SESAC is now fighting anti-trust lawsuits on two fronts.
In a March 3 U.S. Southern District of New York court ruling, Judge Paul Engelmayer denied SESAC’s motion for a summary judgement and is allowing an antitrust complaint brought against by television broadcasting companies to proceed to trial.
Prior to the latest development, on Dec. 23, 2013, a lawsuit filed in October 2012 by the Radio Music License Committee alleging anti-trust allegations against SESAC was greenlighted for a trial; a magistrate judge ruled that the RMLC has established a likelihood of a finding that SESAC’s conduct has produced anti-competitive effect and that the PRO has monopoly power. That trial is set to be hard by Judge C. Darnell in the U.S. Eastern District Court of Pennsylvania.
In the March 3 ruling (on a motion for a summary judgement for a lawsuit initially filed in November 2009 and amended in March
2010), the judge found in favor of the plaintiffs–which included the Meredith Corp., the E.W. Scripps Co.; and Hoak Media LLC, companies that run local television stations–allowing the complaint to proceed to trial on all three counts of antitrust behavior, although in a minor tweak, he narrowed two of the claims.
After reviewing the evidence, the court held that it “would comfortably sustain a finding that SESAC… engaged in an overall anti-competitive course of conduct designed to eliminate meaningful competition to its blanket license.”
But it narrowed the complaint’s ability to show it was a concerted action by the PRO and its 20,000 affiliate, and instead said the trial should focus on the small percentage of SESAC members–less than 1% of its membership–who appear to get the largest advances from the PRO and sign supplemental agreements with the organization.
According to court documents, 60-100 of the 20,000 SESAC songwriters have entered into a supplemental agreement which gives them an advance or an otherwise guaranteed amount of money, sometimes well over $1 million a year; in exchange for that they agree not to license their music directly or face large monetary penalties.
The television companies filed the complaint only after the Television Music Licensing Committee couldn’t convince the U.S. Dept. of Justice to sue SESAC back in 2008-2009. After investigating the TMLC complaints, the DOJ closed its investigation without taking action.
The plaintiffs allege that prior to 2008 SESAC’s licensing ability was constrained by industry wide agreements and a contractual duty to arbitrate disputed rate increases. But since then, the plaintiffs allege that SESAC has set an exorbitant price for its blanket license, even as it rendered the other alternative licenses — per-program licenses, direct licenses, source licenses and an adjustable-fee blanket licenses — as either cost prohibitive or of diminished utility.
For example, negotiations between SESAC and the TMLC were unsuccessful in 2005 and an arbitrator set the industry-wide blanket fee of $16 million for 2005; $17.6 million for 2006; and $19.3 million in 2007. But the use of alternative licenses to the SESAC blanket license produced savings off the blanket license fees for those years, respectively of $575,000; $1 million and $2 million. Since then, savings have been negligible because of changes made by SESAC to the alternative licenses, the plaintiffs allege.
In allowing the lawsuit to proceed, Judge Engelmayer found that the plaintiffs have produced evidence on which a jury could find: that no economically feasible alternatives to SESAC’s blanket license existed; and that SESAC’s conduct harmed competition.
SESAC argued that its blanket license has pro-competitive benefits that outweigh any anti-competitive aspects of its dealing with the television companies; and the judge said at trial they will get the opportunity to defend that stance.
A SESAC spokeswomen declines to comment other than to state: “SESAC is confident that we will ultimately prevail.”
Subsequent to Billboard talking to SESAC, the Judge ordered both parties to take the next month and try to negotiate a settlement. “The Court hopes that the parties and counsel will use this “time out” to explore and discuss whether there are terms on which this lawsuit can be amicably resolved. The Court’s assessments of the facts and law in its recent decision also may be relevant to counsels’ assessments.” He asked them to tell him where they stand by April 11, and tell him whether the discussions have produced a settlement; or the possibility of one, or if there is no realistic prospect for a settlement. If its the latter, and the case is going to proceed to trial, the parties must submit by that date any future motions they intend to make; and their estimates for the length of trial.
“The parties should not expect a trial date, once set, to be moved,” Judge Engelmayer wrote. “The court urges the parties to use this window of time wisely.”