Attorney General Loretta Lynch Says Dept. of Justice Position on Licensing, Consent Decrees Isn't Finalized

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U.S. Attorney General Loretta Lynch testifies during a hearing before the House Judiciary Committee July 12, 2016 on Capitol Hill in Washington, DC.

The decision continues to draw heated criticism -- “this position by the DoJ on 100 percent licensing is 100 percent wrong.”

Despite reliable sources tell Billboard that the Dept. of Justice’s (DoJ) ruling expanding the power of the consent decree is a done deal -- with a written statement detailing its decision is expected sometime this summer -- the head of that agency, U.S. Attorney General Loretta Lynch, testified before Congress last week, on July 12, that the DoJ’s review isn’t complete and that a decision has not yet been reached.

“My understanding is that the review is not complete… and the decision hasn’t been made and the discussion is still ongoing,” Lynch said during a House Judiciary Committee hearing on the DoJ's decision, as recommended by the FBI, not to prosecute Hillary Clinton over her use of a private e-mail server while the Secretary of State. The question was posed by Rep. Doug Collins (R-GA), who questioned Lynch about the DoJ’s decision to enforce what is called 100 percent licensing. “It will be a few more months before [the review] is done," she said.

While questioning Lynch, Collins noted that the DoJ appears to have “reinterpreted the consent decrees in a way that fundamentally changes the way licensing is done.”

According to numerous sources from both sides of the debate, the DoJ, in separate private conversations with ASCAP, BMI, Sony/ATV, Universal Music Publishing (UMPG), and some digital services, has told the industry that it will not amend the consent decree, much to the chagrin of large publishers like Sony/ATV and UMPG. Those companies were pushing for the allowance of digital withdrawal, opening up the possibility for them to strike direct deals with digital services, who then wouldn’t be able to employ a compulsory license, in turn forcing them to negotiate market rates without the fallback of the ASCAP and BMI rate courts.

Worse, from the point of view of the music publishing industry, is that the DoJ's interpretation of the consent decree means the industry must accept 100 percent licensing -- meaning any rights holder of a song can provide a license to play that song, and that a digital service such as Spotify wouldn't need licenses from the other rights holders.

The music publishing business has long operated under the fractional licensing of music, wherein each rights holder of a song was required to provide a license for their percentage of the work in order for any licensee to play that song. Meanwhile, digital services and other licensees have long maintained, in opposition to that practice, that all they needed to license songs with multiple songwriters was the assent of one. The only reason they licensed from all three PROs, they say, is because each has so many songs under its sole control that services are all but required to have licenses from all three -- ASCAP, BMI and SESAC -- in order to present a full offering to their listeners.

Rep. Collins said during that hearing that the DoJ's interpretation is completely contradictory to the interpretation of the U.S. Register of Copyrights, who is on record as saying that 100 percent licensing “violates the principals of copyright, interferes with collaboration among songwriters, negates private contracts, and expands the reach of the consent decree."

“The way I see it, songwriters are gasping for air and the antitrust division just took them off life support,” Collins added.

Meanwhile, the music publishing industry continues to react to the decision. In a posting on the BMI website directed at the organization's employees and songwriters, CEO and president Mike O'Neill wrote: “As you know, during our meeting on June 29, we learned that the DoJ would not take the opportunity to modernize BMI’s outdated consent decree. Instead, it determined that BMI and ASCAP must follow a 100 percent licensing model, a practice that has never been the industry standard and one that BMI and ASCAP never raised for discussion.” Continuing, O'Neill writes that the decision has left in its wake confusion about its impact, and that conversations are taking place within the industry about what will happen.

Importantly, O'Neill notes that "the DoJ’s position is simply that -- its position. It’s not a ruling or a decision. It is how the DoJ interprets BMI’s consent decree. And as you know, BMI disagrees strongly with that interpretation... While we hope to reach a mutually agreeable resolution with the DoJ, we have a number of scenarios in front of us that we are evaluating carefully."

He added that “the DoJ’s interpretation benefits no one -- not BMI or ASCAP, not the music publishers, and not the music users -- but we are most sensitive to the impact this could have on you, our songwriters and composers. The decisions we make will always consider what is in your best interest. To that end, we are working closely with ASCAP as we evaluate our options.”

