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DOJ Ends Consent Decree Review Without Action

The Dept. of Justice has ended its ASCAP/BMI consent decree review without taking action, meaning the agreements governing how ASCAP and BMI operate will continue to exist exactly as they are now.

That’s likely to the chagrin of the two performance rights organizations, the music publishing sector and some songwriters who were hoping the consent decrees would be modified; but to the relief of the music user licensee community that wanted them to stay exactly the same.

The DOJ’s assistant Attorney General for the Antitrust Divison Makan Delrahim, who tendered his resignation as the head of that unit on Jan. 13, effective Jan. 19,  revealed that decision Friday (Jan. 15) in a webinar sponsored by the Vanderbilt Law School’s Journal of Entertainment & Technology. Delrahim acknowledged that he does see a need to somehow modify the now nearly 80-year old consent decrees under which ASCAP and BMI operate — but that the COVID-19 pandemic prevented the DOJ from holding in-person meetings with all interested parties in the same room to “engage in the granular negotiations” needed to bring about consensus on how to change them.

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Delrahim said the existence of the consent decrees into perpetuity is unrealistic and urged the DOJ to review the ASCAP and BMI consent decrees every five years, saying continued review remains necessary considering how much evolution is occurring within the music industry. He issued some guidance on what the DOJ should look for in those proposed subsequent reviews, including acknowledgement of the realization that market-based solutions insure a competitive marketplace; that songwriters and rights holders aren’t short-changed on compensation when their music is used; and the recognition that a compulsory licenses might have been needed when the industry began decades ago but too often that types of license results in rights holders getting the short end of the stick. The compulsory license runs counter to free-market principles, he said. adding that the best way to get a competitive market is to allow it to occur through negotiations among the various stakeholders, with the realization that anti-trust law acts as a back-up if any side has too much power in such negotiations.

This marked the second DOJ review in four years. In 2013, a review at the behest of music publishers that wanted to be able to selectively withdraw digital rights from the ASCAP/BMI blanket licenses wound up working against them: The DOJ ruled that publishers couldn’t selectively withdraw from the blanket licenses and then added the interpretation that the decrees require whole works licensing — meaning that for a song with multiple writers, licensees need only get a license from one of them, the position advocated by music users.

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The BMI rate court judge, however, ruled against that interpretation and an appeals court backed up that decision, stating that the consent decree is silent on whether they require whole works or fractional licensing (where licensees need a performance license from each songwriter or their representative involved in a single song), as advocated by PROs, publishers and songwriters.

In the wake of the announcement, ASCAP CEO Elizabeth Matthews and BMI President and CEO Mike O’Neill released a joint letter voicing their disappointment with the DOJ’s decision but also optimism concerning Delrahim’s tone, stating in part, “While we were disappointed that no action was taken, we are encouraged to see how the DOJ’s approach to these issues has evolved. In his closing remarks, AAG Makan Delrahim recognized several important truths that we have long understood: Songwriters are the backbone of the music marketplace and must be paid fairly; blanket licensing is incredibly efficient; ASCAP and BMI are innovating to serve the needs of the industry; greater competition and not compulsory licensing is the answer; and the value of music is best decided in a free market.”

Matthews and O’Neill added that while they “knew that reaching consensus would not be easy…we also found that some were using this review to advocate for even greater restrictions in our decrees” and that although “it would have been wonderful to see our decrees modernized, we would rather they remain as they are, than see an outcome that could adversely affect music creators for generations to come.”

National Music Publishers’ Association president and CEO David Israelite issued a statement following the ruling expressing disappointment “that DOJ chose not to update the regulations to allow for freedoms that would have greatly helped songwriters and music publishers realize the true value of their work.” He continued, “We understand that the PROs and the Department could not come to an agreement on broad changes and therefore allowing selective withdrawal of digital rights could not be fully considered, however we see this as a massive missed opportunity for music creators.

“We agree as Assistant Attorney General Delrahim stated, that ‘the ultimate goal should be a market-based solution that ensures songwriters, publishers, and other artists are compensated fully for their creative efforts at market rates,’ and we are relieved to hear his denunciation of compulsory licensing. Our hope is that the Biden Administration will pick up where this administration left off and take decisive action that would give songwriters and music publishers the ability to directly negotiate with the giant tech companies who continue to pay below market rates. To that end, NMPA will continue to push for progress that would allow songwriters and music publishers the same rights as other intellectual property owners to sell their work in a free market.”

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The National Association of Broadcasters celebrated the decision, issuing a press release saying, “We appreciate the willingness of DOJ to have an open mind and to conduct a comprehensive review of all of the possible issues raised by stakeholders concerning modifying or eliminating the decrees. DOJ’s decision not to take action will ensure that ASCAP and BMI continue to fairly and efficiently license musical works in a manner that is pro-competitive. Broadcasters look forward to continuing to work with the performance rights organizations for the mutual benefit of songwriters, music licensees and listeners.”

The Digital Media Association also welcomed the news with a statement underlining “that successive Administrations have now rejected calls to alter these essential pro-consumer protections.” The press release continued, “Music licensing is complex, but throughout their existence the decrees’ protections have fostered an efficient marketplace that in turn has been critical to the resurgence and growth of the music industry. The ability to fairly and efficiently license music to perform to the public benefits fans, songwriters and U.S. businesses alike, and has been foundational in the establishment of a modern music system where more music is being listened to than ever before and more creators are being paid.”

The Music Artists Coalition (MAC) noted that it had “made certain that songwriters’ interests were represented during the review process. MAC was instrumental in working with the Division to highlight the important provisions of the consent decrees that protect songwriters. Historically, there has been almost exclusive focus on the protections in the consent decrees for music licensees (like radio, bars, and grills). It is obvious from the Division’s decision and the remarks today that MAC was successful in emphasizing the need to preserve the vital protections for songwriters in the consent decrees.”

The MIC Coalition added, “The announcement essentially reconfirms the finding of the previous Administration which concluded that the music industry has, ‘developed in the context of, and in reliance on, [the ASCAP and BMI] consent decrees and that they therefore should remain in place.’ We could not agree more with such sentiments. The ASCAP and BMI consent decrees guarantee a competitive and efficient licensing regime that benefits songwriters and music licensees, alike.

“Maintaining this framework will ensure that millions of American businesses can efficiently and fairly pay for the right to play and perform live and recorded music, which is crucial as venues struggle to open their doors again in the wake of the pandemic, and as more Americans access music from an ever-growing array of platforms.”