim of the retailers was well-founded, and
that the tariff
proposed by SAMPRA was unreasonable?
[31]
It
is necessary at the outset to deal with the contention by SAMPRA that
the retailers were obliged to lead evidence of the rand
value they
derived from the use of sound recordings in their stores. SAMPRA
submits that the tribunal could only determine what
is a reasonable
tariff ‘in the circumstances’ in terms of s 33(5)
(b)
of the Act, once it was established that this value was
disproportionately lower than the proposed tariff. The discrepancy in
value must be such as would cause economic harm to the retailer. In
addition, the argument went, it would have to be established
that the
retailers need to use the recordings offered by SAMPRA under a
blanket licence in order to sustain the viability of their

businesses. Further, the argument continued, it would have to be
established that no available substitute would serve the retailers

economic interests, even if such available substitutes are recordings
of the same musical works as those offered under a blanket
licence by
SAMPRA.
[32]
The
issue of whether the rand value to the retailers of playing music in
their stores had been researched by them, but not disclosed,
played a
significant role in the evidence led by SAMPRA. Mr Keith Lister, the
chairman of the board of SAMPRA, stated that the
retailers knew the
value of playing music in their stores and that the report prepared
by their experts that they do not, was ‘a
work of fiction’.
He was of the view that the evidence of the economist of the
retailers, that no one knows the economic
value of music and no one
can presently calculate it, is ‘complete nonsense’.
However, Mr Lauri Rechardt, an attorney
in Finland and a consultant
to the International Federation of the Phonographic Industry, called
by SAMPRA, stated that he had
not seen this type of evidence used in
any court case. He said he had not seen any studies that established
that for a retailer
to play original recorded music ‘the value
is X amount of Euros or Dollars or Rand. . . ’ although he
would prefer
it if there was such evidence. He assumed that this was
because the retailers would be unwilling to assist in collecting such
information,
which they would not wish to disclose.
[33]
These
views were echoed by another expert called by SAMPRA namely, Prof
Charles Areni, to comment on the use by retail businesses
of
atmospheric music to achieve commercial objectives. He was not,
however, asked to express an opinion on whether the SAMPRA tariff
was
reasonable. He agreed that no research had been done anywhere to
assess the global relationship between playing music in a
retail
environment and profits. He also agreed that any such study would be
prohibitively expensive and impractical, because it
would take too
long. He said he would accordingly not criticise the retailers for
not conducting this type of research. He added
that it was not just
that the research was not available, but the magnitude of the study
would need so many retailers, so many
different formats of music
would have to be tested, so many variables would have to be kept
track of and even then one could not
be sure that the simple result
would generalise to all retailers. He added that anybody considering
this type of research would
consider that it was going to cost a lot
of money, take a lot of time and whatever conclusion was attained may
not apply to all
retailers. Accordingly in his view, one could not
expect the retailers in this case to carry out this type of research.
[34]
Mr
David du Plessis, a member of the board of SAMPRA, stated that any
attempt by the retailers to measure the economic value of
playing
music in their stores, would produce a result that would be
speculative and subject to a wide range of variables. He explained

that different users may extract different value from the use of the
same repertoire of music. Even within one retailer, one might
find a
different usage of the same music. He had no expectation that the
retailers would be able to say what the actual monetary
value was to
them, of playing music in their stores.
[35]
Prof
Donald Ross, a professor in the school of economics at the University
of Cape Town, was called by the retailers to comment
on the tariff
set by SAMPRA, how it would compare with one that a free market would
be expected to set and how it compared with
a tariff that would
optimise overall social welfare. He stated that no research had been
done by any party that would quantitatively
estimate the value range
to retailers of broadcasting copyright protected music. It would not
be impossible to investigate this
but would require time consuming,
carefully designed and relatively expensive experiments. The outcome
of such research at a particular
retailer’s store would not,
however, be sufficient to set a tariff for all stores. In addition,
the sample of retailers studied
would have to be random with respect
to all the variables in the structural model, and would involve the
sharing of information
between the retailers studied. The researchers
would have to have access to the cash register outputs over a period
of time of
all the stores in the study. They would have to share this
confidential information. The reluctance of businesses to reveal
their
cost structures to their competitors was a very sound principle
of business, and a reason why this research had not been done. He

