By: David Oxenford, Wilkinson Barker Knauer LLP
In 2019, the Antitrust Division of the US Department of Justice began a review of the court-administered antitrust consent decrees that have bound ASCAP and BMI since the 1940s. We wrote about the issues in their review here. The formal review of these decrees began as part of the DOJ’s broader review of its antitrust consent decrees covering many different industries. The DOJ received almost a thousand comments on the questions that it asked about the ASCAP and BMI decrees. It also held public roundtables as well as private discussions with interested parties during its review. Last week, Makan Delrahim, the outgoing head of the Antitrust Division, presented remarks at a Vanderbilt Law School virtual event where he said that the review would be ending without any proposals for reform. While the statement notes some of the reforms that were sought by the music industry, it also notes that music users around the country rely on the systems established under the decrees and judge them to be working well. Mr. Delrahim’s statement says that because of the complexity of the issues and the interruptions caused by the pandemic, no reforms would be offered at this time, but it urged the DOJ to continue to review these decrees on a regular basis – at least once every five years.
This action is significant for broadcasters and other music users as it leaves in place these consent decrees that are the basis on which so many businesses use music in their day-to-day operations. Given the volume of music they have under license, most businesses do not have an alternative to using the blanket licenses offered by these organizations. The only alternative would be to license the music themselves which, due to the complexity of the copyright laws and the lack of transparency in music ownership, would be exceedingly difficult for a business where music is but a secondary component to their operations. Together, ASCAP and BMI provide a license to broadcasters and other music users (including any business that performs music to the public, such as bars and restaurants, retail stores, digital music services, concert venues, hotels and so many other locations).
By some estimates, as much as 90% of the musical works (the musical compositions – the lyrics and music used in any performance of a song) performed in the United States are licensed through ASCAP and BMI. The decrees are in place because of the fear that companies with such a significant market share could discriminate against music users (or against songwriters, whose music could be excluded from the catalogs offered under blanket licenses to every song licensed by ASCAP and BMI). These antitrust consent decrees have long required that these two performing rights organizations (or PROs as they are often called) treat all music users and all songwriters who are similarly situated in the same way.
The requirement that these PROs treat all similarly situated songwriters and music users in the same way leads to all songwriters being paid at standard rates (obviously the payouts will differ based on how much their songs are played, but particular songwriters cannot be offered a bonus or guarantee that is not offered to other songwriters and are not paid at different rates). By the same token, similar users of music cannot be treated differently (so all commercial radio services pay at standard rates, as do all retail establishments of similar size or all venues at which music is played). Rates paid by music users are also subject to review by a “rate court” – a US District Court in New York which can be asked to review the rates proposed by the PRO for any identified group of music users to ensure that the proposed rates are reasonable.
But this system has been subject to criticism, especially among those in the music industry. The ASCAP consent decree allows it to only offer public performance licenses – not sync licenses needed to allow musical compositions to be used in commercials or videos or mechanical licenses that would allow music to be used in on-demand situations. While BMI’s consent decree is not explicitly restrictive, because of the uncertainty, it too has not expanded beyond public performance licensing (other royalty collection organizations are not similarly limited – see our articles here and here). Also, some music publishing companies have felt as if they should be allowed to withdraw their musical works from the repertoire of ASCAP or BMI for the licensing of certain types of music users while allowing the PROs to handle other licensing (see our articles here and here). Specifically, the desire has been for some publishers to be able to negotiate outside the consent decree with big digital music services, while still permitting the PROs to license to other types of services (like bars and restaurants where any marginal return from higher direct licenses would be outweighed by the costs of negotiating with the disparate licensees).
Given the outstanding issues, and in light of the existence of competing PROs like SESAC and GMR that are subject to less regulation (and have had their own antitrust battles with the broadcast industry – see for instance our articles here and here about SESAC; and here, here, here and here about GMR), it is almost guaranteed that, even though the DOJ has ended this review, these issues will be revisited again in the not too distant future. At the end of the Obama administration, the DOJ completed its own review of the decrees, concluding that only a minor change in the interpretation of these rules was necessary, one prohibiting “fractional licensing“, an interpretation rejected by the courts. While we have no idea yet how the Biden administration will view these issues, and in light of the myriad of other issues facing the incoming administration, we have no idea when they will have time to revisit these issues. But expect that these issues will not disappear. We will be writing in the coming weeks about other copyright issues that are on the horizon for the new administration so that you can speculate as to how all the pieces of future copyright regulation will fit together.
David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).
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