Monday, June 24, 2019

US music sector braces for a new battle on ASCAP and BMI's consent decrees

By Emmanuel Legrand 

The US music community is preparing for a long battle ahead following the decision by the Antitrust Division at the US Department of Justice to open a full review of the consent decrees ruling the country's two main performance rights societies, ASCAP and BMI, since 1941.

  David Israelite, CEO of Washington, DC-based National Music Publishers Association, said at the organisation's annual meeting in New York that the music community will be fighting against industries such as broadcasters, digital service providers, hotels and bars who do not want to change the status quo and represent collectively $2.5 trillion in market capitalisation.

  "When we get to the DoJ, we will be up against these people," said Israelite. He added that the NMPA will be working in partnership with ASCAP and BMI to get the reform through. "We are going into this DoJ process united ," said Israelite. He added: "We just fought against digital services and we beat them in court. You can beat a bigger industry in court." Israelite was also confident that the DoJ review would "trigger" Congressional action.

Achieve greater efficiency

  The US Register of CopyrightsKaryn Temple, said at the Indie Week conference that although the USCO was not directly involved in the process, she would closely monitor the situation. Temple said that if the DoJ decided "to terminate" the consent decrees, she would like "to ensure that there is a transition period," so that there is not one day a licensing market with the consent decrees, and the next day a completely open market.

  Announcing the review, Makan Delrahim, the DoJ's assistant Attorney General in charge of the antitrust division, said: "The ASCAP and BMI decrees have been in existence in some form for over seventy-five years and have effectively regulated how musicians are compensated for the public performance of their musical creations. There have been many changes in the music industry during this time, and the needs of music creators and music users have continued to evolve. It is important for the Division to reassess periodically whether these decrees continue to serve the American consumer and whether they should be changed to achieve greater efficiency and enhance competition in light of innovations in the industry."  

  A Consent Decree is a legally binding arrangement by which a defendant agrees with the government to certain undertakings without admitting fault for the reason that brought the legal proceedings in the first place. Both ASCAP and BMI's consent decrees were the by-product of lawsuits for alleged violations under the Sherman Antitrust Act that were settled with the DoJ.

  The consequences are quite drastic: neither ASCAP nor BMI can refuse, under the compulsory license, access to their repertoire to any licensee who asks for a license; and the rates under which the use of such repertoire is compensated are set by a judge. Music publishers have long argued that the consent decrees put rights holders and songwriters under the supervision of the government and cannot negotiate willing-buyer, willing-seller rates.The decrees have been periodically reviewed by the DoJ to assess their effectiveness, most recently in 2014-2015. The DoJ occasionally agreed to amend the decrees: ASCAP's was last amended in 2001 and BMI's in 1994. 

Competing in a free market

  BMI and ASCAP welcomed the review. They had issued in 2018 an open letter in which they offered a proposed solution to adjust the consent decrees to the times. Sources at US rights societies admit that changing the consent decrees will take come convincing and that the forces opposing changes to the decrees could prevail, but they are satisfied that the DoJ's process has started and that they can have the opportunity to present their case. 

  "Thanks to the DOJ's review, we now have the unique opportunity to re-imagine the music marketplace in today's digital age," said ASCAP CEO Elizabeth Matthews. "A more flexible framework with less government regulation will allow us to compete in a free market, which we believe is the best way for our music creators to be rewarded for the value of their mus."

  BMI said the review represents "an opportunity to do what BMI has been advocating for years – modernise music licensing." Added BMI: "We look forward to working with the DOJ, licensees and our other music partners to help ensure a smooth process that safeguards a vibrant future for music."

Chaos for the marketplace

  The MIC Coalition, which regroups users of music, from DSPs to broadcasters, saidthe decrees "have helped mitigate anti-competitive behavior, while also ensuring songwriters and creators get paid when their music is played in the millions of American venues. The modification, elimination or even the possible sunset of the decrees at the present time would lead to chaos for the entire marketplace."

  As part of the review, the DoJ is seeking comment from stakeholders, The comment period closes on July 10, 2019. As part of its review, the DoJ seeks public comments on the following issues:  
> 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?

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