agreed that such a study would be prohibitively expensive and that it
had not been done anywhere to his knowledge. It would cost
millions
of rands and take a couple of years to complete. Although this
research would have been the first choice for a systematic
analysis
of optimal tariffs, it would require a retailer to release private
information and no retailer anywhere in the world would
be prepared
to do that.
[36]
It
is against this evidence that SAMPRA’s submission that the
retailers were obliged to lead evidence to prove the rand value
they
derive from the use of sound recordings, and that this is
disproportionately lower than the proposed tariff of SAMPRA, has
to
be assessed. It will be recalled that a further submission by SAMPRA
in this regard is that in the absence of this evidence,
there is
insufficient evidence available to this court to make its own
determination of the reasonableness of the tariff. The consequence,

according to SAMPRA, is that unless this court upholds the tariff set
by SAMPRA the only option is to remit the matter to the tribunal.
As
pointed out, it is in this context that SAMPRA adds that it is
unwilling to lend its consent to this court substituting its
own
determination in the place of the tribunal’s tariff, in the
name of expediency.
[37]
SAMPRA
submits that the unwillingness of the retailers to make confidential
information available could be addressed by appropriate
orders of
confidentiality. The problem, however, with SAMPRA’s insistence
upon proof of the rand value to retailers of playing
music in their
stores, lies not only in the issue of confidentiality. The evidence
is that this study would be prohibitively expensive
and impractical
as it would take too long to complete. In addition, it cannot be said
that any conclusion reached could be applied
to all of the retailers.
In my view, it was accordingly not necessary for the retailers to
lead evidence of the rand value to them
of playing music in their
stores, in order for the tribunal to be satisfied that their claim
was well-founded. There is accordingly
no justification for a
referral to the tribunal for this purpose.
[38]
I
turn to consider whether sufficient evidence was placed before the
tribunal for it to be satisfied that the claim by the retailers
was
well-founded in that the tariff proposed by SAMPRA was unreasonable.
The evidence of Prof Ross and Prof Areni described three
possible
methods which could be utilised to determine the tariff. The first
method dealt with above was the determination of the
rand value to
the retailers of playing music in their stores. The remaining two
methods were the ‘market-based solution’
proposed by Prof
Areni and the use of tariff levels in foreign jurisdictions as a
benchmark, proposed by Prof Ross.
[39]
Prof
Areni stated that in the absence of agreement between the user and
copyright owner, the operation of market forces should be
left to
determine the tariff. The appropriate criterion was that the tariff
should maximise SAMPRA’s revenue and market forces
would
constantly move towards where the optimum tariff rate should be. This
would mean that there would be no need for intervention
by the
tribunal. However, he accepted that the tribunal must act in the
public welfare and set a tariff that accords with public
welfare. He
conceded in cross-examination that he was not aware of the legal
framework in which the tribunal operated, which directed
the tribunal
to determine the tariff. This accordingly precluded market forces
being left to decide whether the tariff was too
high or too low. In
the result, there is no basis for Prof Areni’s view that market
forces should be left to determine the
tariff.
[40]
I
turn to the issue of the use of tariff levels in foreign
jurisdictions as a benchmark to establish the tariff. Mr Lister
disagreed
that tariff levels in foreign jurisdictions could serve as
a basis for determining a reasonable tariff. The role of foreign
tariffs
was simply a point of reference, once it had been decided
what a reasonable tariff would approximately be. Mr Smit, the
national
sales manager for SAMPRA, stated that his first role when he
joined SAMPRA was to gather information in order to establish tariffs

