The U.S. Department of Justice’s (DOJ) antitrust division has opened a review of the government’s consent  decrees with ASCAP (formally known as the American Society of Composers, Authors and Publishers) and  BMI (also known as Broadcast Music Inc.), which could lead to changes in the fees and license terms for  advertisers that license music directly or indirectly from these organizations.

BACKGROUND

Nearly seventy-five years ago, the  government entered into consent  decrees with ASCAP and BMI to  resolve antitrust lawsuits stemming  from its concerns about the market  power each had acquired through the  aggregation of public performance  rights held by their member  songwriters and music publishers.  Since the entry of the consent decrees  in 1941, the DOJ has reviewed  their operation and effectiveness  periodically, and the consent decrees  have since been amended. The BMI  consent decree last was changed  in 1994; ASCAP’s was altered most  recently in 2001. Under the consent  decrees, a federal district court sitting  as a rate court helps resolve disputes  over the license fees payable to these  groups.

Given recent changes to the way  music is delivered and experienced,  and in light of the growth of Internet  and mobile services like Pandora and  Spotify that provide music digitally  through streaming, ASCAP, BMI, and others have contended that the  consent decrees now are outdated  and should be amended. Indeed, in a  statement, ASCAP indicated that it  was “gratified” by the DOJ’s decision  to open a formal review of the consent  decrees. BMI reacted similarly, saying  that it regarded the DOJ’s review as a  “positive development for America’s  music creators.”

ISSUES UNDER REVIEW

As part of its review of the consent  decrees, the DOJ is seeking public  input by August 6 on “competitive  concerns that arise from the joint  licensing of music” by ASCAP and  BMI, and how those concerns could  be remediated. In particular, the  Justice Department is seeking  comment on the following:

  • Whether the consent decrees  continue to serve important  competitive purposes and any  modifications that could enhance  competition and efficiency;
  • Whether differences between the  two consent decrees adversely  affect competition;
  • Whether the contents of ASCAP’s  and BMI’s repertories should be made available in more transparent  and useful formats;
  • Whether songwriters and publishers  should be able to limit ASCAP  and BMI from licensing their  performance rights to certain  music users (such as digital music  services, which certain rights  holders do not view as sufficiently  compensating music creators); and
  • Whether the consent decrees  should be modified to permit rights  holders to allow ASCAP and BMI to  license rights additional to the right  of public performance.

Significantly, the DOJ also said that it is seeking input on whether the rate-making function currently performed by the rate court should be changed to a system of mandatory arbitration, as well as the procedures that should be considered to expedite resolution of fee disputes, when payment of interim fees should begin, and how they should be set.

THE BOTTOM LINE

If the DOJ were to recommend changes to the consent decrees – including a  groundbreaking elimination of the consent decrees altogether, as ASCAP has  suggested, or arbitration of the rates payable to ASCAP and BMI – its proposals would  be subject to review by federal judges in New York. A great deal has changed since  1994 and 2001, and it would appear likely that the consent decrees in their current  format will be changed, at least to some degree. Just how any changes could affect  advertisers and other licensees remains to be seen.