News

Canadians Overpay Millions on Private Copying Levy

The Copyright Board of Canada issued its latest private copying decision [pdf] on Friday.  The fourth major decision from the board on private copying, the decision addresses the levy for 2005 – 2007 (the Canadian Private Copying Collective attempt to extend the levy to iPods and SD cards would commence in 2008). 

Interestingly, the levy will decrease slightly as a result of this decision, though the Copyright Board was actually inclined to increase the rate (note that all opposing parties dropped out of the proceedings, leaving only the CPCC to present evidence). The Board felt that 29 cents would be the appropriate levy for blank CDs, yet kept the levy at 21 cents since that is what the CPCC requested.  At the same, it reduced the levy for other blank media – cassette tapes dropped by five cents to 24 cents per tape, while CD-R Audio, CD-RW Audio, and MiniDiscs all dropped from 77 cents to 21 cents. 

The reduction in the levy leaves a significant surplus with the Board estimating that the CPCC will need to return $2.5 million in overpayment for the past three years.  The CPCC has expressed disappointment at this result and indicated that it will develop a plan to reimburse importers and manufacturers for the higher levies that were collected from 2005 – 2007.  Of course, assuming that the price of the levy was passed along to consumers, it is not the importers and manufacturers that should receive the reimbursement – it is Canadian consumers.  The Board absolves itself of this issue by stating that "it is not for us to determine who, in the supply chain leading to the final consumer, will be the ultimate beneficiary of these refunds."  In other words, Canadians have overpaid millions of dollars over the past three years for the private copying levy, yet that money will go into the pockets of importers, manufacturers, and possibly retailers (sounds like a class action lawsuit waiting to happen).

In addition to the overpayment issue, the decision contains several interesting revelations.  First, the decision sheds some light on the CPCC's enforcement program.  The collective has aggressively targeted those parties that do not pay the levy, with 21 claims over the past three years.  In fact, the enforcement program has been so effective that the Board found that concerns about the emergence of a gray or black market for blank CDs has not materialized.  Second, the Board indicated that it expects that revenues earned from the levy will steadily decrease in the coming years as the popularity of blank CDs gives way to other media.  Of course, the CPCC has sought to address that by expanding the levy to iPods and SD cards.  Third, despite claims that the levy does not apply to computer hard drives, the decision reveals that the Canadian Association of Broadcasters struck a deal with the CPCC in which it agreed that it would not collect a levy on computer hard drives used by broadcasters primarily for broadcasting purposes. Finally, readers may recall a CPCC survey which purported to find that Canadians think the private copying levy is reasonable.  The retailers objected to the survey, but the Board went out of its way to state that it took no account of the findings in reaching its decision.

19 Comments

  1. Anonymous says:

    Class action sounds dumb to me
    Sure – have a class action lawsuit for a few cent refunds per person… let’s enrich the legal profession, create legal defense costs for the importers. Those increased legal costs will ultimately get passed on to consumers.

    So, besides lawyers, who do you think would benefit from this class action?

  2. Michael Geist says:

    More than a few cents
    Fair point, but something is needed to ensure that consumers get their money back. For those affected, the dollars are not insignificant. For example, a MiniDisc or CD-R Audio user who purchased 100 blank discs over the last three years is out $56.

  3. Where does the tax go?
    I remember when this all started it was to pay artists for lost royalties when their CD gets copied instead of being bought. Other than the CPCC itself (Lawyers included), where does the money go?

    If the money only goes to the CPCC, Doesn’t this make the levy a government sanctioned protection scam? Did Avril Lavigne and NickleBack get their cheques, yet?

  4. Where are these CD-R Audio discs? I\’ve only ever used the same kind of disc to burn both data and audio, for as long as I\’ve burned CDs. I\’m confused about why there would be a different kind of CD with a levy almost four times as large if one can pick either one without caring. Also, I can get 100 CDs right now for $20 from a favorite store of mine – isn\’t that less than the levy for 100 CDs?