O'Neill is joined in his disappointment by two coalitions, which both recently issued statements on behalf of their extensive memberships. 

First, the 500,000-member strong International Coalition of Songwriters and Composers (ICSC). (The coalition consists of the following groups: Music Creators North America [MCNA]; the Songwriters Guild of America [SGA]; the Council of Music Creators [CMC]; the Screen Composers Guild of Canada [SCGC]; the Society of Composers & Lyricists [SCL]; the Songwriters Association of Canada [SAC]; Songwriters of North America, LA Branch [SONA]; the International Council of Music Creators [CIAM]; the European Composers and Songwriters Alliance [ECSA].)

“This is an unworkable solution to a problem that does not exist,” said the coalition spokesperson. “It’s an arbitrary and capricious mandate that could cost music creators tens of millions of dollars in administrative costs, and might destroy their ability to collaborate with one another unless they are affiliated with the same performing rights society. It is ill-conceived, ill-considered, and leaves us with nothing but confusion and concerns that even DoJ acknowledges have legitimacy.

The only beneficiary of the decision, the ICSC maintains, will be corporations whose music distribution businesses have been built principally on songwriters' work. The DoJ’s contemplated actions, “fly directly in the face of the U.S. constitution's celebrated recognition of the importance of motiving and protection creators and inventors for the betterment of community.”

“The DoJ has refused to address the issue that these consent decrees are needlessly perpetuating the inability of songwriters and composers to earn a viable living, artificially driving performing rights royalty rates downward toward zero rather than upward toward fair market value,” according to the group spokesperson. “Our economic viability is imperiled, which threatens to deeply harm the future progress of musical culture and the arts as encouraged under the US Constitution. Are these results really acceptable to DoJ?”

The coalition did agree, however, with the DoJ's decision not to amend the consent decree to allow for digital withdrawal, so that music publishers could license some digital services directly while still enjoying the benefit of the blanket license for other licensees.

“As we repeatedly stressed to the DoJ throughout two years of dialog, partial withdrawal without guarantees of upstream transparency and other protections would be a complete catastrophe for songwriters, composers, and small publishers,” the coalition’s statement said. “We take some solace in the fact that the DoJ at least understands the vital importance of this issue to creators, and urge that it continue to do so in the future.”

The coalition members also vowed to “oppose any action taken by music publishers to withdraw works from ASCAP or BMI without the explicit authority of the songwriters and composers of those works. For over a century, individual songwriters and composers have had the right -- unless explicitly agreed otherwise -- to independently determine who represents the performing rights in their works.”

Apparently anticipating that some publishers might withdraw completely from the blanket licenses due to that decision, the group's spokesman added: “That right is generally the source of our most important income stream, and we are not going to let this crisis be used to take it away."

Finally, the coalition also complained that after taking two years to come to its decision, it only gave interested parties two weeks to submit concerns with the DoJ position.

Noting its strenuous objections to the timetable, it nonetheless commented in a filing to the DoJ made available to Billboard that “in the digital age, no group of creators has suffered more severe income devaluation (despite a substantial increase in the public consumption of our works) than songwriters and composers. The DoJ appears poised to add to these miseries."

The other, a coalition of independent music companies consisting of AIMP (Association of Independent Music Publishers), A2IM (American Association of Independent Music) and CMPA (Canadian Music Publishers Association) also expressed unhappiness with the DoJ position. “After spending a great deal of U.S. taxpayer money... reviewing the 75-year-old consent decrees, holding public testimony on the various ways in which the anachronistic consent decrees should be updated to address the challenges of a digital economy, and apparently ignoring hundreds of public comments officially submitted to them, the DoJ determined both that the consent decrees should not be amended and that ASCAP and BMI should be forced to issue 100 percent licenses,” their statement said.  “This position by the DoJ on 100 percent licensing is 100 percent wrong.”

Moreover, they charged that with its decision on 100 percent licensing, the DoJ has now “unwittingly entered the creative process in the writing room and the recording studio. They do not belong there.”