for SAMPRA. He looked at the tariffs of collecting societies in other
countries, which he used as a guide to establish the tariffs
in 32
different categories for SAMPRA. When cross-examined he said that in
setting the tariff for retailers he looked at the tariff
set in the
United Kingdom by Phonographic Performance Ltd (PPL) and the tariff
of the Phonographic Performance Company of Australia
(PPCA) in
Australia, as well as the tariff of the South African Music Rights
Organisation (SAMRO), which administers the performance
rights of
composers and lyricists. Consequently, the two currencies he looked
at were the UK pound sterling and the Australian
dollar. He was told
by Mr David du Plessis to examine these two tariffs because PPL was
the oldest society and the trading conditions
in the United Kingdom
and Australia were similar to South Africa. Mr Du Plessis confirmed
that what was presented to Mr Lister
to determine the tariff was the
Australian and UK tariff levels together with the SAMRO tariff
levels. The evidence of how SAMPRA
went about determining the tariff
accordingly does not support the assertion made by SAMPRA, that to
use any form of benchmarking
to determine the tariff would be both
unreasonable and arbitrary.
[41]
Prof
Ross stated that in the absence of research to establish the rand
value to retailers of playing copyright protected music in
their
stores, the only practical recourse in order to avoid economic
arbitrariness was for the tribunal to have regard to comparable

tariffs in other countries. Prof Areni stated that although he was
not qualified to comment on Prof Ross’ testimony that
it was
standard practice, when regulating the price in regulated markets
around the world to do benchmarking exercises, he agreed
that this
was fair. He conceded that reference to international benchmarks was
a relevant input in setting tariffs, but should
not solely be relied
upon.
[42]
In
the light of the evidence that SAMPRA paid regard to international
benchmarks in setting the tariff, as well as the above concession
by
Prof Areni, the view of Prof Ross that international benchmarking is
a method of preventing economic arbitrariness in setting
the tariff,
must be accepted. This court in
National
Association of Broadcasters
(para 70) referred to international benchmarks in determining the
‘needletime’ royalties payable by commercial and
public
radio stations for the broadcasting of sound recordings.
[43]
Prof
Ross stated that he focused on the United Kingdom and Australia when
carrying out his benchmarking exercise. He did not do
this because
these two jurisdictions had been relied upon by SAMPRA, but for a
number of independent reasons. These countries had
Copyright
Tribunals in which there had been fairly recent reviews of needletime
tariffs and the legislative and regulatory framework
governing music
rights and collecting societies closely resembled South Africa’s.
He concluded that Australia, however, was
the best reference point
for a qualitative evaluation of South African tariffs for a number of
additional reasons.
[44]
In
South Africa and Australia there are two principal collecting
societies. The PPCA is the counterpart to SAMPRA in Australia,
which
collects licence fees for copyright and recorded versions of musical
words. The Australian Performing Rights Association
Ltd (APRA) is the
counterpart to SAMRO, which collects licence fees for copyright in
the musical works themselves.
The
South African rand and the Australian dollar are both currencies
based to a large extent on extracted industry being minerals
and are
small, quite heavily traded, currencies. As a result historically
they have tended to track each other very closely and
accordingly the
economic analysis was much less likely to invoke arbitrariness or
error. In addition, both markets are not integrated
into a large free
trade area. In both countries the markets are relatively far from
other large markets that produce a lot of recorded
music and have
relatively vulnerable indigenous music, which does not have a
presence in other international markets and which
is accordingly
dependent on the domestic market. Both countries, therefore, have
similar concerns to ensure their domestic niches
are protected. In
addition, the retailers of domestic music sales in both countries are
similar and, as both countries use English
as the main language of
business and trade, the appeal of the dominant US and UK music
catalogues was comparable. In his view there
was no factor unique to
Australia which would have the result of drawing down tariff levels
in that country, relative to the rest
of the world.
[45]
Mr
Lister, on behalf of SAMPRA, was of the view, however, that Australia
was the country which was the least comparable to South
Africa. His
reason was that the indigenous music scene in South Africa consisted
of several language groups, whereas domestic music
in Australia
consisted of ‘imitation American music’. The South
African industry was about making music that reflected
the diversity
of the country’s culture, whereas Australia was a mono-cultural
society. However, it seems that the similarity
is simply that both
markets have relatively vulnerable indigenous music.
[46]
In
the face of this evidence the allegation by Prof Areni that Prof Ross
had selected Australia as a suitable comparator, simply
because it
had the lowest tariffs, which suited his clients’ interests and
the selection of which Prof Ross did not genuinely
believe in, is
quite clearly without foundation. From the detailed reasons Prof Ross
furnished as to his selection of Australia
as a suitable comparator
as well as the fact that SAMPRA utilised the Australian tariffs in
setting the tariff, it is clear that
Prof Ross’ selection of
Australia was justified.
[47]
Prof
Ross accordingly ascertained the tariff of the PPCA for each of the
categories specified in the tariff, determined by the floor
area of
retail stores in square metres. The retailers did not dispute that
the tariff should be based upon the square meterage
of individual
retail stores, which was the accepted approach internationally. The
PPCA tariff sounding in Australian dollars was
converted into rands,
using two alternative conversion factors being purchasing power
parity (PPP) and the exchange rate. He explained
that PPP indicates
how many rands you would need in South Africa, to buy what you could
for one Australian dollar, in Australia.
In this way the foreign
price is placed within the local context. A conversion utilising the
exchange rate does not do that, because
a conversion using the
exchange rate means that South African consumers would be paying more
in real terms, than their Australian
counterparts. South African
consumers would then be charged for recorded music as if they were in
Australia, operating in the general
Australian price and income
context. This would, however, be unfair, because South African
incomes are much lower than Australian
incomes and South African
prices are lower than Australian prices in real terms. He stated that
where a regulator, such as the
tribunal, is primarily concerned with
maximising the welfare of domestic people, purchasing power parity is
the more appropriate
comparison. Prof Ross accordingly recommended
that the tribunal endorse a tariff at the PPCA level converted to
rands, in accordance
with purchasing power parity. In this context it
is clear from the evidence of Mr Smit that SAMPRA’s provisional
tariffs
were set by converting the Australian tariff to rands, using
purchasing power parity, in the form of the Big Mac index. This index

