Next week, Sen. Mike Lee (R-Utah) will convene a critical hearing before Senate Judiciary Antitrust Subcommittee on the decades old antitrust consent decrees governing both the American Society of Composers and Publishers (ASCAP) and Broadcast Music, Inc (BMI). It may sound esoteric but the impact on American consumers could be substantial.
Prior to World War II, the music publishers attempted to extort radio stations and music halls into paying higher royalties, a move the Department of Justice deemed a violation of the Sherman Anti-Trust Act. Rather than lose the case, the publishers signed a consent decree to restrain their monopoly powers. Despite 70 years of precedent, Sony Music and ASCAP recently proved the need to reaffirm the consent decrees when they tried to force Pandora to pay higher royalty rates in a move reminiscent of the 1940s. When Judge Cote of the U.S. District Court for the Southern District of New York rule just last year on the inevitable suit she specifically noted the “not too veiled” threats by ASCAP, Universal and Sony/ATV.
Now the music publishers demanding that their agreement with the DoJ be thrown away. For the 70 million Americans who enjoy legal online music, that would have tragic consequences. Removing the consent decrees would collapse the legal music services under the weight of constant litigation. Removing the consent decrees would do nothing less than disenfranchise everyone who utilizes the legal, royalty paying services, eliminating this established revenue stream for artists, musician and songwriters.
Let’s be honest. There have been a lot of technological innovations in the decade since the last DoJ review of the consent decree – unfortunately none of them by the publishing rights organizations (PROs) themselves. ASCAP and BMI are asking DoJ to relax the controls on their proven monopoly behavior and yet they have not bothered to provide any substantive innovation to their own system. The PROs will not provide simple open transparency of the royalty collection process nor how they disperse funds to songwriters.
The PROs seem to think that mobile innovation and new music services suddenly create a free market within the music licensing industry. Nothing could be farther from the fact. In case after case over the past two years alone, judges have expressed dismay at ASCAP, BMI and SESAC’s inability to provide a simple list of their own catalog of musical works and cited their obvious monopolistic control of the music licensing process.
While the rest of the music industry is constantly adopting technology innovation, it is necessary to maintain the consent decrees to restrain the ever-present monopoly of the publishers. A recent decision in lawsuit against the other major publishing rights organization, SESAC, demonstrates what happens without DoJ compliance. Judge Sitarski found “SESAC has engaged in exclusionary conduct by failing to disclose its repertory and ensuring that users have no alternatives but to purchase their licenses.”
It’s like the storybook bully telling the smaller kid, “Hey, you’re gonna give me all your lunch money and I’m gonna give this brown bag. It might have a lunch in there, or maybe just my leftovers from yesterday. I don’t know. You’re still gonna buy it… Or else.”
While SESAC holds a much smaller catalog of musical works than ASCAP or BMI, somewhere between 2 and 5 percent, this only makes the direct corollaries of anticompetitive behavior more obvious. Free from any constraint of a consent decree, SESAC openly engages in behavior which ASCAP or BMI would be free to do if they were to be released from the continued restraint of their consent decrees. Tellingly Judge Sitarski found that SESAC is able to “exercise unlawful collective market power” by refusing to admit what songs are actually part of the proffered blanket license. Thus licensees cannot chose whether or not to purchase the only legally available option. They are literally forced to pay whatever they are charged – or be dragged into court for TRIPLE the damages.
Sen. Lee should be praised for looking at this issue with a balanced approach — something that has been lacking in this debate for years. If there is an attempt to unleash yet another deal shaped by cronyism, the American people have a right to know. Any attempt to vacate the consent decrees would collapse the legal systems that have helped innovative services flourish. Reducing controls on acknowledged monopoly powers would only deny the American people their access to legal music and eliminate the system which payers millions of dollars to artists, creators and songwriters.
Horowitz is an independent consultant specializing in public policy strategy, coalition building and development. He previously has served as staff in the U.S. House and Senate and as the presidential appointee in charge of policy at the U.S. Small Business Administration.