I have always been confused about this - I feel that in many instances the songwriters/artists do not own the rights to their songs. So maybe the only deal that must be reached is with the producing companies who might own the rights. Same goes for all the comps. then the comp creators will chase down the blog sites on anyone who posts the recordings.
I would expect some level of legitimacy given the breadth of places you can buy the albums under that label.
but I hope someone with some real insight replies to the entire comp business.