was developed by economists as a simple way to estimate the extent to
which a currency is relatively over-valued, or undervalued
by
exchange rates. The exchange rate prices of McDonald’s Big Mac
hamburgers across a range of countries are compared. The
basis for
this comparison is that the hamburger is a common product having the
same ingredients and therefore draws from a range
of inputs across
the economies.
[48]
Prof
Ross stated that a comparison of the SAMPRA tariff with the PPCA
tariff indicated that the SAMPRA tariff was substantially
higher than
the PPCA tariff which became more marked, the larger the store. This
was the case regardless of whether PPP, or the
exchange rate, was
used as a conversion. He was of the view that the tariffs he
recommended were closer to an efficient market
rate than the current
monopolistic rate of SAMPRA’s tariffs. The tariff he
recommended was, however, higher than the rate
which a competitive
market would produce. The tariff categories produced by Prof Ross
were based upon the SAMPRA tariff categories
determined by the square
meterage of each distinct category.
[49]
Apart
from the evidence of Prof Ross that the tariff established by SAMPRA
was excessive, there are a number of other factors which
indicate
that this is so. Mr Lister stated that in determining the tariff he
identified in ascending order, the tariffs in other
countries. This
was because the record companies felt they had ‘been sold
short’, and SAMPRA was going into the market
for the first time
and did not want to be locked into the bottom half of the table of
comparative rates in other countries. He
therefore positioned the
tariff at the 75 per cent mark of these tariffs to see whether
anybody was able to say they were ‘way
out of line’. He
conceded that although some people may think the tariff was out of
line, he did not. Prof Ross criticised
this approach as he did not
understand why the tariff in a developing country such as South
Africa should be placed in the top
quartile of the tariffs of
countries in general, as economically it was arbitrary and not
rational. He stated that SAMPRA’s
tariffs ranged between the
14
th
and 17
th
most expensive, and were higher than almost all of the developing
countries and higher than a few of the wealthier countries, including

