The Radio Music License Committee last week lost a skirmish in its lawsuit against SESAC when the judge hearing the case denied the RLMC's request to impose an injunction stopping the performance right organization from raising its rates while the lawsuit is ongoing. But other aspects of the judge's ruling indicates that the RMLC may be winning the war in the early going.
While Eastern District Court of Pennsylvania Judge Lynn Sitarski in a Dec. 23 filing denied an injunction ruling that the RLMC had failed to prove that a SESAC rate increase will impose irreparable harm on radio, at the same time the court gave creedence to RMLC's anti-trust allegations.
In October 2012, the RLMC filed an antitrust lawsuit in the Philadelphia Federal District Court against SESAC, alleging that SESAC charges rates that are disproportionate to the number of works it licenses in comparison to ASCAP and BMI. Combined ASCAP and BMI have about 16 million works versus SESAC’s 250,000 to 400,000 songs.
The case noted that while the radio industry has seen its revenue drop and the number of stations that have a licensing agreement stay the same, SESAC increase its rates 8% annually (or 32% gross over the past four years). In that same period, the rate charge to radio stations by the other two PRO's, ASCAP and BMI have dropped by about 40%, according to the court documents.
Magistrate Judge Sitarski ruled that radio stations could not realistically consider foregoing a SESAC license due to two factors: an inability to exercise total control over what they play due to music used in commercials and an inability to determine what songs are in SESAC's catalog.
A station cannot bypass a SESAC license by obtaining a bundle of direct licenses, which means the only option is a blanket license, the ruling stated. Even though the SESAC PRO blanket license represents an efficient manner for radio stations to get properly licensed, the Judge in her ruling wrote, "SESAC has engaged in exclusionary conduct by failing to disclose its repertory and ensuring that users have no alternative but to purchase their licenses.”
The court said it is satisfied that the plaintiff RMLC has established a likelihood of success in proving a concerted action, and also shown there is no restriction on SESAC's ability to raise its prices on its 100% market share of its unique product, i.e. its catalog. Those conditions "further supports a finding that the challenged conduct has produced anticompetitive effect," according to her ruling.
Since SESAC has no mechanism to challenge the rates it sets, like ASCAP and BMI, which operate under consent decrees, the court also ruled that the plaintiff RLMC has established a likelihood that SESAC has monopoly power.
While the magistrate judge’s decision concerning the alleged anti-trust elements of the RLMC's suit against SESAC "may be accepted, rejected or modified," when the case goes to trial, according to the document making it more likely that the ruling will be accepted and the case will begin with SESAC having the burden of proving it’s not in violation of antitrust.
The case was assigned to Magistrate Judge Sitarski by Judge C. Darnell Jones. Federal Judges frequently use magistrate judges for preliminary matters in order to lighten their workloads, according to the Eastern District Court's procedure handbook.