- - Sunday, July 24, 2016

Sometimes the grass is not greener on the other side of the hill.

A little more than two years ago, the two collectives that control the rights to an estimated 90 percent of the music we hear — the American Society of Composers, Authors, and Publishers (ASCAP) or Broadcast Music Inc. (BMI) — asked the Justice Department to review the antitrust consent agreements they’ve operated under since 1941.

The Justice Department oversees the consent decrees, which allow ASCAP and BMI to maintain their respective monopolies but include restrictions that protect consumers from monopoly pricing.

BMI and ASCAP say the rules have not been reviewed in 15 years, and changes are needed to more accurately reflect the way music is bought, sold and produced now and to provide for fair compensation for music creators.

Customers of the two firms — the bars, restaurants, retail stores, radio stations and other outlets that play recorded music — oppose any relaxation of the consent decrees because it would raise prices, leave them open to infringement lawsuits and add significantly to the administrative function of purchasing music rights.



Specifically, ASCAP and BMI asked for two primary changes:

ASCAP and BMI asked Justice to grant their largest publishers the right to “partially withdraw” certain licensing rights. This way, a large publisher such as Sony or Universal could negotiate fees directly with a service such as Pandora, free from antitrust restrictions.

ASCAP and BMI attempted partial withdrawals several years ago, but it was rejected in federal court. In throwing out the rates established via partial withdrawals, the court cited collusion and other anticompetitive practices to raise rates

ASCAP and BMI also lobbied the Justice Department to establish a new form of licensing known as “fractional licensing,” which would require businesses to go out and negotiate licenses with every owner of a song. Since most businesses that play music need rights to thousands if not millions of works, negotiating with each partial owner through a “fractional licensing” scheme would prove entirely impossible and lead to market manipulation.

Reports are widely circulating that Justice is about to release a formal decision that will make no changes to the consent decree, and both ASCAP and BMI appear unhappy with the decision to maintain the status quo. The Justice Department’s rejection of partial withdrawals and refusal to institute fractional licensing coupled with a separate Justice fine of $1.75 million against ASCAP for recent antitrust violations has ASCAP and BMI on the offensive.

But the language of the consent decrees, terms of licensing agreements, and judicial precedent (including a Supreme Court decision) all argued against making the kind of changes ASCAP and BMI suggested.

Since the beginning of the Justice Department’s review, the big publishers have threatened to leave BMI and ASCAP altogether if the consent decrees were not relaxed. With the Justice Department expected to announce its decision by the end of the month, the ball now appears to be in the court of the major publishers. Will they make good on their threats to create unrest in the marketplace?

There is no easy free-market solution to this mostly because there is nothing remotely resembling a free market operating here. The consent decrees resulted from widespread anti-market activity and represent what probably is the best we can hope for in terms of market responsiveness and fairness to those who both create and purchase the music.

What can be achieved — what is being achieved — is a sensible, reliable, predictable marketplace that brings music into every aspect of our daily life and does so at a fair price.

The Department of Justice got it right this time. It did not bow to the threats of the big publishers, and the evidence spoke for itself. This is no time to undo its work in this area.

Brian McNicoll is a former director of communications for the House Committee on Oversight and Government Reform.

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