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Advertising, Marketing & Promotions Alert >> U.S. Department of Justice Opens Review of ASCAP and BMI Consent Decrees

July 2, 2014

The U.S. Department of Justice’s (DOJ) antitrust division has opened a review of the government’s consent decrees with ASCAP (formally known as the American Society of Composers, Authors and Publishers) and BMI (also known as Broadcast Music Inc.), which could lead to changes in the fees and license terms for advertisers that license music directly or indirectly from these organizations.

Nearly seventy-five years ago, the government entered into consent decrees with ASCAP and BMI to resolve antitrust lawsuits stemming from its concerns about the market power each had acquired through the aggregation of public performance rights held by their member songwriters and music publishers. Since the entry of the consent decrees in 1941, the DOJ has reviewed their operation and effectiveness periodically, and the consent decrees have since been amended. The BMI consent decree last was changed in 1994; ASCAP’s was altered most recently in 2001. Under the consent decrees, a federal district court sitting as a rate court helps resolve disputes over the license fees payable to these groups.

Given recent changes to the way music is delivered and experienced, and in light of the growth of Internet and mobile services like Pandora and Spotify that provide music digitally through streaming, ASCAP, BMI, and others have contended that the consent decrees now are outdated and should be amended. Indeed, in a statement, ASCAP indicated that it was “gratified” by the DOJ’s decision to open a formal review of the consent decrees. BMI reacted similarly, saying that it regarded the DOJ’s review as a “positive development for America’s music creators.”

Issues Under Review
As part of its review of the consent decrees, the DOJ is seeking public input by August 6 on “competitive concerns that arise from the joint licensing of music” by ASCAP and BMI, and how those concerns could be remediated. In particular, the Justice Department is seeking comment on the following:

  • Whether the consent decrees continue to serve important competitive purposes and any modifications that could enhance competition and efficiency;
  • Whether differences between the two consent decrees adversely affect competition;
  • Whether the contents of ASCAP’s and BMI’s repertories should be made available in more transparent and useful formats;
  • Whether songwriters and publishers should be able to limit ASCAP and BMI from licensing their performance rights to certain music users (such as digital music services, which certain rights holders do not view as sufficiently compensating music creators); and
  • Whether the consent decrees should be modified to permit rights holders to allow ASCAP and BMI to license rights additional to the right of public performance.

Significantly, the DOJ also said that it is seeking input on whether the ratemaking function currently performed by the rate court should be changed to a system of mandatory arbitration, as well as the procedures that should be considered to expedite resolution of fee disputes, when payment of interim fees should begin, and how they should be set.

Bottom Line

If the DOJ were to recommend changes to the consent decrees – including a groundbreaking elimination of the consent decrees altogether, as ASCAP has suggested, or arbitration of the rates payable to ASCAP and BMI – its proposals would be subject to review by federal judges in New York. A great deal has changed since 1994 and 2001, and it would appear likely that the consent decrees in their current format will be changed, at least to some degree. Just how any changes could affect advertisers and other licensees remains to be seen.