Australia. In general, SAMPRA’s rates were approximately
equivalent to the average counterpart rates in countries with per

capita gross domestic products about one third higher than South
Africa. In other words, SAMPRA’s tariffs were on a par with

countries that on average were one third richer than South Africa,
for which there was no economic justification. Consequently,
the
SAMPRA tariff, in comparison with other tariffs, was unreasonable.
[50]
SAMPRA
also submitted as justification for the amount of the tariff that its
tariff should be higher than that of SAMRO. This was
based upon the
view of Mr Du Plessis that the value in the sound recordings was
worth more than the value in the underlying composition,
at least in
the bulk of the music used by the retailers. According to Mr Du
Plessis this had nothing to do with the fact that the
SAMRO rate was
unreasonably low. This court, however, in
National
Association of Broadcasters
(para 63) expressed the view that ‘[i]t does not appear that
royalty rates for sound recordings internationally exceed composer

royalty rates. It is arguable, though not definitive, that composers
are the key component in relation to the production of music.’

Prof Areni stated that he was not aware of any research on this issue
and accordingly there was no scientific basis for the proposition.
Ms
Kobie Swart, an expert in music therapy, agreed that one could not
make a general statement in this regard, as it would depend
upon the
individual piece of music as well as the type of music. I accordingly
agree with the submission by the retailers that
there was no
rationally justifiable basis for SAMPRA’s decision to adopt a
tariff level considerably higher than that of
SAMRO.
[51]
SAMPRA
led no expert evidence to rebut the evidence of Prof Ross that the
tariff set by SAMPRA was excessive and therefore unreasonable.
Prof
Areni, as pointed out above, stated that he had not been asked to
express an opinion on whether the rate set by SAMPRA was
reasonable.
There was accordingly sufficient evidence before the tribunal for it
to be satisfied that the retailers’ claim
was well-founded, ie,
that the tariff set by SAMPRA was unreasonable. In coming to this
conclusion I do not overlook the contentions
of SAMPRA that a
relevant factor in setting the tariff was the administrative benefit
to users of copyright music, in having to
deal with one entity,
namely SAMPRA, and not several record companies to agree a tariff. I
also do not overlook the contention
of the retailers that a further
relevant factor to setting the tariff is the benefit to SAMPRA of
having its music played in the
retailers’ stores and exposing
it to the public. In the context of all of the evidence I do not
regard either of these contentions
as being of significance in
determining whether there was sufficient evidence before the
tribunal.
[52]
The
remaining issue is whether the tariff determined by the tribunal was
reasonable in the circumstances. The table below sets out
the
discrete categories based upon the floor area of a store in square
metres. The first column is the SAMPRA tariff for each category
and
the second column is the equivalent PPCA (Australian) tariff
converted to rands, using PPP by Prof Ross. The third column sets
out
the tariff awarded by the tribunal for each category. The final
column sets out the tariff which counsel for the retailers
submitted
was a reasonable tariff in each category.
Size
of store
SAMPRA
tariff 2008/2009
Retailers/Prof
Ross recommended tariff
Copyright
Tribunal tariff
Copyright
Tribunal tariff set at 30% of Sampra tariff
Up to 50 m²
R500
R279.46
R389
R150
Between 50 and 100 m²
R1000
R279.46
R389
R300
Between 100 and 200 m²
R1500
R337.32
R568
R450
Between 200 and 300 m²
R2000
R376.10
R620
R600
Between 300 and 500 m²
R2500
R399.49
R840
R750
Between 500 and 750 m²
R3000
R511.52
R930
R900
Between 750 and 1000
m²
R3500
R549.69
R1050
R1050
Between 1000 and 1250
m²
R4000
R646.94
R1110
R1200
Between 1250 and 1500
m²
R4500
R676.49
R1110
R1350
Between 1500 and 1750
m²
R5000
R709.73
R1220
R1500
Between 1750 and 2000
m²
R5500
R739.89
R1220
R1650
Between 2000 and 2500
m²
R6000
R792.83
R1220
R1800
Between 2500 and 3000
m²
R6500
R839.00
R1220
R1950
Between 3000 and 3500
m²
R7000
R880.24
R1220
R2100
Between 3500 and 4000
m²
R7500
R917.17
R1220
R2250
Between 4000 and 4500
m²
R8000
R951.03
R1220
R2400
Between 4500 and 5000
m²
R8500
R983.03
R1220
R2550
Between 5000 and 6000
m²
R9000
R1039.67
R1220
R2700
Between 6000 and 7000
m²
R9500
R1090.76
R1220
R2850
Between 7000 and 8000
m²
R10000
R1136.92
R1220
R3000
Between 8000 and 9000
m²
R10500
R1179.40
R1220
R3150
Between 9000 and 10000
m²
R11000
R1218.17
R1220
R3300
Every
additional 1 to 1000 (above 10000)
R500
[53]
From
the table it is apparent that the tribunal placed a limit on the
tariff in stores with a floor area of 1750 square metres.
Thereafter
the rate was fixed without regard to the increasing size of the
store. No reasons were given in the judgment for this
radical
departure from the approach of SAMPRA and the retailers that there
should be a progressive increase in the rate, based
upon the
increased size of a store. In addition, no reasons were furnished in
the judgment why a particular tariff was determined
for each
category. The tariff set by the tribunal is considerably less than
the tariff set by SAMPRA. Other than the statement
in the judgment
that the tariff should ‘optimise public welfare’ and that
it ‘is reasonable in the circumstances’
no other reasons
are furnished for its award. An examination of the tariffs determined
by the tribunal reveals no rational or consistent
basis for their
computation, save that it appears the tribunal arrived at the initial
rate of R389 up to 50 square metres, by averaging
the initial rates
for this category of SAMPRA and the retailers.
[54]
The
determination of the tariffs by the tribunal, in terms of s 33(5)
(b)
of the Act, accordingly is not ‘reasonable in the
circumstances’. In terms of s 36(3)
(a)
of the Act, this court is entitled to confirm, vary or set aside the
order of the tribunal as this court ‘may deem fair’.
It
is in the context of determining a tariff that is fair to both
parties and which is reasonable in all of the circumstances that
I
find merit in the submission by counsel for the retailers. The
submission was that SAMPRA should be awarded 30 per cent of the

