The Webcaster Alliance filed an antitrust complaint against the Recording Industry Association of America (RIAA) and its leading members on Wednesday, alleging that they had set royalty rates at an excessive level in order to drive independent webcasters out of business.
The Webcaster Alliance is a trade organisation for independent webcasters - internet radio broadcasters. It was set up to assist members in dealing with the royalty payments that have to be paid in respect of copyrighted songs broadcast on-line.
In 2001 a Copyright Arbitration Royalty Panel (CARP) was set up to recommend the rates to be paid between October 1998 and December 2002. After some changes the Librarian of Congress then set the rates in July 2002 (the LOC rates). These amounted to 0.07 cents per song and were to have retrospective effect.
According to Webcaster's complaint, "Based on the LOC rates, small webcasters faced immediate extinction because the back-royalties from the period commencing October 1998 were catastrophically high."
In order to help the small webcasters, the US Congress then enacted the Small Webcaster Settlement Act, which effectively changed the rates to those set out in a private agreement between a division of the RIAA, SoundExchange, and another trade association called the Voice of Webcasters (VOW).
These rates were based on a percentage of revenue, rather than on a per song basis. According to the complaint they were:
"not only unreasonably high, but actually put many small webcasters in worse position than under the LOC Rates by among other things, increasing by four-fold the minimum fee found to be reasonable by the CARP."
As a result, says the complaint, competition in the market for "domestically recorded sound recordings and in the market for internet distribution for such sound recordings" has been restricted.
The complaint alleges:
"RIAA and the Labels were acutely aware that certain VOW members faced significant back royalties under the LOC Rates and that these members would be effectively out of business if such royalties became due on October 20, 2002. Using such negotiating leverage to its maximum effect, RIAA and the Labels coerced certain VOW members to support a small webcasting agreement that would be applied to all small webcasters under SWSA."
According to Ann Gabriel, president of the Webcaster Alliance:
"It is time for the RIAA to be held accountable for years of manipulating an entire industry in order to stifle the growth of independent music and control internet content and distribution channels. Their ruthless campaign has also had the devastating effect of destroying the hopes and dreams of thousands of independent internet radio stations. It is time for us to stand up to the RIAA and fight for the American consumer's freedom of choice."
A spokesperson for the RIAA dismissed the complaint, telling CNet News.com, "This lawsuit is a publicity stunt that has no merit".