ASCAP and BMI: Attempting to Strong-Arm the Department of Justice

Dan Horowitz
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Posted: Mar 12, 2016 12:01 AM
ASCAP and BMI: Attempting to Strong-Arm the Department of Justice

For several years, the American Society of Composers and Performers (ASCAP) and Broadcast Music, Inc (BMI) have been unsuccessful in persuading Congress and the courts to prop up their business model. Now, they have turned to the Department of Justice (DoJ) in hopes of creating cataclysmic upheaval in the music industry - not for the benefit of songwriters, but to line the corporate pockets of their largest music publishing companies.

ASCAP and BMI are the two major Performance Royalty Organizations (PROs), the entities which license the use of musical compositions - the words and notes which become the music we all love. To put it simply, while the music composition is merely one portion of the overwhelmingly complex copyright licensing system, these two entities control an estimated 90% of the musical works in the U.S.

Any business (from radio and television stations to restaurants and from retail stores to wineries) that plays music publicly must obtain a license from both ASCAP and BMI as well as smaller PROs or risk ruinous copyright infringement actions. It doesn't matter whether the business primarily plays jazz or classical, hip hop or punk. There's no segmented options.

The lack of ownership transparency coupled with the ever-present threat of infringement suits means that any business that does not purchase a license from each PRO does so at its own peril.

Due to a history of anticompetitive behavior and continued dominant position in the market, ASCAP and BMI have operated via antitrust consent decrees for the past 75 years. On its face, seven plus decades of a consent decree might suggest time for a change, however these consent decrees have not produced a competitive marketplace - nor were they designed to do so. ASCAP and BMI control essentially the same percentage of works they did in the 1940s. Instead, these consent decrees simply permit ASCAP and BMI to operate as monopolists with certain protections against anticompetitive abuses.

Now, ASCAP and BMI are asking the DoJ to make sweeping changes to the consent decrees. Their motive is simple. ASCAP, BMI, and their major music publisher members, believe that if they are freed themselves of the anticompetitive protections of the consent decrees, they can wield their significant market power and force higher fees from every other business.

Both ASCAP and BMI’s largest publishers have tried to skirt the consent decrees in recent years, and their efforts have been shot down in federal court. In response to these efforts, the court has noted collusion and anticompetitive behavior by the publishers and PRO. Yet having failed in the courts, ASCAP and BMI are asking the DoJ to give them the exact ability to manipulate prices through market dominance that the court rejected.

To put the consent decrees into historical perspective, it is important to realize that the Administrations of the past THIRTEEN Presidents have reaffirmed these consent decrees. Regardless of anyone's political leanings, this is a staggering thought. More than 30 different DoJ Attorneys General - and innumerable Assistant AG's running the AntiTrust Division - have reviewed the past and current facts of the composition licensing process and the dominant positions of ASCAP and BMI within the music industry and each of those office holders have chosen to retain and reaffirm these consent decrees, with only very minor tweaks from time to time.

Perhaps there are a few ongoing, inherent reasons why these decrees remain necessary.

Recent efforts by ASCAP, BMI, and the largest publishers to circumvent the consent decrees have clearly demonstrated the continued anticompetitive concerns that exist within this marketplace.  And, over the past two years, the Society of European Stage Actors and Composers (SESAC), a small PRO controlling less than 10% of music compositions, which is not under a consent decree, has settled two antitrust actions brought against it. In those cases, two different federal courts labeled SESAC a monopolist - again with less than 10% of the market.

Even more alarming, ASCAP and BMI’s petition to DoJ is largely based upon the threats by the largest publishers that if DoJ does not relax the consent decrees, the largest publishers will leave ASCAP and BMI, potentially throwing the entire market into chaos. This threat itself demonstrates the eagerness of the publishers to wield their market power. DoJ should make decisions based upon market realities, not threats from the music publishers.

The consent decrees remain as vital in protecting competition and consumers today as when they were first established.

It's time for the DoJ to cease their review, reaffirm the consent decrees and let the music play on.