tariff set by it. The resultant tariff set out in the fourth column
of the table is higher than the tariff awarded by the tribunal
in
stores with an area exceeding 1000 square metres. In addition, except
for stores up to 50 square metres, it is higher than the
tariff
recommended by Prof Ross in each category. This disparity becomes
more apparent in stores over 1250 square metres in size,
where it is
approximately double the tariff recommended by Prof Ross. This
progressive increase becomes more marked in larger stores
where it
increases to two and a half times the rate recommended by Prof Ross.
The rate proposed is accordingly considerably higher
than the PPCA
(Australian) tariff for all floor sizes, except for stores less than
50 square metres in size. When regard is had
to Prof Ross’
recommendation that the tariff should be set at the Australian tariff
level and this is the only expert evidence
that attempts to determine
what a reasonable tariff is in the circumstances, in my view the
tariff proposed by the retailers is
fair to SAMPRA and the retailers
and reasonable in the circumstances of this case.
[55]
As
regards costs SAMPRA submits that the view of the tribunal that
SAMPRA’s ‘take it or leave it’ approach at
the time
of setting the tariff, justified an award of costs in favour of the
retailers was unjustified. This was because the legislative
framework
did not impose a duty on either of the parties to reach an agreement.
However, the tribunal followed this statement by
adding that the
retailers succeeded in having the tariff set by SAMPRA reduced, as
justification for the award of costs. In terms
of reg 36 of the
Copyright Regulations the tribunal has a discretion to award ‘the
costs of and incidental to any proceedings’
to any party. In
all of the circumstances, I can see no reason to alter the costs
order of the tribunal. As regards the costs of
the appeal, although
SAMPRA has succeeded in achieving an increase in the tariff awarded
by the tribunal in respect of floor areas
greater than 1000 square
metres, this is still considerably less than that determined by
SAMPRA. In addition, the increase in the
tariff in this appeal was
not as a result of any of the legal submissions advanced by SAMPRA
being upheld. In all of the circumstances,
the extent of SAMPRA’s
success should be acknowledged by awarding it 50 per cent of its
costs of the appeal.
[56]
I
make the following order:
1.
The appeal is
upheld to the extent of the order contained in para 2 below.
2.
The order of the Copyright Tribunal contained in para 79.1, read with

