The European Commission on Wednesday (16 July) told the organisations that collect music copyright fees for artists that they have to end agreements that stop them from competing across borders.
At the moment, music copyright groups have a system of contracts meaning that artists may collect payments only from an agency in their own country.
But after consultation with industry and artists, following a complaint by broadcaster RTL and British online group Music Choice, the commission came down on the side of freer competition, saying this would allow authors to choose on the basis of quality of service, efficiency of collection and level of management fees deducted.
At the moment, companies such as RTL that want to offer a pan-European service cannot obtain a single licence but have to negotiate with individual national collecting societies.
The decision also says the societies should be allowed to license material for use on the internet or by broadcasters outside their own countries.
Competition commissioner Neelie Kroes said the deal could "benefit cultural diversity by encouraging collecting societies to offer composers and lyricists a better deal in terms of collecting the money to which they are entitled".
But artists have reacted angrily to Brussels' move, believing it will mean that less famous musicians and smaller collecting societies will be hurt by it. They also believe that EU-wide music rights may reduce their royalties, with musicians making money from their music after they register the copyright with collective rights managers.
CISAC, an international organisation representing the creative community, condemned the decision, saying it would lead to "a calamitous decline in artistic creation, cultural diversity and creators' income."
It also criticised the commission for claiming to act in artists' interests while it "imposed" the decision against their "expressed wishes."
The European musicians' organisation also blasted Brussels for saying the decision will benefit them and that it was acting in their interests.
The European Composers and Songwriters Alliance (ECSA) said this was a "unilateral claim" with which they strongly disagreed.
Meanwhile, Dutch authors' society Buma/Stemra welcomed the commission's decision. But it said Brussels should now be turning its attention to what it called "a much bigger threat" to fair competition.
It accused major music publishers of not allowing small and medium-sized collecting societies to use popular Anglo-American music for online and mobile purposes, instead entrusting these "money-spinning rights" to German, French and British collecting societies.