  5. Xetheriel says:

    Another Picture…
    Aside from the potential class action lawsuit this could bring, it paints a different picture to me…

    This seems to show me that the private copying levy is *more* than adequate at re-reimbursing those who would lose out on profits from CD sales. I don’t speak for everyone, only myself, but I’m happy with the private copying levy, and if it means that Canadian citizens are free from the lawsuit campaign that the RIAA has been bringing to American citizens, Then by all means, levy what you feel is appropriate to reimburse artists.

    Now, that doesn’t mean that I condone the wonton distribution of millions of songs over P2P networks, but for somebody like me, who enjoys music, but can’t afford to buy hundreds of CD’s for all the music I want, paying a levy on blank CD’s makes me feel a little better about borrowing CD’s from the public library and copying them.

    I would even go as far to say that they should extend this levy to blank DVD’s.

  6. Dr
    Sorry, what does “overpayment” mean? Is the fee not “by the disc”, so no error could happen?

  7. CD-R Audio is sometimes needed
    CD-R Audio is sometimes required by specialized audio devices that do audio recording only. If you think of it as a “cassette deck for CDs” you will be pretty close.

    All of this CD-R Audio stuff is pretty much spillover from the U.S. Audio Home Recording Act (AHRA) which created special rules around home recording, and for which there *could* be a levy on CD-R Audio (there is one for cassette), so they are created and treated in a special fashion, with special levies, pricing, and some technical details.

    Of course, all of this was worked out in 1992 when hard drives were barely held more than a CD-ROM. The idea that many, many people would have hard drives that could hold 100 CD’s worth of data was not in the legislative forecast. That largely sidelined the idea of buying a specialized CD-R Audio recorder, which typically cost more than today’s desktop PC.

    The history of technological change not being in the legislative forecast is a very long one.

  8. I have mixed thoughts on this. This levy was charged to the manufacturers/importers/retailers, right? The consumer made a free market exchange here. They thought the price was fair for the product, and they paid for it. Why should consumers get reimbursed?

    If the government retroactively reduced corporate income taxes for last year, should consumers expect checks in the mail for all of the purchases they made? These are all business costs that factor into the price.

    Now don\’t get me wrong: I completely disagree with the purpose of the levy to begin with. But I\’m not sure how consumers must necessarily be the ones to benefit from this. Kudos to the corporations that do pass their relief onto their customers, but I don\’t understand how people are jumping to the conclusion that there\’s a legal obligation to do that.

    It might have made more sense for them to make the adjustment, and simply deduct it from future sales. Consumers get \”reimbursed\” by virtue of (hopefully) lower prices in the near future, until the surplus is exhausted.

  9. Who really pays?
    “If the government retroactively reduced corporate income taxes for last year, should consumers expect checks in the mail for all of the purchases they made?”

    The levy was expressly designed as a pass-through — the idea was to charge the end-user, but the levy was applied at the manufacturer/importer for efficiency reasons.

    A better paraphrasing of your question would be…

    “If the government retroactively reduced the GST for last year, should consumers expect checks in the mail for all of the purchases they made?”

  10. I think we should really spend some time looking into the legality of the levy in the first place. I have never seen a satisfactory answer for the calculation that is used to set the levy (which I believe to be arbitrary). When I questioned this a few years ago I approached it on the fact that “open source” should not have the levy and therefore if I returned all my “used” discs ( CD’s at the time) then I should be entitled to a rebate of the levy since I proved positively that the media (CD’s) were not used for any copyright materials.
    I was told that that factor had be used to calculate the levy in the first place. But when I asked to see the calculation they were not forthcoming.
    I think this would also be a good basis for a class action suit!

  11. MickEfinn says:

    I’m fine with the levy. Makes me feel good actually.

    The Government says I’m a thieving bastard and I should pay for my thieveryishness. Fine. But then I feel not a shred of guilt in grabbing things. After all, I’m giving the Govt it’s cut.

    I’m a patriot! Sponsored by the Government I am!

    Viva La Canada!