para 76 of the judgment of the Copyright Tribunal, is set aside and
substituted with the following order:
a)
The following tariff is declared to have been the reasonable rate of
royalties in terms of
s 9A
of the
Copyright Act 98 of 1978
with
effect from 1 January 2008:
Fees: Size of
Premises (Audible Area in square metres)
Licence Fee per
store per Annum (exclusive of VAT)
Up to 50
R150
51 to 100
R300
101 to 200
R450
201 to 300
R600
301 to 500
R750
501 to 750
R900
751 to 1000
R1050
1001 to 1250
R1200
1251 to 1500
R1350
1501 to 1750
R1500
1751 to 2000
R1650
2001 to 2500
R1800
2501 to 3000
R1950
3001 to 3500
R2100
3501 to 4000
R2250
4001 to 4500
R2400
4501 to 5000
R2550
5001 to 6000
R2700
6001 to 7000
R2850
7001 to 8000
R3000
8001 to 9000
R3150
9001 to 10000
R3300
Every additional 1 to
1000 (above 10000)
R150
b)
The tariff is subject to revision with effect from 1 January every
year in accordance with the Consumer Price Index for the previous

year.
3.
The
respondents are ordered to pay 50 per cent of the appellant’s

costs of the appeal, such costs to include the costs of two counsel.
K G
B Swain
Judge
of Appeal
Appearances:
For
the Appellant:

M Brassey SC (with D Ehrlich) (heads of argument prepared by G Marcus
SC and D Ehrlich)
Instructed
by:
Edward
Nathan Sonnenbergs Inc, Sandton
Matsepes
Inc, Bloemfontein
For the Respondents:

A R Sholto-Douglas
SC (with M Blumberg)
Instructed
by:
Bernadt
Vukic Potash & Getz, Cape Town
Lovius
Block, Bloemfontein
[1]
The playing of a
sound recording includes ‘communicating the sound recording to
the public’ in terms of s 9
(e)
of the Act.
[2]
Regulation 3(1)
(a)
of the Collecting Society Regulations, GN R517
GG
28894, 1 June 2006.
[3]
In terms of
s 8
of
the
Patents Act 57 of 1978
.
[4]
In terms of s
29(1) of the Act.
[5]
Paddock Motors
(Pty) Ltd v Igesund
1976 (3) SA 16
(A) at 23C-F;
Bank
of Lisbon and South Africa Ltd v The Master & others
[1986] ZASCA 121
;
1987 (1) SA 276
(A) at 290D-F;
Road
Accident Fund v Mothupi
[2000] ZASCA 27
;
2000 (4) SA 38
(SCA) para 30 and 33.
[6]
O H Dean
Handbook
of South African Copyright Law
(Revision Service 14, 2012) at 1-55.
[7]
O H Dean op cir at
1-55.
[8]
See the definition
of ‘well-founded’ in
The
Shorter Oxford English Dictionary
6 ed (2007) Vol 2.
[9]
Natal Joint
Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) para 18.
[10]
Copyright
Regulations, GN R2530,
GG
6252, 22 December 1978.