Music publishers have been under consent decrees since 1941 with good reason, to limit the kinds of anti-competitive practices they had been engaging in before that. Having been busted for violation of the consent decrees, the Performance Rights Organizations (PROs) that represent copyright holders of music compositions seek permission to engage in more anti-competitive practices.
Earlier this year, the American Society of Composers, Authors and Publishers (ASCAP) settled with the Department of Justice for $1.75 million for violations of its existing consent decree. It tried to charge royalty rates, higher than allowed by the consent decree, to the music streaming service Pandora. Despite this ruling, ASCAP has the audacity to continue asking for weakening of the antitrust consent decree in order to engage in the very practices for which it was busted.
ASCAP and Broadcast Music Inc. (BMI), the PROs that control about 90 percent of all music compositions, have repeatedly pushed for changes in the consent decrees that would allow them to leverage their market power to obtain higher licensing fees for music.
“These violations, as well others in the recent past, serve to highlight the ongoing need for the consent decrees and disprove the industry’s arguments for changing or abandoning them,” writes Christopher Versace in Forbes.
“The agreements were put into place in 1941 after ASCAP and Broadcast Music Inc. were each found to be abusing their market powers and are intended to restrain anti-competitive behavior by allowing a judge to intervene when negotiations between those seeking to use music and music publishers break down. That these agreements have been in place for so long is the centerpiece of the industry’s demand for (Justice) to weaken them. They argue that much has changed in the last 75 years.”
The ways consumers access music has changed greatly in the last 75 years, including advances in technology. However, nothing has changed regarding the anti-competitive issues involving the owners of the music. Recently, a federal court ruled that a smaller PRO, the Society of European Stage Authors and Composers, is a monopolist, despite controlling a smaller fraction of music compositions than do ASCAP and BMI.
Currently, the PROs are asking Justice to allow major publishers to engage in what is called “partial withdrawals,” which means the major publishers would license certain rights free from the constraints of the consent decrees. This would allow them to leverage their market power to negotiate higher rate agreements with digital music providers like Pandora and Spotify, and then having established those rates, get higher licensing fees from restaurants, radio stations, retail stores, hotels, etc.
Federal courts have rejected the practice of “partial withdrawals,” and in these rulings highlighted the concerns about collusion and other anti-competitive activities. Since the courts have consistently denied the likes of ASCAP and BMI to manipulate music licensing prices, the PROs are now seeking from Justice changes in the rules that would weaken marketplace protections, and allow their market power to extort higher fees.
As a result, the music industry has pursued another change in the rules by asking its allies in Congress to pass the so-called Songwriter Equity Act that would allow them to charge higher rates. There is, however, nothing “equitable” about the Songwriter Equity Act. This legislation would rig the courts that set licensing rates paid by the broadcasters and consumers of music. The bill has gained little support in Congress, but the industry has enlisted some of the biggest names to lobby Congress for increased rates charges to local business for music broadcast.
There is only one goal of the changes sought by the music industry. It seeks to increase the fees it charges to businesses that use music. It is that simple. While creators should be rewarded for their work, the timing of these efforts is suspect. ASCAP and BMI have recently reported all-time highs in royalty revenue.
Both Congress and Justice should recognize the consent decrees are working and don’t need to fixed.
