The question as to which country's copyright laws apply when music is sold in electronic format across borders arose with the emergence of the online music market and became more urgent with the huge success of Apple's iTunes music-download service.
Previously, artists and publishers were forced into specific collecting societies, according to their country of residence and occasionally to the kind of artwork they were producing. Commercial music users were forced to pay royalties with the local collecting society - for music from another member state, collecting societies were balancing payments between each other.
This approach led to huge differences in prices across member states, with some countries' collecting societies having a reputation of charging high royalties from users but paying comparitively little to artists, with the rest lost in bureaucracy. For online music, the approach resulted in market distortion, because an online music company could have established itself where royalties were lowest, thus gaining a competitive advantage over companies established elsewhere but competing for the same markets.
Those issues were addressed in an October 2005 Recommendation to member states, in which the Commission suggested to partially open the online music market to competition between collecting societies, in order to allow artists and publishers as well as users the option of selecting the collecting society with the best pricing model and the highest service level, independent of where they were established.
The Recommendation was widely regarded as a model of what a single market for copyright could look like.
Since the Commission's recommendation is a non-legislative 'soft-law' proposal, neither the Council nor the Parliament had a say. The Parliament could only react with another non-legislative text, namely an own-initiative report. Katalin Lévai (PSE, Hungary) was named rapporteur for the Legal Affairs Committee, which presented its report on 27 February 2007. On 14 March 2007, the Parliament adopted the Committee's report without any amendments.
