With all eyes on the Conventions, The Department of Justice is about to Issue a Major Decision Impacting Businesses Across the Country

Steve Sherman
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Posted: Jul 27, 2016 12:01 AM
With all eyes on the Conventions, The Department of Justice is about to Issue a Major Decision Impacting Businesses Across the Country

Sen. Ted Cruz didn’t show enough love to Trump at the RNC. Rep. Debbie Wasserman Schultz gets canned from the DNC. Every time they say Hillary’s name all the Bernie people boo.

The conventions are entertaining, if nothing else. However, while we’re all laughing or cursing the speakers something very serious is about to happen. The Department of Justice is poised to rule on an issue that could actually change your life and many businesses you use daily.

While our attention is focused on Cleveland and Philadelphia nobody is even looking at Washington, D.C. Most of our Senators and Representatives, cabinet officials, and even the President will be engaged in the goings on at the conventions. Meanwhile, Washington feels like a ghost town and a department full of unelected bureaucrats is making significant policy decisions with widespread ramifications for all of us.

The Department of Justice is reported to be on the verge of issuing a decision that could influence the prices that millions of businesses - from restaurants to retail and from radio stations to hotels - pay for the ability to perform and play music.  In fact, reports indicate that the Antitrust Division of the Department of Justice has already come to a decision, but the insiders are trying to change that decision through an intense lobbying campaign. 

Did you hear that?

It was the sound of your music and mine costing a lot more than it used to.

For the past two years, DoJ has undertaken a review of its antitrust consent decrees with the two largest collectives for the music industry – the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI).  The largest music publishers argue that the consent decrees constrain royalty rates. The licensees (like restaurants and others) counter that without the consent decrees their costs would skyrocket due to the monopoly power of ASCAP and BMI.

The consent decrees were the result of antitrust actions brought against ASCAP and BMI, and they allow the two organizations to operate as monopolists in exchange for restraints on anticompetitive behavior. Being a “Sherman” I’m rather fond of “Anti-trust” laws. Anything that helps foster competition and restrains overly powerful monopolies are good for American business.

For all intents and purposes, the decrees have worked rather well for decades. They provide efficient licensing for both copyright owners and users, and have resulted in record revenues for ASCAP and BMI (and their member publishers and songwriters). So why is the DoJ being pressured to change things? Money of course.

Despite raking in record amounts of royalty money, the ASCAP and BMI have asked DoJ to loosen the anticompetitive restrictions of the consent decrees so they can make even more and stamp out freedom. I’m not being dramatic. In fact, ASCAP was recently hit with a $1.75 million settlement over the allegation that they violated one of the consent decrees. 

There is some hope that despite the immense pressure brought to bear against the DoJ they may keep the consent decrees in place pursuant to the Antitrust Division’s findings and reported order.

While a final decision is expected to be announced at any moment, it has been widely reported that DoJ will maintain the status quo and not make any changes to the consent decrees. This should be a welcome outcome for consumers and many songwriters, who opposed changes to the consent decrees, but it is not sitting well with the larger music publishers, who have loudly criticized DoJ’s reported decision in the press.

The largest publishers complain that by making no changes to the consent decrees DoJ is somehow radically changing the music licensing system.  This is not correct.  They are claiming that a practice called “fractional licensing,” allowing any rights holder in songs with multiple authors to negotiate separately, was banned by the Antitrust division order.  The consent decrees are reportedly unchanged and allowing fractional licensing would have been a change to the decrees.

If anything, a DoJ’s decision will bring continuity and stability to the music marketplace.  These consent decrees have governed the licensing of music for decades. By refusing to make any changes, DoJ would be embracing the status quo, and highlighting the continued need for anticompetitive protections.

DoJ’s formal decision is likely to come at any moment, very possibly while much of the focus is still on the events in Cleveland and Philadelphia. If press reports about the decision are true, the only remaining question is whether the major publishers will continue to embrace a system that has generated all-time high revenues or not.