  12. Graeme Lawrie says:

    Retail Electronics Manager
    I’m surprised the RIAA hasn’t sued the CPCC yet. The majority of music being copied in Canada is no doubt American, the CPCC are effectively collecting royalties on other people’s music without paying them. Perhaps I’m missing something here?

    And what’s this about a levy on SD cards? This is insanity. Probably less than 2% of MP3 players use SD cards, and out of all SD card owners I’m sure 99.9% of them use them in their digital cameras.

    Overall I disagree with the levy system because it is based on a misguided principle that the innocent (someone who buys CD-R’s for data) should pay for other people’s “crimes”. Every other industry is forced to factor in whatever losses it might incur from theft in to it’s budget, yet somehow these wizards managed to convince legislators to force the population to pay for their “losses” (which probably barely put a dent in their profit margins). I can’t comprehend how this is legal.

  13. Graeme Lawrie says:

    Looks like I’m not the first to be confused by the “Title” field :)

  14. Rob Jenkins says:

    Levy is plain wrong anyway
    The whole concept of paying a levy for media that is going to be used for “private copying” is ludicrous. By definition, you are recording copyrighted content that has already been bought and paid for onto a different medium for personal use. This in no way deprives the artist of royalties, because they were paid on the original purchase. In the U.S., this would be covered under the concept of “Fair Use”, which is legally allowed. It states, in essence, that once you have purchased copyrighted media (music, dvd, cassette tape, etc.), you are allowed to make copies of it for your own personal use. Not to share or trade, but for remixes, timeshifting, placeshifting etc. The only thing they don’t allow, under the DMCA, is the breaking of copy protection to achieve this. A bit of a catch-22, I admit, but that’s the American political system I guess. If this levy was called for what it is, which is an attempt to mitigate the financial effects of file-sharing, then fair enough. But if you look at the CPCC’s website, they don’t mention that. What we have is a levy on media used by all Canadians with no attempt to separate legal from illegal usage. It’s a typical lazy effort from a group that is only interested in preserving the status quo and by extension, themselves. Also, if they tax MP3 players, my future purchases will be from the States.

  15. Jeff Hume says:

    Forget Avril
    Forget Avril Lavigne and Nickelback. I’m an artist about to release an album. How am I supposed to get in on this revenue? Oh, that’s right I can’t, and neither can any independent artists or artists on small labels. So, the levy money, if it actually goes to any artists at all, will only go to those who have made it big.

    Lovely.

  16. Unfair
    The Levy is clearly unfair. It seems to me that all of this is just a way to keep one very large, and growing sect of lawyers very rich, and very busy for years yet to come. Take 100 people and give them all 100 blank CD\’s. Will all of these people even use these CD\’s to put music on them?, will some use them for pictures?, some to put their homework on? Kinda makes me think

  17. Re: Forget Avril
    I just wanted to point out that as far as I\’ve read, none of the money has actually been payed out to anyone, as they have no idea how to disburse the funds. Its basically just another big government moneypot to dip into when they need to pad something else they took their money out of.

    Just my $0.02

    Dan
    Gods of NOS
    http://www.nerdnos.net

  18. Re: Forget Avril
    I just wanted to point out that as far as I\\\’ve read, none of the money has actually been payed out to anyone, as they have no idea how to disburse the funds. Its basically just another big government moneypot to dip into when they need to pad something else they took their money out of.

    Just my $0.02

    Dan
    Gods of NOS
    http://www.nerdnos.net

  19. Michael -

    can you give us some up-to-date info on the actual distribution of the funds collected by the CPCC? Their website claims to have disbursed funds annually starting in 2003, but I’m certain I saw somewhere in the news over the last year that in fact they still hadn’t paid out anything since the levy started due to legal challenges from the labels wanting a cut of the revenue for themselves.

    As Jeff Hume also mentioned, of course small and new artists are not getting their fair share either. The CPCC’s own webpage states that they use radio play and album sales data to determine who paid. So the rich get richer in this manner too..