Department of Justice Opens Review of ASCAP and BMI Consent Decrees

by Sheppard Mullin Richter & Hampton LLP
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The Antitrust Division of the Department of Justice this month announced that it has opened a review of the 73-year-old ASCAP and BMI Consent Decrees. In its press release, the DOJ noted that it is most interested in comments “on competitive concerns that arise from the joint licensing of music by performance rights organizations and the remediation of those concerns.”

The Consent Decrees originally resolved antitrust lawsuits brought by the United States against the two major performing rights organizations (“PROs”) – ASCAP (the American Society of Composers, Authors and Publishers) and BMI (Broadcast Music Inc.). In addition to a variety of restrictions agreed to by ASCAP and BMI, such as terms prohibiting the organizations from obtaining synchronization and mechanical licensing rights from publishers, the Consent Decrees established rate courts to set reasonable fees for performance licenses when the PROs and licensees cannot agree. The Consent Decrees also require ASCAP and BMI to grant non-exclusive licenses to music outlets on request, and necessitate that alternate methods of licensing be available to potential licensees. The Consent Decrees with ASCAP and BMI were last amended in 2001 and 1994, respectively. The DOJ noted in its press release that “ASCAP, BMI and some other firms in the music industry believe that the Consent Decrees need to be modified to account for changes in how music is delivered to and experienced by listeners.”

Recent litigation has challenged the licensing practices of another PRO. In a closely watched case, the Television Music License Committee in 2009 sued Nashville-based SESAC LLC (“SESAC”), the third and smallest PRO, alleging antitrust violations under Sections 1 and 2 of the Sherman Act. The plaintiffs, a group of local television stations, allege, among other things, that SESAC “has taken steps to make illusory any alternative to the blanket license it sells, which conveys the right to play the music of all SESAC affiliates.” (The Radio Music Licensing Committee has brought a similar case against SESAC). SESAC currently does not operate under any consent decree. Instead, it operates under license agreements with the various stations and other contractual licensing arrangements. In a win for the television stations, U.S. District Judge Paul Engelmayer issued a comprehensive opinion in March denying, in large part, SESAC’s motion for summary judgment.

In its press release, the DOJ indicated that it is specifically interested in comments that address the following questions:

  • Do the Consent Decrees continue to serve important competitive purposes today? Why or why not? Are there provisions that are no longer necessary to protect competition? Are there provisions that are ineffective in protecting competition?
  • What, if any, modifications to the Consent Decrees would enhance competition and efficiency?
  • Do differences between the two Consent Decrees adversely affect competition?
  • How easy or difficult is it to acquire in a useful format the contents of ASCAP’s or BMI’s repertory? How, if at all, does the current degree of repertory transparency impact competition? Are modifications of the transparency requirements in the Consent Decrees warranted, and if so, why?
  • Should the Consent Decrees be modified to allow rights holders to permit ASCAP or BMI to license their performance rights to some music users but not others? If such partial or limited grants of licensing rights to ASCAP and BMI are allowed, should there be limits on how such grants are structured?
  • Should the rate-making function currently performed by the rate court be changed to a system of mandatory arbitration? What procedures should be considered to expedite resolution of fee disputes? When should the payment of interim fees begin and how should they be set?
  • Should the Consent Decrees be modified to permit rights holders to grant ASCAP and BMI rights in addition to “rights of public performance”?

The deadline for comments is August 6, 2014.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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