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ASCAP, BMI Submit Final Arguments to DOJ to Modernize ‘Outdated’ Consent Decrees

Since 1941, the two largest U.S. performing rights organizations, ASCAP and BMI, have been operating under separate consent decrees that govern how music is licensed by the two PROs (although not their competitors, SESAC and Global Music Rights). The consent decrees were designed to protect competition but nearly all involved parties agree that they have long become obsolete, particularly since the advent of the internet.

While ASCAP and BMI are fierce competitors in most areas, they are united in saying that the consent decrees are in dire need of updating and issued a joint statement saying so in February.

Last year, Makan Delrahim, Assistant Attorney General for the Anti-Trust Division of the Department of Justice, announced that he will be examining the consent decrees to determine their validity. (Earlier this week, 12 free market organizations asked the DOJ to strengthen the consent decrees, arguing that the “inherently anti-competitive” music industry needs those regulations.)

Today was the deadline for the submission of public comments on the process — solicited by the DOJ from “interested persons, including songwriters, publishers, licensees, and other industry stakeholders” — seeking to answer the following questions:

  • Do the Consent Decrees continue to serve important competitive purposes today? Why or why not? Are there provisions that are no longer necessary to protect competition? Which ones and why? Are there provisions that are ineffective in protecting competition? Which ones and why?
  • What, if any, modifications to the Consent Decrees would enhance competition and efficiency?
  • Would termination of the Consent Decrees serve the public interest? If so, should termination be immediate or should there instead be a sunset period? What, if any, modifications to the Consent Decrees would provide an efficient transitionary period before any decree termination?
  • Do differences between the two Consent Decrees adversely affect competition?  How?
  • Are there differences between ASCAP/BMI and PROs that are not subject to the Consent Decrees that adversely affect competition?
  • Are existing antitrust statutes and applicable caselaw sufficient to protect competition in the absence of the Consent Decrees?

ASCAP and BMI’s responses to those questions, which were obtained by Variety, are expansive, complex and exceed 30 and 40 pages respectively. While the two organizations differ on some points, they both have long agreed that the consent decrees are obsolete. A short description of their comments follows.

Both organizations advocate the following in a proposed transition from the existing consent decrees:

“To help facilitate that orderly transition, and to protect both music creators and licensees alike, ASCAP and BMI are recommending four key provisions that would encompass newly formed decrees.  Like all modern consent decrees, the new decrees would contain a sunset provision.

  • “The four provisions are:
    • “Allow all music users to continue to have automatic access to the ASCAP and BMI repertoires with the immediate right of public performance.  However, this right should be contingent upon licensees providing ASCAP and BMI with necessary business information and an automatic, fairer, and less costly mechanism for the payment of interim fees.
    • “Retain the rate court process for resolution of rate disputes, as recently reformed by the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (MMA).
    • “ASCAP and BMI will continue to receive non-exclusive U.S. rights from our writers and publishers, which allows licensees, songwriters, composers and publishers to continue to negotiate direct deals if they so choose.
    • “Preserve the current forms of licenses that the industry has grown accustomed to beyond the traditional blanket license, such as the adjustable fee blanket license and the per-program license.”

ASCAP CEO Elizabeth Matthews said in a statement, “The way music is made and consumed has changed dramatically since the ASCAP and BMI consent decrees were implemented nearly eight decades ago. The time has come to modernize these decrees so we can move toward a more innovative, flexible, and competitive marketplace that is fair to both music creators and licensees.”

ASCAP’s primary points in its comments include:

“The way music is made and consumed has changed dramatically since ASCAP and BMI entered into consent decrees with the Department of Justice (DOJ) in 1941;
“To be effective, the regulatory system has to reflect the realities of today’s digital music marketplace;
“The music industry, DOJ and Congress agree we are in critical need of a licensing framework that promotes innovation and efficiency in a free market;
“Without the outdated consent decrees, ASCAP and BMI will be able to better compete and innovate to benefit our songwriter members and licensing partners. Removal of the consent decrees will not impede a functioning marketplace;
“ASCAP, BMI and other licensors of music, will remain subject to the same antitrust laws that govern other businesses in the marketplace;
“PROs and licensees all have the same goal—to keep the music flowing to the public. But music creators deserve to be compensated fairly for the use of their work.

For its part, BMI said in the introduction to its comments:

“BMI believes that the Decree has become an impediment to innovation and should be substantially modified, and ultimately terminated, to remove unnecessary restrictions that do not further a legitimate public interest and constrain BMI’s ability to best serve songwriters, composers, music publishers and music users. The Decree reflects an outdated model of antitrust enforcement by regulation. It imposes an inflexible contract structure and a judicial rate-setting process that are unresponsive to market needs, impede BMI (and other music industry participants) from adapting to changes in the marketplace, stifle innovation, and are unnecessary to preserve competition.

Its primary points include:
“Technology has revolutionized music use, distribution, and licensing;
“Competition in music rights management and public performing rights licensing has proliferated;
“The music industry, particularly music distribution, has consolidated, shifting the balance of power;
“Modern antitrust policy, case law, and enforcement are incompatible with the Decree;
“BMI strongly disagrees with the assertion by some music users that their businesses are reliant on the Decree and that they would be unable to survive in its absence;
“Nonetheless, BMI would support maintaining certain provisions of the Decree to help transition the industry without disruption.”

 

 

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