preventing economic arbitrariness in setting the tariff, must be accepted. This Court in National Association of
Broadcasters (at paragraph 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.
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[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 monocultural 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
Page 56 of [2016] 2 All SA 40 (SCA)
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 overvalued, 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