According to Wired, the outfit is restricted by the Copyright Act on how it can spend the money it collects on behalf of artists and labels.
The Act implies that Soundexchange should be a neutral body and not just another enforcement outfit for the recording industry. It is only allowed to spend money it collects on administering the collection, distribution, and calculation of royalties.
However Wired found that SoundExchange registered the MusicFirstCoalition.org domain on May 9, 2007 and is a founding member of the PR and lobby group. It also supports Musicfirst financially. The Musicfirst Coalition is a public relations outfit whose job is to levy a sound recording performance royalty on terrestrial radio stations.
When asked for details, Soundexchange spokesperson Richard Ades called that information "proprietary." Michael Huppe, general counsel for SoundExchange, claimed funding was a legitimate use of its members' money. The cash does not come from royalities, but from members, he claimed.
However he admitted that there was no part of the Copyright Act which allowed them to do this. Jessica Litman, a law professor at the University of Michigan, who was asked by Wired for her view couldn't find any legal justification either. µ
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