The United States Department of Justice has opened a review of the consent decrees that govern the operation of the nation’s two largest music performing rights organizations (“PROs”), the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI). The Department is seeking public comments on the effectiveness, operation, and continued need for the decrees.
DOJ originally entered into its consent decree with ASCAP in 1941 to resolve a lawsuit against that PRO for alleged violations of Section 1 of the Sherman Antitrust Act. The ASCAP Consent Decree has been amended several times, most recently in 2001. The BMI Consent Decree was first entered into in 1966, following initiation of a similar antitrust suit. That decree was last amended in 1994.
The decrees limit the operations of the PROs in numerous important ways. The PROs are prohibited from obtaining exclusive licensing rights (publishers must retain the right to license their own performance rights), they may not license rights other than the public performance right, they must not discriminate against similarly situated licensees, and they must offer certain types of licenses other than their preferred blanket form of license.
The decrees establish a process that ensures that any music user that wants to perform compositions in ASCAP’s or BMI’s repertory may obtain a license simply by writing and asking for the license. If the user and PRO are not able to agree on a reasonable fee, the decrees define a “rate court” process where the fee is set by a judge in the Southern District of New York. These limitations have, at times worked to the PROs’ benefit, enabling them successfully to resist private antitrust liability. A third, smaller, music PRO, SESAC, Inc., is not subject to a consent decree and is currently facing antitrust claims brought by both the television and radio industries.
The DOJ review is the result of extensive lobbying by the PROs and music publishers following decisions by the respective rate courts that limited the ability of the major publishers to withdraw their compositions from the PROs for “new media” uses, particularly performances by the Pandora webcasting service. The PROs and member publishers assert that the review is warranted due to recent changes in how music is delivered and experienced by listeners. Recent rate court decisions, however, have taken the PROs to task for efforts to limit competition and unreasonably exploit their collective market power, suggesting that the decrees remain as important today as ever.
The DOJ’s public notice identifies a number of issues that the Department will consider as part of its review. Specifically, DOJ is seeking comment regarding:
- Whether the consent decrees continue to serve important competitive purposes, whether all of the provisions remain necessary, and whether certain provisions are ineffective in protecting competition;
- Whether any modifications for the consent decree would enhance competition and efficiency;
- Whether differences between the ASCAP and BMI consent decrees adversely affect competition;
- Whether information concerning the content of the ASCAP and BMI repertories is reasonably available and whether modifications are required to foster repertory transparency;
- Whether copyright owners should be permitted to authorize ASCAP and BMI to license their performance rights to some music users (e.g., bars and restaurants or television and radio stations), but not others (e.g., Pandora);
- Whether mandatory arbitration should replace the rate court and whether other steps could be taken to expedite resolution of fee disputes; and
- Whether the consent decrees should be modified to permit rights holders to grant to ASCAP and BMI rights beyond public performance rights.
Comments are due to DOJ by August 6, 2014.